Trademark licensing is when a person who is the owner of the Trademark authorizes a third party to use his mark in the course of trade with regards to royalty over the sale of products or services that are licensed under the trademark. In other words, when the owner of the trademark allows the usage of the mark by others without transferring the ownership, it is trademark licensing.
The Benefits of Trademark Licensing
- Trademark licensing paves way for the owners to avail maximum economic benefits of the goodwill attached to their respective brand sans the need to invest in infrastructure for the process of marketing their products. Further, it also promises a consistent revenue on account of steady obtaining of royalties from the licensee of the trademark.
- The licensee is also a beneficiary. This can be said so, because if a licensee establishes an enterprise under the trademark of a reputable business, stable returns could be a viable assurance, along with a substantial decrease of the overall risk of beginning a new enterprise.
- It also holds a distinctive importance for the multi-national companies. A foreign company could retain control of its outlets by stating specific terms and conditions to the licensee of the trademark through a licensing agreement, regardless of the government imposed restrictions in some sectors. Therefore, this helps the foreign companies to expand their presence even if their investment in that particular market is less.
The Essential Inclusions of a Licensing Agreement
A licensing agreement is the basic essentiality for stating all the terms and conditions regarding the use of the trademark. The following could be some of the pertinent components which may be added to the agreement:
- The important provision regarding quality control- This is important to maintain the goodwill attached to the trademark. The agreement should state the corollaries of infringement of quality measures with the aim to ensure the subsistence of the quality of the product.
- Exclusive or Non-exclusive license
- The duration of the license
- The permitting or non-permitting of sub-licensing. If permitted, then the extent and terms of its usage.
- Commercial terms such as the payment of royalties, escalations, etc.
- Specific restrictions or terms of the use of trade-name.
- The instances of cancellation of license
- The dispute settlement mechanism.
Registration of Licensing Agreement
The registration of licensing agreement is not mandatory, however it is advisable. For such registration, the following procedure can be followed:
- The application for registration of licensing agreement should be made within six months from the date of signing the agreement.
- The licensor and licensee are to jointly apply for the same, in written format on FORM TM-28, to the registrar.
- The proprietor should submit an affidavit mentioning the following:
- Particulars regarding the relation between licensor and licensee,
- The kind of control he exercises over the usage made by the licensee,
- The extent of usage of trademark by the licensee,
- Terms and Conditions of such usage,
- Period of usage etc.
- The parties must submit all necessary related documents that are required by the Registrar.
- Once the Registrar is satisfied with the application and the particulars contained therein, the licensee or proposed user of the trademark would acquire registration. The date of submission of application for registration would be entered in the register and from such date only, the licensee would be the registered user of the trademark.
- Further, the particulars regarding the relation between the licensor and licensee would also be entered in the Trademarks Journal within two months from the date of registration.
- Thereafter, the Registrar would send a notice of registration of the licensee as the licensed user to other licensed users, if any, of the trademark in question.
- Also, if the applicant requests, and the Registrar is satisfied by the same, may choose not to disclose the particulars of the registration, for protection against the disclosure of information to competitors.
Cancellation of Registration
The cancellation of registration may be requested by the proprietor, registered user or any other registered user on FORM TM-U. The Registrar also holds the rights to cancel the registration of the licensed user on basis of the following:
- On the instance of unauthorized use of trademark,
- Upon the failure of the proprietor or licensor to reveal any pertinent material information or fact relating to use of trademark,
- Upon the failure of the licensee to follow the requisites regarding quality standards, or a change of circumstances from the date of registration.
To know more about Trademark Registeration click here