Trademark Licensing

INTRODUCTION

Trademark licensing is a mechanism where the Trade owner (Licensor) grants permission to a Third Party (Licensee) to use the invention (Trademark) on mutually agreed terms and conditions. 

In Trademark licensing, only the temporary right to use the trademark is given to the licensee and ownership is not at all transferred to the licensee. 

Hence, Trademark licensing is significantly different from the Assignment of a trademark.

Mainly there are two kinds of Trademark licensing, given as under;

• EXCLUSIVE LICENSE: Herein, only the licensee has the right to use the subject trademark. Meaning that no other person is allowed to use the subject trademark other than the licensee, not even the licensor.
• NON-EXCLUSIVE LICENSE:  Herein, the licensor does not provide exclusive rights to the licensee to use the trademark. That means the licensor has the right to allow other parties to use the trademark by way of another trademark license.

ADVANTAGES OF TRADEMARK LICENSING

• Expansion of Market: Expansion of Brand as well as Territory. Allowing licensees the right to use your trademark, by way of trademark license, significantly helps to expand your business. 
• Consumer Awareness: Trademark licensing agreements help in raising awareness among consumers with regard to the subject trademark. Consumers become more aware of the trademark and business activities thereunder, thereby increasing consumer flow.
• Distribution of Workload: Trademark licensing reduces the workload on the owner as the same gets distributed with the licensee.
• New Opportunities: Trademark licensing agreement is greatly beneficial to businesses as well as for the proper functioning of the parties therein. Welcoming new opportunities greatly boosts your business. 
• Generates Revenue: Helps generate additional revenue 
• The licensee (the person who is granted the license) gets the benefit of using the trademark without inventing it
• The licensor (the person who grants the license) benefits from the expertise of the licensee in different areas
• Goodwill: Goodwill increases in the market 

OTHER TYPES OF TRADEMARK LICENSING

• FRANCHISING: This is a type of licensing where the franchisor (trademark owner) licenses the invention to the franchisee (third party) to use the invention for the business purpose, in return for royalty (fee). The license is followed by a bundle of Intellectual Property Rights.

Few of the Examples are, a local restaurant using “DOMINO’S” brand to operate, a store selling “SAMSUNG” branded electronics, or a local outlet under the brand “PIZZA HUT”, etc.

• BRAND EXTENSION: It is a process where a company gets in touch with the owner of the Trademark or its agent; in order to expand its business earning the monopoly right, through a legitimate license agreement.

For example: Monaco Coach, a manufacture of luxury recreational vehicles, entered into a license agreement with Dodge, a manufacture of trucks in order to use the Dodge Trademark and logo.

• COMPONENT OR INGREDIENT BRANDING: The owner may license the component or an ingredient of the Trademark, thus, attracting the consumer toward the product of the licensee. Component or ingredient branding is done in order to enhance the overall perception of the finished product.

For example, Diet soft drinks with Nutra Sweet, or computers with the “INTEL INSIDE” over the computers in order to let people know that the computer contains an intel processor which eventually attracts customers to purchase the computers, etc.

• CO-BRANDING:  Number of companies joining together in order to make a new product, contributing the best of their products or inventions. Co-branding helps businesses to generate more consumer flow due to the amalgamation of the finest qualities of two companies.

Few of the Examples are, the Spotify and Starbucks co-branding partnership which was created to enhance experience of coffee shop with a musical ambience, or partnership between Titan Watches and the motorcycle brand Ducati releasing co-branded watches consisting design elements of both the companies, etc.

CONTENTS OF A TRADEMARK LICENSE AGREEMENT

• Title of the Agreement- containing the subject matter of the agreement.
• Effective Date- stating the date when the license along with the terms and conditions comes into effect.
• Description of the Parties- describing the type of business, its legal or registered name, address etc.
• Preamble- Background or history between the parties leading to such agreement.
• Territory- the territorial boundary that is the countries or markets the trademark can be used.
• Terms And Duration- clauses and terms, against which the license shall be granted. It shall also include the responsibility of both the parties.
• Reservation Of Rights: the owner has the right to reserve a particular Intellectual Property right in the context of the Trademark, for future licensing opportunities.
• Sub-License- the licensor may mention in the agreement whether he gives the prescribed right of sub-licensing the invention for the licensee
• Payment And Royalties- the amount that shall be paid to the licensor for using the right of the owner. It shall also describe the manner in which the payment shall be done.
• Termination: the conditions under which the license may get terminated.
• Penalty: it shall also include the penalty that the licensee has to pay in case of any waiver or infringement.