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.
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:
- What Everybody Ought to Know About Trademark Law
- 5 Keys to Protect Your Trademark
- Justice Explained: Trademark Infringement & Defenses
*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.