Licensing trade marks

Licensing trade marks can be an effective way for a trade mark owner to expand the use and public recognition of their trade mark. A licence can help to ensure that you avoid the pitfalls of entering into such an arrangement, eg the value and the validity of the trade mark being jeopardised.

What is a trade mark?

A trade mark is a word, slogan, symbol, design or combination of these elements. It serves to identify and distinguish the goods or services of one party from others. The purpose of a trade mark is to prevent unfair competition by applying a test of consumer confusion and providing rights and remedies to the owner of the trade mark.

What is a trade mark licence?

A trade mark licence is an agreement between the owner of the trade mark and another party, who is given permission to do something that would otherwise be an infringement of the owner's rights without a licence. The person granting the licence is called the 'licensor' and the person receiving the licence or exploiting the trade mark is called the 'licensee'.

How does licensing a trade mark work?

A trade mark licence permits the licensee to use the licensor's trade mark in connection with specific products or services in return for a fee. Although the terms of every license are different and may be freely negotiated between the licensor and licensee, all licences must at least include the following in order to be valid:

  • Identification of the trade mark(s) that are the subject of the agreement.
  • Identification of the products/services with which the licensed mark may be used.
  • The geographic territory in which the licensee may operate and sell its products/services.
  • Quality control provisions that set out clear standards as to the nature and quality of the licensed products/services.

From the licensor's perspective, the quality control provisions in the licence are particularly important. This is because the licensee's products/services must meet a certain standard or else the value of the licensor's trade mark could be harmed.

What are the benefits of licensing a trade mark?

Revenue

Licensing can broaden the reach of the trade mark into different markets.

Expertise

By taking a licence, a business may tap into expertise it does not already have.

Competitive advantage

By acquiring a licence to use a trade mark, a business may obtain a competitive advantage over its competitors.

Collaboration

Licensing helps businesses work together to develop new products and services.

Increasing market penetration

An owner of a trade mark may license another business to sell in territories that the owner cannot cover.

When is licensing a trade mark not appropriate?

Licensing a trade mark may not be appropriate if it is licensed to companies who might lessen its value. If you are seeking to license your trade mark, it is worth considering whether the quality of your brand will be affected by the goods it's being applied to. If you are looking to licence a trade mark, be wary that the trade mark to be licensed may be too weak, i.e. it may not be 'distinctive' enough. If a competitor could work around it and take away market share, it may not be worth investing in a licence. For further information on licensing trade marks, Ask a lawyer.