What Is Trademark Licensing?

Trademark licensing is when the owner of a trademark (the licensor) gives another business (the licensee) permission to use that brand on agreed terms, usually for a fee or royalty, while keeping ownership. In Australia, a licence only protects your brand if you actually control how the licensee uses it.

Here’s the uncomfortable bit. Plenty of brand owners sign a licence, file it and never look at it again. That’s exactly how a real wine brand lost its registration in the Federal Court. Nobody copied it. The owner said yes to a licensee and then stopped watching.

What is trademark licensing, and how is it different from selling your brand?

You license a trademark when you want someone else to trade under your name but you still want to own it. You assign a trademark when you want to hand it over for good. These get mixed up all the time, usually because a buyer or partner says “licence” when they really mean “we’ll own it”.

Here’s how the three main ways of sharing a brand compare.

Arrangement	Who owns the brand	What the other party gets	Main risk for you
Trademark licence	You	Permission to use it on set terms	Losing control of quality
Trademark assignment	The buyer	Full ownership, including the right to sue	You can’t get it back without a new deal
Franchise	You (as franchisor)	Your brand plus your system or marketing plan	Franchising Code obligations and ACCC penalties

Moving the brand into a new company or selling the business? You want a trademark assignment, not a licence. Still weighing it up? Our guide to licensing vs assigning intellectual property walks through the trade-offs.

When does trademark licensing make sense for a small business?

Licensing earns its keep when someone else can take your brand somewhere you can’t reach on your own budget. Your trademark is an important business asset, and a licence lets it earn money without you building a new factory, shopfront or sales team.

• A merchandise partner puts your logo on products you’d never make yourself.
• A distributor sells under your brand in another state or overseas.
• Your own trading company uses a brand owned by a separate holding entity.
• Another business co-brands a product line with you for a season.

That third example surprises people. Plenty of Australian businesses hold their trademarks in one entity for asset protection, then license them to the company that actually trades. It’s a sensible structure. It still needs a written licence, though, because “we’re related” isn’t a quality control clause.

So when doesn’t it make sense? If you can’t spare a few hours a year to check what a licensee is doing with your brand, don’t license it yet. A licence you never monitor can cost you more than the royalties will ever pay.

Exclusive, sole or non-exclusive: which trademark licence do you need?

The grant clause decides who else gets to use your brand. Get it wrong and you can lock yourself out of your own trademark for years.

Licence type	Can you still use the brand?	Can you license other businesses?	Best for
Exclusive	No, within the agreed territory or field	No	A licensee investing heavily who needs the market to themselves
Sole	Yes	No	Partnerships where you keep trading but want one partner only
Non-exclusive	Yes	Yes	Merchandise, several distributors, or testing a new market

Our view? Start with a non-exclusive or sole licence. Exclusivity is a big thing to give away. If a licensee insists on it, tie it to minimum annual royalties or sales targets, and let the licence drop to non-exclusive if they miss them.

Read the clauses, not the heading. A licence labelled “exclusive” that also reserves your right to keep selling under the brand is really a sole licence, and the licensee may be paying an exclusive price for it.

Scope matters just as much. Limit the licence to the goods, services and territories your registration actually covers. Licensing a mark for products outside your registered classes hands the licensee far less protection than they think they’re buying.

What does “control” mean in trademark licensing under Australian law?

Under section 8 of the Trade Marks Act 1995 (Cth), a licensee is an “authorised user” only if they use your trademark under your control. That can be quality control over the goods or services, financial control over the licensee’s trading, or another form of genuine control. Get it right and their use counts as your use.

Why should you care? A registered trademark can be removed if nobody uses it for three continuous years. If your licensee is the only one trading under the brand, their use has to count as yours. Otherwise your registration is exposed to a non-use removal application from a competitor.

The case every licensor should know

In Lodestar Anstalt v Campari America LLC [2016] FCAFC 92, the owner of the WILD GEESE marks had licensed them to a wine business. The licence even contained quality control clauses. The Full Federal Court still found the owner hadn’t exercised actual control, because it never checked, approved or enforced anything. Both marks came off the Register.

The lesson is blunt. A control clause you never use is worth almost nothing.

The exception for related companies

Three years later, Trident Seafoods Corporation v Trident Foods Pty Ltd [2019] FCAFC 100 took a softer line for corporate groups. The trademark owner and the related company selling the products shared directors and a common purpose. That was enough for the court to find authorised use, even without a formally policed licence.

Don’t build your structure around that exception. Group companies get some benefit of the doubt. Unrelated licensees get none.

What real control looks like in practice

• Approve samples, packaging and marketing before launch, and keep the emails.
• Set brand guidelines and send updates whenever the brand changes.
• Ask for quarterly sales reports, then actually read them.
• Put an annual review of the licensee’s use in your calendar.
• Respond to breaches with a written notice, even a friendly one.

None of this needs a compliance team. A shared folder of approvals and one yearly reminder covers most small licences.

What should a trademark licensing agreement include?

A good trademark licensing agreement answers one question for every scenario: who decides? Four basic clauses won’t cut it. These are the terms that matter, starting with the ones that most often end up in a dispute.

• Grant and scope. Exclusive, sole or non-exclusive, plus the exact marks (with registration numbers), the goods or services, the territory and the sales channels.
• Fees and royalties. An upfront fee, a percentage of sales, a minimum annual royalty, or a mix. Define “sales” precisely, including whether GST, discounts and returns come off first.
• Reporting and audit. Regular sales reports, plus your right to inspect the licensee’s books if the numbers look light.
• Quality control and approvals. Brand guidelines, sample approvals and inspection rights. This is the clause that keeps your registration safe.
• Goodwill. A plain statement that all goodwill from the licensee’s use belongs to you.
• Enforcement. Who watches for infringers, who sues, who pays and who keeps any damages.
• Sub-licensing and assignment. Whether the licensee can pass rights to anyone else. Default to no, or yes only with your written consent.
• Warranties and indemnities. You confirm you own the mark. The licensee covers you for claims about their products.
• Term, termination and sell-off. Start and end dates, grounds for ending early, and a short window to sell existing stock before the licensee stops using the brand.

Two example clauses worth adapting

Vague royalty wording causes more arguments than almost anything else. Something like this closes the gap: “Royalties are calculated on Net Sales, meaning gross invoiced amounts less GST, freight and genuine customer returns, and are payable within 14 days after the end of each calendar quarter.”

For control, approval before launch beats inspection after the fact: “The Licensee must not use the Licensed Mark on any new product, packaging or advertising until the Licensor has approved a sample in writing.” Both are illustrations only. Tailor them to your deal.

Can a trademark licence accidentally become a franchise?

Yes, and it’s one of the least obvious risks in trademark licensing. Under the Franchising Code of Conduct, an arrangement is a franchise if three features are present. The business runs under a system or marketing plan you substantially determine, control or suggest. It’s substantially associated with your trademark. And the other party pays you, subject to some exceptions.

What you call the contract doesn’t change the answer. A document headed “Licence Agreement” can still be a franchise agreement in substance.

Here’s the catch. The quality control that keeps your trademark safe can start to look like a “system or marketing plan”. Dictate how the licensee prices products, trains staff, fits out premises and runs local marketing, and you may have built a franchise without meaning to.

That matters because a new version of the code started on 1 April 2025, and the ACCC can pursue penalties for breaches. Draw the line here: control what the brand looks like and the quality of what it appears on, and stay out of how the licensee runs their business. If your licence is growing into an operations manual, read our guide to the Franchising Code of Conduct before anyone signs.

How are trademark royalties taxed in Australia?

Royalties are ordinary income for the brand owner, so they go in your tax return like any other revenue. If you’re registered for GST, royalties from Australian licensees will usually carry GST. Licences granted to overseas businesses can be treated differently, so check the GST position with your accountant before you invoice.

Paying royalties overseas is where it gets sharp. If you’re an Australian licensee paying a foreign brand owner, you must withhold tax from each payment and send it to the ATO. The rate is 30% unless a tax treaty with the owner’s country sets a lower one, and you need to be registered for PAYG withholding first.

Miss this and the shortfall lands on you, not the overseas owner. Build the withholding into the royalty clause from day one, so everyone knows whether the agreed rate is before or after tax.

Can you license an unregistered trademark?

You can, but you’re building on sand. An unregistered brand relies on goodwill, protected through passing off and the Australian Consumer Law. Goodwill attaches to the business that earns it, not to a piece of paper.

The Kraft v Bega peanut butter fight shows how messy that gets. Kraft had licensed its brand to the Australian business that made the product. When that business was sold, the courts found the goodwill in the jar’s distinctive packaging went with the business, not back to Kraft. A global brand owner lost its own get-up in Australia.

The fix is boring and cheap compared with litigation. Register your trademark before you license it, including distinctive packaging or logos if they carry real value.

Do you need to register a trademark licence with IP Australia?

No. Australia doesn’t keep a register of trademark licences, and the licence works without being filed anywhere. That’s convenient. It’s also why so many licences sit forgotten in a drawer.

A licensee can, however, voluntarily record a claim to an interest in the trademark with IP Australia under Part 11 of the Act. Exclusive licensees who’ve paid a lot sometimes ask for this. It puts the claim on the public record and means they’re told about certain applications affecting the mark.

Older guides sometimes mention registering the licensee as a “registered user”. That system belonged to the old legislation and ended with the 1995 Act. Today, control matters far more than paperwork with the Registrar.

What should you check if you’re the one taking a trademark licence?

Licensees carry most of the commercial risk. You’re the one buying stock, printing packaging and building customers under someone else’s name. Before you sign, check these five things.

• Search IP Australia’s register to confirm the licensor owns the mark and that it covers your goods or services.
• Ask whether the mark is under opposition, or unused in its other classes. Either could weaken what you’re paying for.
• Push for a sell-off period long enough to clear the stock you’ll realistically hold.
• Make sure approval timeframes are written in, so a slow licensor can’t stall your launch.
• Agree up front whether you can take action against copycats in your territory.

That last point is more useful than it sounds. Under section 26 of the Act, an authorised user can bring infringement proceedings in certain circumstances, such as with the owner’s consent, but the licence can change that. If you’re paying for exclusivity, you’ll want the right to defend it.

How do you license your trademark, step by step?

1. Check your registration covers the goods, services and places the licensee will trade in. If it doesn’t, file new applications first.
2. Do your homework on the licensee: their finances, product quality and reputation. Your brand will wear their mistakes.
3. Decide the licence type, territory, term and fee model before negotiating, so you know your walk-away points.
4. Test the deal against the Franchising Code if you plan to shape how the licensee runs their business.
5. Put everything in a written agreement, signed before the licensee uses the mark.
6. Run the control habits from day one: an approvals folder, quarterly reports and a yearly review.

Steps one and five are where Lawpath saves you the most time. Our trademark attorneys review your application, and the agreement, assignment and NDA templates you’ll need all sit in one library of 550+ legal documents. That’s the same toolkit more than 650,000 Australian businesses have used to get their legals sorted.

Frequently asked questions

Can I license or sell my registered trademark to another business?

Yes. A registered owner can license the trademark, so another business uses it while you keep ownership, or assign it, so ownership transfers. A licence needs written terms and real control. An assignment should be recorded with IP Australia so the Register shows the new owner.

What is a trademark licensing agreement?

It’s a contract setting out how another business can use your brand: which marks, for what goods or services, where, for how long and for what fee. It also records your quality control rights, which keep your registration safe from non-use removal.

Is it a trademark licence or a trademark license?

Both, used differently. In Australian English, “licence” is the noun (you sign a licence) and “license” is the verb (you license your brand). US English uses “license” for both, which is why you’ll see it on so many websites.

How much should I charge for a trademark licence?

There’s no set rate. Deals use an upfront fee, a percentage royalty on net sales, a minimum annual royalty, or a mix. Price it from what the brand will realistically earn the licensee, and add a minimum royalty if you’re granting exclusivity.

What if my licensee stops meeting quality standards?

Act quickly and in writing. A good agreement lets you require fixes within a set period and terminate if they don’t happen. Letting poor quality slide weakens your argument that you control the brand, which is what keeps the registration safe.

Can I license my trademark before it’s registered?

Yes, but both sides get less certainty. If the application fails, the licence may be worth very little, and unregistered rights rely on goodwill that can end up with the licensee’s business. File your application before you sign, at the very least.

Can a licensee sue people who copy the brand?

Sometimes. Under section 26 of the Trade Marks Act, an authorised user can bring infringement proceedings in certain circumstances, such as with the owner’s consent, but the licence agreement can change that. Decide up front who enforces the trademark and who pays.

Do I have to register my trademark licence?

No. Australia has no register of trademark licences. A licensee can voluntarily record a claim to an interest in the trademark with IP Australia, and exclusive licensees sometimes insist on it.

Your next step

If this feels like a lot, take a breath. You’re thinking about control before you’ve signed, which is exactly when it’s cheapest to get right. Most brand owners only read up on trademark licensing after something has already gone wrong.

Ready to put your terms on paper? Start your Trademark Licensing Agreement today.