What Is Trademark Licensing?
Find out about the types of trademark licensing and the benefits.
You are a business owner with a trademark. Did you know you can license the rights that flow from your trademark to others and receive royalties for commercialisation? Or perhaps you are a small business owner wishing to gain rights to use someone else’s trademark. Upon registration of your trademark, you have the ability to use, sell and license your brand.
Trademarks are an important business asset that offers protection to your brand. Licensing your trademark can be a beneficial business strategy that can enhance your brand and allow for expansion into new markets.
If you do not have a trademark to protect an original aspect of your business, LawPath offers a simple trademark application process which will be reviewed by a trademark attorney.
What Is Trademark Licensing?
Trademark licensing refers to the process where the owner of a trademark (the licensor) gives another person (the licensee) the right to use the trademark. Common examples of trademark licensing include merchandising partnerships and plant breeders.
Under the Trade Marks Act 1995 (Cth) the licensor must hold control over the authorised use of the trade mark. This includes quality control in relation to goods and services, as well as financial control over trading activities. The importance of needing to exercise and enforce control was highlighted in the ongoing 2016 case of Lodestar Anstalt v Campari America LLC, following registration from both parties for the word mark ‘WILD GEESE’.
Benefits of Trademark Licensing
There are a range of benefits of licensing a trademark, such as:
- Access new markets: in the case of marketing and distributing channels, allowing licensees the right to use your trademark can help to expand your business;
- Increase consumer recognition;
- Distribute workload; and
- Partnerships: trademark licensing can lead to benefits for the business life and functioning of parties involved.
3 Types of Trademark Licence
1. Exclusive Licence
This grants the rights to commercial use of the trademark solely to the licensee. In effect, it also excludes the licensor from using it. The licensor receives a sum for licensing and the licensee receives any future profits or incurs losses arising from commercialisation.
Limitations can be placed on exclusive licences so that the licensee is restricted to use the mark within a certain class of product or geographical area.
2. Sole Licence
A sole licence is an adaptation of an exclusive licence where both the licensor and licensee can use the trademark. However, the licensor is not permitted to licence the trademark to another third party.
3. Non-exclusive Licence
As the name suggests, a licensor can grant a non-exclusive licence to multiple licensees.
Trademark Licensing Agreement
If you are a licensor, it is important to conduct a due diligence check on a potential licensee to ensure that they have the necessary managerial and financial capacity to use the trademark in a beneficial way.
However, irrespective of whether you are a licensor or licensee, it is vital that the trademark licensing agreement is drafted concisely to help avoid problems. Some of the essential clauses which your agreement should contain are:
- Date of commencement of the licensee to use the trademark and date of expiry if applicable;
- Details of the parties and their firm structure;
- Grant clause – defining whether the terms of licence are exclusive, sole or non-exclusive; and
- Payment details – for the licensor, in the form of a lump-sum payment or royalties.
Trademark licensing can help you expand your business reach and processes.
In order to better navigate trademark licensing agreements and protect your rights, it is best to negotiate with the other party and draft a clear contract to reduce chances for future dispute. LawPath has access to a team of experienced trademark attorneys who can help you negotiate and finalise an agreement.
Interested in entering into a trademark licensing agreement? LawPath has access to highly qualified patent attorneys that can help you apply for a trademark and license it as well. Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or any other legal needs.
Carmen is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With an interest in consumer and professional negligence law, her primary focus is on the importance of expanding legal awareness to business longevity.