What Should Be in a Licensing Agreement?

You, the trademark owner, are the licensor and the other party is the licensee in this agreement. There are three types of trademark license agreements:

Exclusive Trademark License

The licensee is the only party that can use the trademark with an Exclusive License, including you, the licensor.

Sole Trademark License

In a Sole Trademark License, both the licensee and the licensor can use the trademark, but you, the licensor, cannot offer such licensing to other parties.

Non-Exclusive Trademark License

This third type of trademark license allows the licensee to use the mark, and you, as licensor, can also sign licensing agreements with anyone you wish going forward (which you want to make very clear).

How Long?

You also want to be very clear about the term of this licensing agreement. Remember, it's like renting and unlike an assignment that will last indefinitely. As with any rental agreement, you must specify how long the licensee can enjoy the right to use your trademark.

And Where?

As the licensor, you can define the geographical territory where the licensee can use your trademark, but this can get tricky.

For instance, your trademark is registered in Canada and the US. And you're looking for a licensee in the European Union to extend your reach. This idea can be a great opportunity, but do you own the brand in Europe?

Most countries do not protect unregistered trademarks. If you have not registered your mark abroad, you should be very careful when defining territory so that you understand whether you have the right to grant this territory.

Getting Paid

You must be crystal clear about the payment details in your license. There is no right or wrong way. Do you want to receive royalties, a flat fee, receive payments monthly or annually? Make your best deal and be clear.

What about a Sub-License?

Will you allow the licensee to license your brand further? You, Company A, have a licensing agreement with company B, can company B sub-license it to company C? Again, there is no right or wrong.

Maintaining Quality

The primary purpose of your trademark is as an identifier of the source of specific products and services. Essential in this equation is the quality of these products and services. It is critical to address this issue clearly in the license.

Should the licensee cut corners and offer products of inferior quality to your established specifications, your brand will dilute, and your customers will be easily confused by the difference under the same trademark.

Include a mechanism allowing you, the licensor, to control and inspect the quality, and potentially discontinue the license should the issue remain to avoid possible problems with the validity of your agreement.

Summary

Your most crucial takeaway regarding trademark licensing should be that the agreement is like renting; the licensor retains ownership of the trademark and provides a licensee with specific limited rights to its use.

The Trademark Licensing Agreement is a contract containing all the details of these limits and each party's obligations. The terms of the agreement are often quite creative. Include as many limitations as you wish and terms that meet the requirements of both parties.

Trademark Factory® can assist in all aspects of trademarking including international marks and strategizing for the future.

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