A trademark license is an agreement in which a trademark owner (the “licensor”) permits another person (“the “licensee”) to utilize the licensor’s trademark in connection with specific goods or services. Even though a trademark license agreement is not required to be in writing to be legally enforceable, it is strongly recommended that all trademark licensing agreements must be in writing and signed by both the licensor and licensee.
Purpose of a Trademark License agreement
Trademark licensing refers to the procedure where the owner of a trademark (the licensor) gives someone else (the licensee) the right to utilize the trademark. The licensee generally creates a trademark licensing agreement, yet a licensor could also create this document. Both the parties usually agree upon the terms before creating a trademark licensing agreement.
Inclusions in a Trademark License Agreement
Parties involved: In the creation of this agreement, there are usually two parties involved, the first being the licensor who is the owner of a trademark, and the second is the licensee who gets the right to use the trademark from the owner.
Effective dates: This agreement would state the date on which the license will start and when the agreement will expire, if applicable
How to Draft a Trademark License Agreement?
For licensor, it is important to conduct a due diligence check on a potential licensee to make sure that they have the necessary managerial and financial capacity to use the trademark in a beneficial way.
However, regardless of whether someone is 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 the trademark license 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 the license are exclusive, sole or non-exclusive; and
- Payment details – for the licensor, in the form of a lump-sum payment or royalties.
Benefits of Trademark License Agreement
The range of benefits of licensing a trademark is:
- Accessing new markets: in the case of marketing and distributing channels, allowing licensees the right to use the trademark could help to expand their business;
- Increase consumer recognition;
- Distribute workload; and
- Partnerships: trademark licensing could lead to benefits for the business life and functioning of parties involved.
Types of Trademark License Agreement
There are 3 Types of Trademark License, they are;
1. Exclusive License
This gives the rights to commercial use of the trademark solely towards the licensee. In effect, it additionally excludes the licensor from using it. The licensor gets a sum for licensing, and the licensee receives any future profits or incurs losses arising from commercialization.
Limitations could be placed on exclusive licenses so that the licensee is restricted to use the mark within a certain class of product or geographical area.
2. Sole License
A sole license is an adaptation of an exclusive license where both the licensor as well as licensee could use the trademark. However, the licensor is not permitted to license the trademark to another third party.
3. Non-exclusive License
A licensor could grant a non-exclusive license to multiple licensees.
[ Also Read: Patent License Agreement ]
Key Terms/Clause of Trademark License Agreement
The key terms a Trademark License Agreement may include:
- The legal names of the licensor and licensee
- The business structures of the licensor and licensee
- Type of license (exclusive, sole, or non-exclusive; see above)
- The trademark(s) included in the licensing agreement
- The products and services concerned with the agreement
- The geographic territory where the licensee may operate and sell the products or services
- Quality control provisions define clear standards about the nature and quality of the licensed products or services. This area is the most important part of a trademark licensing agreement for licensors. Promises, warranties, or both that the licensor makes are representations.
- Payment details, such as whether the licensor will get royalties or a lump sum, how much these payments amount to, and when the licensor will get paid
- The date the license will start and its expiration date, if known
A few added provisions could likewise help improve the agreement for both parties, which may include that:
- The licensor would approve all advertising and promotional materials before any marketing content gets distributed.
- The license could be renewed.
- Specific conditions apply for renewal.
- The license would not be shared with an outside individual or sold to an assignee, either in the United States or internationally.
- The license would last for a set amount of time.
- The licensor, as well as licensee, have specific responsibilities when the license ends.
- Penalties will apply if either party breaches the license.
- Any breach should be remedied in a specific time frame
What Happens In Case of Violation?
Licensing agreements are contracts and are administered by various contracts and business laws. As such, enforcing a licensing agreement could involve various contract remedies. The violations of the terms contained in a trademark license agreement might result in the following remedies:
Monetary damages: The injured party might sue the breaching party to recover losses connected with the breach.
Injunction and Other Equitable Remedies: A common remedy is for the court to issue an injunction instructing the breaching party to stop the infringing activity
Remedies prescribed in the contract: The parties might also include clauses in the trademark license agreement, which spell out how the parties would resolve any disputes.
[Also Read: Trademark Assignment Agreement]
Sample for Trademark License Agreement
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