Overview of Trademark Licensing

Trademark licensing is a process where the registered owner of a trademark permits a third party to use their mark or logo without transferring ownership. In simpler terms, trademark licensing allows the owner to let others use the trademark or brand name, while retaining ownership. The owner may impose specific restrictions on how the trademark can be used through the terms outlined in the Trademark Licensing Agreement.

The trademark owner can also earn royalty payments from the licensee for the authorized commercial use of the registered trademark. However, it's important to note that the licensee only receives limited rights regarding the use of the trademark, while exclusive ownership and other key rights remain with the original trademark owner.

Section 49 of the Trademark Act, 1999, governs the licensing of service marks and trademarks in India. Trademark licensing is generally based on mutually agreed terms, which may include quality standards for the products, the maintenance of the trademark's established status, exclusivity, and the scope of use. While the Indian Trademark Act doesn't set specific legal terms or durations for trademark licensing, it is typically undertaken for a defined period.

At CA Anytime, we provide comprehensive guidance and support on trademark licensing, assisting both domestic and international companies with all aspects of the process.

What are the Types of Trademark License?

Following are the different types of Trademark License:

1. Sole License: This license is an edition of an exclusive license where both the Licensee and the Licensor can use the Trademark. But, the Licensor is not allowed to license the Trademark to others.
2. Exclusive License: This license grants the rights to commercial use of the Trademark exclusively to the Licensee.
3. Non-Exclusive License: A Licensor can grant a Non-Exclusive License or multiple licensees.

Benefits of Trademark Licensing

1. Financial Benefit: Both parties can benefit financially. The trademark owner earns royalties by allowing others to exploit the trademark, while the licensee profits by using the established brand. The licensor, who may lack resources or visibility, can utilize the licensee’s resources to generate additional income. The licensee, in turn, shares in these profits.

2. Expand Trademark’s Popularity: Licensing allows the trademark to reach a larger audience, boosting its popularity. This, in turn, increases sales and potentially leads to more licensing opportunities.

3. Help in Expanding Business: Licensing helps expand the trademark owner’s business across new territories. The licensee’s expertise in distribution enables the business to grow beyond its original boundaries.

4. Brand Recognition: Trademark licensing helps establish the brand in new regions, where it may not have been known before. The licensee’s resources can drive extensive promotion, contributing to greater recognition.

5. Reduce or Distribute Workload: The licensee shares the burden of maintaining product and service quality. This reduces the workload for the licensor, who no longer needs to manage these aspects directly.

What is a Trademark Licensing Agreement?

A Trademark Licensing Agreement is essential for defining the terms of use between the licensor and licensee. It ensures that the trademark is used appropriately and that both parties' rights and responsibilities are clear. Key clauses to include in the agreement are:

• Parties’ details and firm structure: Information about both parties involved and their legal status.
• Commencement and expiry dates: Defines when the license starts and, if applicable, when it ends.
• Payment details: Specifies how and what the licensee will pay the licensor, whether it's a lump sum or royalty payments.
• Grant clause: Clarifies the type of license granted, such as exclusive, sole, or non-exclusive.

Procedure for Trademark Licensing under the Trademark Act

While recording the permitted use of a trademark is voluntary, it is recommended to register the Registered User Agreement or License Agreement with the Trademark Registrar. An application for recording a Registered User Agreement or License Agreement can be made for registered trademarks. The application for recording the proposed License Agreement must be filed within six months from the date of the agreement.

To register an individual as a Registered User or Licensee of a trademark, both the trademark owner (Licensor) and the proposed Registered User or Licensee must apply in writing to the Trademark Registrar using Form TM-U. Along with the form, the following documents must be submitted:

1. Certified Copy of the Agreement: A certified copy of the agreement or a written contract between the trademark owner or Licensor and the proposed Registered User or Licensee detailing the permitted use of the trademark.

2. Affidavit by the Trademark Owner: An affidavit from the trademark owner or Licensor that provides:

   • Information about the connection between the owner or Licensor and the proposed Licensee or Registered User.
   • The extent of control the owner or Licensor will maintain over the permitted use by the Licensee.
   • Details about the relationship between the parties, including the products or services related to the trademark.
   • Any restrictions or conditions, such as the characteristics of the products or services, the permitted location of use, or the duration of use.

3. Signed Power of Attorney: A signed power of attorney in favor of agents (if applicable).

4. Additional Documents: Any extra documents or proofs as required by the Trademark Registrar.

Once the Trademark Registrar is satisfied with the application and the provided details, they will register the proposed Licensee or Registered User for the specific goods or services related to the trademark. The date of the application will be recorded in the Trademark Register. This recordal will be published in the Trademark Journal within two months from the registration date.

Additionally, the Registrar will issue a notice regarding the registration of the Licensee to other licensees or registered users of the trademark, if any. If requested by the applicant, the Trademark Registrar will ensure that certain details of the application (other than those entered in the Trademark Register) are not disclosed to competitors or opponents in the trade.

Cancellation/Variation of Registration as a Registered User or Licensee

A trademark or brand may be licensed for some or all of the products or services covered. Under Section 50 of the Trademark Act, the registration of a Registered User or Licensee can be canceled or varied if certain conditions are not met. These conditions include situations where:

• The Trademark has been used in a manner not in accordance with the terms of the Agreement.
• The owner or user has failed to disclose any material facts during the registration process.
• The quality standards outlined in the Agreement regarding the products are not upheld.
• The conditions of the Agreement have changed since the registration date.

In such cases, a notice will be issued, and the concerned party will be given an opportunity for a hearing before the cancellation or variation of the registration is finalized.