Trademark license

Trademark licensing is the type of business agreement. The proprietor receives a certain amount of money in exchange for the sharing of the trademark.

Trademark licensing is the process in which a registered trademark owner is called licensor and allows another party called the licensee to make the right to use a trademark to offer or sell or distribute the specific products or services under the trademark licensor’s agreement.

Licensor receives a certain amount of money or royalty called as a consideration in the exchange of sharing for trademark. Royalty is calculated based on a percentage of sales, based on output units produced and in some cases based on the percentage of profits. Apparels, automatics and software and many other goods or services are sold under the trademark licensing agreement.

Types of trademark licensing

Generally there are three types of trademark licensing.

• Exclusive license: the licensee gets sole commercial rights of the trademark, licensor not having any commercial rights but gains a certain amount of money for entering into a trademark licensing agreement. The Licensee also earns in future profits or losses on trademark licensing.
• Sole license: the licensor and licensee both use the trademark. The Licensor cannot give the right to use the trademark to the third party.
• Non -exclusive license: The licensor, licensee and any outsider third party use the trademark license.

Trademark licensing agreement includes:

• The legal names of the parties( licensor and licensee)
• The type of entity of the licensor and licensee
• Products and services concerned with the agreement
• Payment details such as whether licensor will get royalties or lump sum and how much these payments the licensor will get
• Trademark including the agreement
• The geographic area where the licensee may operate and sell the goods and products
• Type of license either it may be exclusive, sole and non- exclusive license
• The Date the license will start and date of expiration of license
• Quality control provisions define the clear standards about the quality and nature of the products under the trademark license.

Some additional provisions can help to improve the trademark licensing agreement for both parties. The provisions are

• A License can be renewed
• Over a period of time license validity may lose
• The licensor and licensee having some responsibilities when the license period ends.
• Penalties will attract if either party breach the license
• Any breach must solve in a specific time frame.

Advantages of the trademark licensing:

• Reach new markets: the licensor and licensee expand their businesses through the partner’s promotion and distribution channels.
• Increase brand recognition: licensing improves visibility when both the brands are putting on the new products and new market channels. As a result trademark license improve the awareness among the consumers.
• Distribute workload: when licensor signs the trademark licensing agreement, the licensee can take some pressure off work I,e licensee becomes responsible for the quality of the products or services.