Trade Mark Licensing

A trade mark license is an agreement between two parties; the trade mark owner (the ‘licensor’) and a person who the trade mark owner grants permission to use their trade mark in commerce (the ‘licensee’). Typically, the license will be expressed in the form of a written contract which should outline the scope of the license. Within this contract there are certain aspects which should be included. These are: the trade mark; the licensor and the licensee; the trade mark right(s) to be licensed (including the territory in which the marks are being licensed); and the nature and quality of the goods and services that the licensee may offer under the trade mark.

A licensor is required to exercise quality control over a licensee’s goods and services. This is due to the trade mark representing the trade mark owner’s reputation, indicating their goods and services are at a certain level of quality, leading to consumer’s inevitably relying on such repute. If the licensor fails to implement a degree of sufficient control over the quality of the goods and services, it is possible for the trade mark to come under attack by the licensee or a third party.

There are ways in which a licensor is able to exercise his control, namely by including provisions such as ‘trade mark usage’ and ‘quality control monitoring’. The way in which a licensor will implement trade mark usage is by specifying the manner in which the licensed trade mark will be used, or stipulate which goods or services the trade mark should be in connection with, along with advising on advertising and promotion methods. It is possible for the licensor to dictate that the licensee contacts him and obtains permission before presenting the trade mark in any way. In order to supervise the licensee, the licensor may demand access to the licensee’s facilities, raw materials, finished products, personnel and records as a means of checking the quality standards.

A trade mark license will commonly deal with issues such as royalty payments, the license term and also exclusivity. Firstly, royalty payments are when a licensor grants a trade mark license in return for subsequent payments. The amount will usually be specified within the licence. Next, the licence term will relate to the length of time the licensee will be allowed to deal with the licensor’s trade mark, with a condition usually being stated within the license whether there will be a renewal period or if it can be terminated for a breach of the licence conditions. With regard to the exclusivity aspect, it is possible for a trade mark to be licensed exclusively to a single licensee or licensed non-exclusively to more than one licensee. A license may also be ‘sole’, where this is evident it will only be the licensee who can use the trade mark.

If licensing your trade mark is a genuine business opportunity for your company, you or the licensor should inform the IPO using the TM50 form. The IPO has no powers to investigate the terms of the licence; the necessity of the form is simply to explain about the licence so it can be recorded within the trade marks register. In contrast, when the license agreement ends or the licence details have changed you should use the TM51 form in order to inform the IPO. 

The fee for each form is £50, we charge £250.00+VAT to carry out the legal assignment and lodge it with the UK IPO, a small price to pay for a potential successful business prospect.

Harry Jeffries

Southampton Solent Law Student