5 Things to Consider Before Licencing Your Trade Mark
Trade marks are one type of intellectual property (IP) protection that you can obtain for your business. One main benefit of trade mark registration is the ability to commercialise your trade mark, with trade mark licencing being one way to do this. Trade mark licencing is the process by which a trade mark owner allows someone else to use their trade mark, usually within pre-determined parameters for a fee. To help you better understand trade mark licencing agreements, this article will take you through four tips you should consider before licencing your trade mark.
1. Choose Your Licence Type
The first thing to consider when deciding to licence your trade mark is your preferred licencing type. There are three main types of licencing agreements you may wish to pursue with third parties. These three licencing types are:
- exclusive, which means the licensee is the only person able to use your trade mark. This type of licencing agreement prevents even you, the owner and licensor of the trade mark, from using your trade mark.
- non-exclusive – A non-exclusive licencing agreement permits both the licensee and the licensor to use the trade mark concurrently. This is common for franchises.
- sole – Sole licencing agreements allows the licensor to use the trade mark along with the licensor. However, this licencing agreement prohibits other licensors from obtaining access to the trade mark in the same area.
Once you know the licencing agreement types, you can choose the best option for your business needs.
2. Know the Benefits
Before licencing your trade mark, you should consider the benefits to decide if this aligns with your business needs.
The primary benefit of trade mark licencing is the ability to earn a passive income from your trade mark. Licencing agreements usually incur an upfront payment and a royalty fee, enabling you to make money off your trade mark without using it yourself.
Trade mark licences are also an excellent way to spread your brand into foreign markets without any direct investment from yourself. This can help expand your brand recognition, thereby increasing the value of your trade mark and overall business.
3. Know the Risks
Despite the benefits of trade mark licencing, there are also several associated risks. You should carefully consider these before deciding if trade mark licencing is suitable for you.
A key disadvantage associated with licencing agreements is that you will ultimately lose a degree of control over your trade marks. This can potentially hinder your brand reputation, which may lead to your brand suffering.
Further, the very nature of licencing agreements means that you risk increasing competition. For this reason, many licencing agreements are cautious about stipulating geographical limitations, limiting the competition between the licensor and the licensee.
4. Consider the Terms
It is also important that you consider the potential terms you might include in a licencing agreement. There are a few key elements in licencing agreements, such as:
- the type of licencing agreement;
- agreement duration;
- quality control measures;
- geographical limitations;
- what will constitute a breach of contract; and
- dispute resolution options.
Considering what a licencing agreement will look like for your business will assist you in determining if a licencing agreement is a good option for you.
A licencing agreement is a great way to commercialise your trade mark and reap the benefits of your trade mark registration. However, before deciding if trade mark licencing is a good option for you and your business, there are a few things you should consider. This includes:
- licencing types;
- benefits of licencing agreements;
- associated risks; and
- potential licencing agreement terms.
Frequently Asked Questions
There are a multitude of benefits for registering your trade mark. Trade mark licences are a great way for businesses to receive a passive income, enter new markets and increase brand recognition.
Before deciding if trade mark licencing is a good option for you and your business, you should consider a few key things. This includes the available licencing types, the benefits and risks of licencing agreements, and the potential terms you can include in your licencing agreement.