Trade mark licensing is a niche area of practice but one that is becoming increasingly common. The exchange of innovative, classic and popular with consumers content as part of sponsorships, franchise, merchandise, manufacturing and distribution, has become a central element in business development. A licence, as a formal permission to use a trade mark, ensures that such exchange is in line with fair competition policies. It also has its business benefits with opportunity for an additional revenue stream, territorial and market expansion.

The Groundwork

Particular terms of granting and obtaining a licence are built upon principles of contract law. The presence of an offer and acceptance, an intention to enter a legal relationship, legal capacity of both parties, valid consideration, a legal subject matter and obligations capable of performance, are all required to set the essential groundwork upon which the terms of a licence can take place.

The Type of License

The strongest type of licence for the Licensee is one that is exclusive where only the Licensee can use the licensed trade mark. This is where the owner of the trade mark, the Licensor fully grants his right to use, and often to protect, the mark. In this set up there can only be one exclusive Licensee.

A sole type of licence limits the use of the trade mark to the owner and one Licensee.

A non-exclusive license has no restriction on the number of Licensees and maintains the owner Licensor’s right to use the trade mark alongside all other licenses.

The Content

 The next step in the architecture of a licence agreement is defining the terms therein via the inclusion of quality control provisions. These will be terms of use that would ensure the goodwill in the mark is not tarnished. Included might also be limitations in respect of time periods, geographic scope and type of goods the licence would apply to.

Recording the License

Making a record of a license in an official register is highly beneficial. It shows that the trade mark remains in use which defeats any revocation action for non-use. A Licensee has the right to represent the proprietor in handling litigation proceedings to protect or enforce the mark against competitors. The Licensee can also claim damages if the registration was made within the six months period following the grant. Furthermore, as a general principal, a conflicting registered right has priority over one that is unregistered. Lack of a record of the license may also result in brand dilution for the proprietor or the breach of an agreement.

Notably, in respect of international licenses, different jurisdictions employ different recordal procedures. Australia, Germany and New Zealand do not provide for the recording of trade mark licences. Others do not accept international recordings as effective unless the recordal is completed directly with their national Office. The latter applies to China, Colombia, Georgia, Greece, India, Japan, Kyrgyzstan, Lithuania, Mexico, Republic of Korea, Republic of Moldova, the Russian Federation and Singapore. Furthermore, in countries like China, Japan, Thailand, India, Kenya, Brazil and Russia, recording a license is mandatory.

Closing Thoughts

As put by WIPO, one of the inherent benefits of a license is that it is designed to convert an infringer into an ally. Yet there are certain social considerations that apply to licensing a trade mark. The essence of a trade mark as a badge of origin is something that a license should not have a weakening impact on, rather the opposite. With a mindful approach, a Licence agreement, namely the quality control provisions therein, ensures that future application of the trade mark is done in a manner which is compliant with its reputation in the market place. And if utilised wisely a trade mark License can be a truly amazing commodity for an owner and for a brand.