Why Lawyers Recommend Using a Trade Mark Licence Agreement
Trade mark owners have the exclusive right to use, licence, and sell their trade mark. Licensing is a great way to commercialise your intellectual property without selling it. However, you should clearly set out the terms on which another party can licence your trade mark. This article outlines the different types of licences available and the benefits of using a licence agreement.
Licensing Your Trade Mark
Licensing is where a trade mark owner (the licensor) agrees to let another person (the licensee) use their trade mark. A licence agreement generally applies over a specified period of time for an agreed price. However, once the licence period has expired, the licensee no longer holds the exclusive rights to use the trade mark. Rather, this right returns to the licensor. This makes a licence agreement distinct from an assignment, where you give your trade mark rights to another party.
As a trade mark owner, you can licence your trade mark either exclusively or non-exclusively.
An exclusive licence means that no other person except the licensee can use your trade mark within the period specified. On the other hand, a non-exclusive licence allows different people to use the trade mark simultaneously during the period specified.
The main benefit of a non-exclusive licence is that you can continue to use your trade mark whilst commercialising it at the same time. For instance, in the context of a franchised shoe repair shop, a franchisee would likely have a non-exclusive licence to use the franchisor’s logo.
What is a Trade Mark Licence Agreement?
Whether you decide to licence your trade mark exclusively or non-exclusively, a trade mark licence agreement can determine the licence conditions.
A trade mark licence agreement is a formal agreement between the trade mark owner (the licensor) and another person (the licensee) which details the conditions of using the trade mark.
Both parties largely determine the terms of the agreement. Typically, the trade mark licence agreement will specify the:
- period in which the licensee can use the trade mark;
- range of products which the trade mark can protect;
- geographic region in which licensee can use the trade mark; and
- the royalties the licensor will receive based on the sales of the products sold under the licensed trade mark.
A licence agreement is also likely to determine remedies available to the licensor in the instance where the licensee breaches the agreement. Put simply, a trade mark licence agreement clearly sets out what the licensee can or cannot do with your trade mark.
Why Use a Trade Mark Licence Agreement?
Below are three reasons why lawyers recommend using a trade mark licence agreement.
Like any agreement, putting things in writing can clearly set out both parties’ terms. Licence agreements typically comprise a range of conditions. These include restrictions on products to which the trade mark can be applied or limitations on the geographical areas in which one can use the trade mark. Therefore, it would be beneficial for both the licensor and the licensee to know what they can or cannot do with the trade mark.
2. Avoid Breaching the Agreement
If a licensee is aware of the licensing conditions upon which they can use the trade mark, there is a less likely chance that they will breach the licence agreement. The agreement can function as a roadmap for the licensee to follow when using the trade mark. Ultimately, it can foster a good relationship between both parties and ensure that the licensee uses the trade mark in compliance with the parties’ agreed terms.
3. Enforcing the Agreement
If a licensee breaches the terms of the agreement, the licensor has legal grounds to enforce the agreement. Contract law largely governs licence agreements. Therefore, the licensor would have a range of remedies available to them in the instance of a breach of the agreement, such as monetary damages or any remedies detailed in the licence agreement itself. Ultimately, a licence agreement protects the licensor from any misuse of their trade mark during the licensing period.
A trade mark licence agreement can clarify the terms upon which the licensee can use your trade mark within the period of time specified. Since the agreement can clearly set out what the licensee can or cannot do with your trade mark, it can help prevent potential breaches. If the licensee breaches the conditions of using the trade mark, a licensor can enforce the agreement and seek remedies in the instance where the licensor has incurred a loss as a direct result of the breach of the agreement. If you require further legal assistance with your trade mark licence agreement, our experienced trade mark lawyers can assist. Call us on 1300 657 423 or complete the form on this page.
Frequently Asked Questions
Whilst anyone can draft a licence agreement, it would be wise to seek a lawyer’s advice to ensure that the terms of the agreement reflect the terms you and the licensee agreed upon.
If you licence your trade mark, the licence agreement might specify any royalties you may earn as the licensor from any sales made by the licensee when using your trade mark. The amount of royalties earned depends on what both parties agree to.