Archives For December 2014

Trademark Licenses 101

December 23, 2014 — Leave a comment

Once you have a trademark for your business there are a number of ways to make it work for you. One of these ways is to license your trademark to other people who want to use it in association with your company or your products. These people – the licensees – would then develop, manufacture, and market products with your company’s trademark with your permission. That would make your company the licensor.

In order to grant a trademark license, the following has to be identified:

  • The trademark itself
  • The licensee(s) and the licensor
  • The types of goods or services that may be offered with the trademark
  • What specific rights are licensed, including the territory approved under the license
  • The quality of the goods or services that may be delivered to customers
  • The length of the license term

Why Trademark Licenses Matter

Trademark licenses are vitally important to companies that are trying to defend their trademark products or services. Since the trademark is a representation of the owner’s reputation, it is something on which many consumers rely when they are making their product and service choices. If a company licenses your trademark and then puts out shoddy products, that affects what customers think of your company.

It could cost you sales, and adversely affect your bottom line. Thus, you should take your licenses very seriously.

Why Quality Matters so Much – A Legal Perspective

Some countries are very particular about what the treatment of a trademark means. According to the International Trademark Association (INTA), in the United States a trademark may be deemed abandoned if the licensor (your company) does not maintain enough control over the quality of the products or services being offered by the licensee. That means you could lose your trademark if you let companies license it and then put bad products or services into the marketplace under that trademark. That kind of problem is something from which many companies never recover.

Other Issues Addressed in Trademark Licenses

There are also other items commonly addressed trademark licenses. These include how long the license is good for (the term), the exclusivity, and the royalty.

The term is important and so are the termination rights. For example, you might set up an automatic annual renewal with termination rights in your favor. Whether you grant exclusivity is another important issue because it can restrict your ability to license your mark to other companies. Before you decide how to offer your trademark to the licensee, consider whether you want to license it to others, use it yourself, or both. If you grant a sole license to a licensee, he or she is the only person or company who may use that license. Lastly, you should cover the royalty or license fee and spell out the terms as clearly as possible in the agreement.

More Information

Trademark licenses are best drafted by attorneys. But before you request help with a license you should make sure you fully understand the basics of trademark law. For that reason, we recommend you check out these other trademark law blog posts:

*This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.

As you may recall from other posts on this blog, trademark laws grant a trademark owner the exclusive right to use their registered mark in commerce with respect to specific goods or services. Those rights extend not only to other people or companies using their exact registered mark, but also to uses of marks that are “confusingly similar” to the registered mark. The USPTO uses this rule to deny marks that, although spelled differently, are pronounced the same.

However, due to rulings in the Federal Courts (which are separate from the USPTO), the Supreme Court has decided to weigh in on this issue via the Sealtight Case.


B&B Hardware sells self-sealing, leak-proof screws and bolts for use in high-tech industries such as the aerospace and medical industries, under the name Sealtight. B&B obtained a registration for this mark in 1993.

Hargis Industries, on the other hand, sells construction screws for buildings under the name Sealtite Building Fasteners.

When Hargis applied for a federal trademark for Sealtite in the late 90’s, B&B objected arguing the use of Sealtite would cause consumer confusion between the two companies and their product lines. The USPTO Trademark Trial & Appeal Board (“TTAB”) agreed with B&B and denied the registration by Hargis.

However, Hargis has argued that its’ products are different from those sold by Sealtight and that Hargis’ customers are a different class of customers. Hargis has even won two jury verdicts in U.S. Federal Courts on this point. One judge even found that B&B attempted to manufacture evidence to bolster it’s trademark infringement claims.

With a split between the Federal Courts and the TTAB, the U.S. Supreme Court agreed to hear the case and decide who should have the final say on this matter.

The Supreme Court Hearings

The Justices heard an hour long oral argument last week on the issue.

Justice Sotomayor said that it only makes sense that the USPTO proceedings should be given some weight in Federal Court cases otherwise the agency’s powers would be rendered “almost irrelevant.” And the Obama administration argued in favor of B&B by claiming that the Federal Courts should defer to the USPTO on such matters.

However, Justice Ginsburg (along with some other Justices) showed some signs of agreement with Hagis. For example, Ginsburg made statements that implied that the USPTO proceedings might not have controlling effect in Federal Courts because the stakes in such cases are much higher than the stakes at the TTAB level.

As a result, it is not clear how the court will rule on this matter. The one thing we do know is that a decision is likely to be announced in June.

What This Means for You

The outcome of this case will almost certainly impact future trademark disputes. And the most important thing for you to take away from this current dispute is the importance of using appropriate guidance and assistance when dealing with trademark matters.

If you want to keep up with trademark law and learn how Federal registration can benefit your business, be sure to subscribe to Mighty Updates, the MightyMarks® email newsletter!

Image: Thinkstock/Willard
*This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.