This trademark license agreement is between
The Licensor (i) has registered or (ii) has applied for registration of the trademarks and service marks listed on Schedule 1 (collectively, the "Marks").
The Licensee is engaged in
The Licensee wants to use the Marks in connection with the Licensee Business and to produce the licensed products and services listed on Schedule 2 (collectively, the "Licensed Products or Services"); and
The Licensor is willing to permit the Licensee to use the Marks in connection with the Licensee Business for the mutual benefit of the parties.
The parties therefore agree as follows:
1. GRANT OF LICENSE.
- (a) License. The Licensor hereby grants to the Licensee a
non exclusive,worldwide, nontransferable, nonsublicensable, revocable license to use the Marks, solely in connection with the Licensee Licensed Products or Servicesin the Territory (as defined in section . The Licensee may make no other use of the Marks and this license does not include any right for the Licensee to grant sublicenses.) - (b) No Unrelated Use. The Licensee may not use a Mark in connection with a business unrelated to the Licensed Products or Services without the prior written approval of the Licensor.
- (c) No Use of Other Trademarks. The Licensee has no right or license to use any trademark, service mark, or trade name of the Licensor that is not listed on Schedule 1.
(d) Licensor's Use of Marks. The Licensor reserves the right to use , and to license other parties to use, the Licensed Marks throughout the world for any purpose.
2. NO ASSIGNMENT OR TRANSFER.
The Licensee hereby acknowledges and agrees that the rights granted to the Licensee by and obtained by the Licensee as a result of or in connection with this agreement are license rights only, and that nothing contained in this agreement constitutes an assignment of the Licensor's rights in the Marks.
4. TERM AND TERMINATION.
- (a) Term. This agreement will become effective as described in section
. Unless it is terminated earlier in accordance with subsection (b), this agreement will end on (the " Initial Term").The Licensor may grant the Licensee an option (the "Option") to extend the Initial Term for an additional period of months year(s) (the "Extension Term") if the Licensee: (i) provides the Licensor with at least days' notice of its intention to exercise the Option and (ii) pays the Licensor for the Extension Term with its notice of the exercise of the Option. The Initial Term and the Extension Term are collectively referred to in this agreement as the "Term." - (b) Termination. This agreement may be terminated:
- (i) by either party for a material breach of any provision of this agreement by the other party, if the other party's material breach is not cured within
days of receipt of written notice of the breach; - (ii) By the Licensor at any time and without prior notice, if:
- A. the Licensee attempts to assign, sublicense, transfer, or otherwise convey, without obtaining the
- Licensor's prior written consent, any of the rights granted to the Licensee by or in connection with
- this agreement;
- B. the Licensee fails to obtain the Licensor's approval of the Licensee's use of the Marks in
- accordance with section
below; - C. the Licensee discontinues the manufacture and sale of the Licensed Products or Services for a
- period of
consecutive months after the effective date described in section ; - D. the Licensee uses the Marks in a manner that violates, or is otherwise inconsistent with, the
- restrictions imposed by section
below; or - E. the Licensee uses the Marks in a manner not expressly permitted by this agreement.
- (i) by either party for a material breach of any provision of this agreement by the other party, if the other party's material breach is not cured within
- (c) Effect of Termination. On termination of this agreement, all rights granted under it, including the Licensee's right to use the Marks, will end and the Licensee shall promptly discontinue all use of the Marks or similar trade names containing the Licensor's name and stop further use of the Marks in advertising, commercial registers, directories, Internet and websites, telephone listings, and all similar listings.
5. CONSIDERATION.
(a) License Issue Fee. On or before the effective date described in section , the Licensee shall pay to the Licensor a nonrefundable fee of (the "License Issue Fee"). The License Issue Fee is not an advance toward royalties that may become due during any calendar quarter of the Term and the Licensee may not deduct the amount of the License Issue Fee from royalties that may become due from the sale of Licensed Products or Services. (b) Royalties. In addition to the License Issue Fee, the Licensee shall pay to the Licensor a continuing royalty of percent of Gross Sales of all Licensed Products or Services sold by the Licensee or of its subsidiaries, divisions, or affiliates. As used in this agreement, "Gross Sales" means the Licensee's billing price to customers or distributors, including the royalty amount but less: (i) customary trade discounts actually given; (ii) returns; and (iii) transportation charges on returns.
If the Licensee sells Licensed Products or Services to a party affiliated with the Licensee at a price less than the regular price charged to other parties, the royalties payable under this agreement will be computed on the basis of the regular price charged to other parties. No deduction from the royalties owed are allowed for uncollectible accounts, or for taxes, fees, assessments, advertising, or other expenses that may be incurred or paid by the Licensee, except as specifically enumerated in the definition of Gross Sales, above. The Licensee shall report and pay royalties quarterly. The royalty report deadline is 30 days after the end of each calendar quarter. (c) Minimum Royalty. The Licensee shall pay the Licensor a minimum royalty (the "Minimum Royalty") during each year of the agreement as a minimum guarantee against royalties to be paid during that year. The remedy of the Licensor for failure of the Licensee to pay this Minimum Royalty is limited to termination of this agreement under section above.
6. MAINTENANCE OF RECORDS AND AUDIT RIGHTS.
- (a) Books and Records. The Licensee shall keep accurate books of account and records covering all transactions relating to this agreement. The Licensee will permit the Licensor and its nominees, employees, accountants, agents, and representatives to (i) have reasonable access to inspect those books and records during normal business hours on reasonable notice, and (ii) to examine those books and records. The Licensee shall maintain these books and records in good order and condition for a period of
years after the termination of this agreement or, if there is a dispute between the parties, until that dispute is resolved, whichever is latest. Receipt or acceptance by the Licensor of any sums paid by the Licensee will not preclude the Licensor from exercising its rights under this agreement. (b) Underpayment of Royalties. If an inspection or examination referred to in subsection (a) above discloses, or a party otherwise discovers, an underpayment of royalties or other fees, the Licensee shall pay to the Licensor the amount of that underpayment (plus interest on it from the date of underpayment to and including the date of payment in full at %) not more than days after its discovery. (c) Overpayment of Royalties. If an inspection or examination referred to in subsection (a) above discloses, or a party otherwise discovers, an overpayment of royalties or other fees, the amount of that overpayment will be credited against future payments owed by the Licensee. If the period for which the overpayment was made is the final period covered by this agreement, the Licensor shall pay the overpayment amount to the Licensee within days after its discovery.
7. OWNERSHIP AND USE OF MARKS.
- (a) Ownership of Marks. The Licensee acknowledges that the Licensor is the owner of the Marks and all rights in those and that nothing in this agreement gives the Licensee an interest in the Marks, except under the license granted by this agreement. The Licensee further acknowledges that the rights granted to the Licensee by this agreement are license rights only, and nothing contained in this agreement constitutes an assignment of the Licensor's rights in the Marks.
- (b) Limitation on Licensee's Actions. The Licensee may not do anything inconsistent with the Licensor's ownership of the Marks, and may not claim adversely to the Licensor, or assist any third party in attempting to claim adversely to the Licensor, with regards to that ownership. The Licensee may not challenge the Licensor's title to the Marks, oppose any registration or re-registrations of the Marks, or challenge the validity of this agreement or the licenses granted in this agreement. Furthermore, the Licensee may not register or attempt to register any trade name or trademark that, in whole or in part, incorporates or is confusingly similar to the Marks.
- (c) Assistance in Protecting Goodwill. The Licensee's use of the Marks inures to the benefit of the Licensor and the Licensee shall cooperate fully with the Licensor to secure and maintain the goodwill of the Licensor in the Marks. To that end, the Licensee may not misuse the Marks, take any action that would bring the Marks into public disrepute, use the Marks, or any mark or name confusingly similar to them, in its corporate or trade name, or take any action that would tend to destroy or diminish the goodwill in the Marks.
- (d) Notification of Infringement. The Licensee shall promptly notify the Licensor of:
- (i) any claim, demand, or cause of action based on or arising from any third-party unauthorized use of the Marks or any confusingly similar marks;
- (ii) any infringement or instance of unfair competition of which the Licensee may become aware involving any of the Marks; or
- (iii) any challenge to the Licensee's use of any of the Marks.
However, the Licensee may not institute any proceedings for infringement of the Marks without the prior written approval of the Licensor.
8. QUALITY STANDARDS.
- (a) Established Standards. The nature and quality of all products sampled, sold, or otherwise disposed of by the Licensee and covered by the Marks will conform to the standards established by and under the control of the Licensor (collectively, the "Quality Standards"). The Quality Standards will be reasonable, no greater than the quality standards imposed by the Licensee's customers generally, and at least equal in quality to the products (in the aggregate) sold by the Licensee before the effective date described in section
. - (b) Review of Associated Products. At the Licensor's reasonable request, the Licensee shall provide samples to the Licensor of all products sampled, sold, or otherwise disposed of by the Licensee that include the Marks. Alternatively, the Licensor may request that the Licensee ensure that those products conform to the Quality Standards. To this end, the Licensee shall permit reasonable inspection of its facilities during business hours by an authorized representative of the Licensor, for that representative to inspect the Licensee's operations, methods of manufacture, materials used, storage and packing areas, and the like, associated with the manufacture of products that include the Marks. Any inspections conducted by the Licensor to ensure that the Quality Standards have been satisfied will be at the expense of the Licensor.
- (c) Representative Samples Required. On the Licensor's request and without charge to the Licensor, the Licensee shall deliver to the Licensor representative samples of labels, containers, advertisements, catalogs, letterhead, and the like, containing the Marks to enable the Licensor to ensure that those Marks are used only in a manner set forth on Schedule 1.
- (d) Other Specifications. The Licensor may impose on the Licensee, as necessary, other specifications or requirements not provided for under this section to maintain control over the Licensee Business to ensure the requisite Quality Standards with respect to products manufactured by the Licensee that include the Marks.
9. MARKING ON PRODUCTS.
- (a) Designation that Marks are Licensed. The Licensee shall designate the Licensed Products or Services in the manner specified by the Licensor in writing, to indicate the rights of the Licensor in the Marks, including the registration status of the Marks, and that those products or services are manufactured under license.
- (b) Proper Notice and Acknowledgment. Every use of the Marks by the Licensee shall incorporate in an appropriate manner an "R" enclosed by a circle or the phrase "Reg. U.S. Pat. & Tm Off."
- (c) Format and Appearance. The Licensor retains the right to specify, from time to time, the format in which the Licensee may use and display the Marks, and the Licensee shall use or display the Marks only in formats approved by the Licensor. The Licensee may not use any colorable imitation of the Marks, or any variant form (including variant design forms, logos, colors, or type styles) of the Marks not specifically approved by the Licensor.
10. LICENSOR'S REPRESENTATIONS.
The Licensor hereby represents to the Licensee that it:
- (a) is the exclusive licensor of interest in the Marks;
- (b) has not assigned or transferred the Marks or agreed to do so;
- (c) has full power and authority to enter into this agreement and to make the grant of license provided in section 1;
- (d) is not aware of any violation, infringement, or misappropriation of any third party's rights (or any claim thereof) by the Marks;
- (e) is not aware of any third-party consents, assignments, or licenses that are necessary to perform under this agreement;
- (f) was not acting within the scope of employment of any third party when conceiving, creating, or otherwise performing any activity with respect to the Marks listed in Schedule 1 and purportedly licensed in section 1.
The Licensor shall immediately notify the Licensee in writing if any facts or circumstances arise that would make any of the representations in this agreement inaccurate.
11. LICENSEE'S REPRESENTATIONS.
The Licensee hereby represents to the Licensor that it:
- (a) has full power and authority to enter into this agreement; and
- (b) has sufficient resources to complete the transaction contemplated by this agreement and the authority to commit those resources for the purposes of this transaction.
The Licensee shall immediately notify the Licensor in writing if any facts or circumstances arise that would make any of the representations in this agreement inaccurate.
12. DOCUMENTATION.
- (a) Recordation of Agreement. As soon as is reasonably possible following a request from the Licensee, the Licensor shall provide the Licensor with a complete copy of all documentation (in any format) relating to the Marks for the Licensee's own use, to meet record-keeping requirements of the Licensee, or to allow the Licensee to exercise its rights granted under this agreement. The Licensor shall also, on request:
- (i) execute and deliver to the Licensee any additional papers, including any separate licenses of the Marks, reasonably necessary to record the license in the United States
and throughout the world ; and - (ii) generally do all other lawful acts reasonable and necessary to record the agreement in the United States
and throughout the world .
- (i) execute and deliver to the Licensee any additional papers, including any separate licenses of the Marks, reasonably necessary to record the license in the United States
- (b) Licensee Assistance in Maintaining Marks. On request, the Licensee shall provide the Licensor or its authorized representatives with information about its use of the Marks which the Licensor may reasonably require and will render any (nonmonetary) assistance reasonably required by the Licensor to maintain the applications, registrations, and common law rights of the Marks.
13. INDEMNIFICATION.
(a) any claim by a third party that any of the Marks or their use or reproduction infringes or misappropriates any trademark, trade secret, or other intellectual property; (a) the Licensee promptly gives notice of the claim to the Licensor; (b) any claim by a third party that this agreement conflicts with, violates, or breaches any contract, assignment, license, sublicense, security interest, encumbrance, or other obligation to which the Licensor is a party or of which it has knowledge; (b) the Licensor controls the defense and settlement of the claim; (c) any claim relating to any past, present, or future use, licensing, sublicensing, distribution, marketing, disclosure, or commercialization of any of the Marks by the Licensor; and (c) the Licensee fully cooperates with the Licensor in connection with its defense and settlement of the claim; and (d) any litigation, arbitration, judgment, award, attorneys' fees, liability, settlement, damage, loss, and expense relating to (a), (b), or (c) above. (d) the Licensee stops all sales, distribution, and public use of or relating to the infringing Marks, if requested by the Licensor.
(a) obtain the right for the Licensee to continue to use the infringing Marks; (b) modify the infringing Marks to eliminate the infringement (if practicable); (c) provide substitute noninfringing Marks to the Licensee pursuant to this agreement (if practicable); or (d) refund the amount paid under this agreement for the infringing Marks to the Licensee, on such terms and conditions as the parties may thereafter agree.
14. NO AGENCY RELATIONSHIP.
This agreement creates a licensor-licensee relationship between the parties. Nothing in this agreement may be construed to establish a joint venture, agency, or partnership relationship between the parties.
15. ASSIGNMENT AND DELEGATION.
- (a) No Assignment. Neither party may assign any of its rights under this agreement, except with the prior written consent of the other party. All voluntary assignments of rights are limited by this subsection.
- (b) No Delegation. Neither party may delegate any of its rights under this agreement, except with the prior written consent of the other party.
- (c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.
16. GOVERNING LAW.
- (a) Choice of Law. The laws of the state of
govern this agreement (without giving effect to its conflicts of law principles). - (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in
County, .
17. AMENDMENTS.
No amendment to this agreement will be effective unless it is in writing and signed by both parties or an authorized representative.
18. NOTICE.
Any notice or other communication provided for in or given under this agreement to a party will be in writing and given in person, by overnight courier, or by mail (registered or certified mail, postage prepaid, return-receipt requested) to the respective parties as follows:
- If to the Licensor:
- If to the Licensee:
19. SEVERABILITY.
If any provision contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if the invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this agreement to be unreasonable.
20. WAIVER.
No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.
21. ENTIRE AGREEMENT.
This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement with respect to the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.
22. HEADINGS.
The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement's construction or interpretation.
23. EFFECTIVENESS.
This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this agreement.
24. NECESSARY ACTS; FURTHER ASSURANCES.
Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.
[SIGNATURE PAGE FOLLOWS]
Each party is signing this agreement on the date stated opposite that party's signature.
Date:_________________ |
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Date: ________________ |
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[PAGE BREAK HERE]
SCHEDULE 1
LIST OF TRADEMARKS AND SERVICE MARKS
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| TRADEMARK/ SERVICE MARKS |
REGISTRATION/ APPLICATION NUMBER |
DATE OF FILING/ REGISTRATION |
[PAGE BREAK HERE]
SCHEDULE 2
LICENSED PRODUCTS AND SERVICES
How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.
Trademark license agreement: How-to guide
Intellectual property assets such as trademarks hold significant value for brand owners. Brand owners can consider licensing their trademarks as an effective business strategy. Licensing enables brand owners to authorize third parties to use their trademarks and receive royalties or licensing fees. This mutually beneficial arrangement can result in several advantages for brand owners, such as increasing revenue and widening their market reach while reducing costs for the licensee.
Before obtaining a license, companies must ensure the licensor owns the desired item's title. A properly written trademark license agreement can be helpful in both cases.
What is a trademark?
To begin exploring the world of trademark licenses, it is vital to understand a trademark first. A trademark is a type of branding element, such as a logo, name, slogan, or design, that provides exclusive rights to businesses. These rights allow businesses to prevent others from using similar or identical elements that could lead to confusion or misrepresentation of their products or services. Trademarks benefit both businesses and consumers, as they help companies protect their brands, and consumers can make informed choices by avoiding confusion in branding elements.
With a trademark license, the trademark owner permits another party, the licensee, to use that mark in exchange for specific fees or royalties.
What is the purpose of a trademark license?
There are many advantages to obtaining a trademark license. Some of them are:
Managing the authorized use of trademarks
A trademark license establishes the ownership and exclusive rights to use the mark. In case of any dispute, your license is proof of the trademark's validity, which can be used in court. The trademark license is the evidence of brand ownership.
Control over trading activities
Businesses typically evaluate potential licensees to ensure they are financially secure and well-managed enough to use their trademark. For this reason, most licensors establish specific requirements that new licensees must meet. Major brands have an in-house licensing program that governs the trade of products and services sold nationally and internationally. For example, the Licensing Program of Harvard University usually includes apparel, stationery, bags, and novelty items. It offers control over the sale of the items on a financial and quality level.
Goodwill management
Businesses grant exclusive rights to use their trademarks for specific goods and services through a license. This protects their reputation and prevents others from exploiting their hard-earned market standing. It discourages deceptive practices that could harm customers and dilute their confidence in the brand.
What are some examples of trademark licensing?
Examples of trademark licensing include:
- A sports team allowing third-party merchandisers to use its logo.
- A popular cartoon character being used on third-party clothing, toys, school bags, and other items that interest kids.
- A soft drink company permitting a licensee to sell branded products.
What is a trademark licensing agreement?
Trademark licensing is when a registered trademark owner (a licensor or proprietor) permits another party, a licensee, to manufacture and distribute specific products or services using the licensor's trademark. It outlines the terms and conditions of trademark usage by other businesses to avoid any violations or breaches.
Licensing intellectual property allows you to grow your business without the commitment of buying it. A trademark license agreement gives the licensor and the licensee guidelines about trademark licensing. It can also cultivate a more substantial reputation as you expand your business.
When should you use a trademark license agreement?
In modern-day business dealings, many scenarios arise where a company may choose a licensed mark. Some instances are:
Launching new products: A company may want to introduce new products without manufacturing them. To this end, it can license its trademark to a producer to create and sell the products under the brand's name.
Franchising: Franchisees license trademarks from franchisors to operate under a brand's name and system. It is a way for companies to boost sales and expand.
Co-branding partnerships: Companies can partner up and license each other's trademarks to create products that combine both brands' strengths.
What are the types of trademark license agreements?
Non-exclusive license agreements: A non-exclusive license is a trademark license that enables the licensee to use a trademark for specific goods or services while allowing the licensor to license the same trademark to other parties. It is granted to many parties, enabling them to use the trademark for the same products or services. Non-exclusive licenses are usually shorter in duration and may be less expensive than exclusive licenses.
Exclusive license agreements: An exclusive license grants the licensee the right to use a trademark for specific products or services. During the license period, the licensor is prohibited from issuing the same trademark to any other business or company. The licensor promises not to grant any other licenses with the same rights as those included in the agreement's field or scope. However, according to Chapter 7- Exclusive Licenses from the book Intellectual Property and Transactions, the licensor can issue unlimited licenses with different rights within the same field or permits with the same rights in another field. Exclusive licenses are typically granted for a particular duration and may be limited by geography.
Territory license: A license agreement between a licensor and a licensee allows the licensee to use the licensor's trademark in a specific geographic territory. This license type can be exclusive or non-exclusive and may be limited to a particular product or service. For example, a beverage company might grant a distributor an exclusive geographic territory license for a specific region or country.
Royalty-free license: A royalty-free license grants the licensee the right to use the licensor's trademark without paying royalties or fees. This license is commonly used when the licensor wants to promote its trademark without incurring licensing expenses for the licensee. Royalty-free licenses can be exclusive or non-exclusive and may be restricted to a specific product or service.
How is licensing intellectual property beneficial for a company?
Ability to grow its business: A licensing agreement builds a collaboration that can benefit both the licensor and the licensee in the long term. Licensees can leverage the emotions and trust earned by the mark throughout the years, such as pride and nostalgia in a sports team's logo or the pride embodied by a well-known apparel brand.
Workload distribution: A trademark licensing agreement can offer you the benefit of having a dependable and supportive business partner who can share some of your responsibilities. When you, as a licensor, enter into such an agreement, the licensee is responsible for ensuring that the goods and services produced with the mark meet specific quality standards.
Market expansion: Trademark licensing effectively leverages a brand's strength and expands its reach in an unexplored geographic territory while promoting brand recognition. A business can be developed by leveraging another's marketing and distribution channels.
How can licensing trademarks help brand owners maximize their revenue potential?
Licensing a trademark from another business can reduce the licensee's costs and increase the licensor's revenue. Businesses can generate extra income through trademark licensing without investing in product development or marketing.
- Regular income: Licensing a trademark can help the licensor generate regular income by granting permission to use the license to as many licensees as they want (except in some cases).
- Diversified income stream: It also helps brand owners diversify their income streams, reduce reliance on traditional revenue sources, and create new revenue streams.
- Royalties and licensing fees: Granting licenses to third parties is an effective way for brand owners to generate revenue from royalties or licensing fees and defend against potential claims.
- Monetize the intellectual property: Licensing trademarks can help brand owners monetize their intellectual property in markets or industries where they may not have a direct presence or expertise, allowing them to maximize their revenue potential.
What is the difference between a trademark license and a trademark assignment?
- A trademark license is an agreement between the licensor and licensee that allows the latter to use a trademark owned by the former in exchange for royalty payments.
- In a trademark assignment, the ownership of a registered trademark (like a brand name or logo) is permanently transferred to another party. Trademark assignments allow for the easy transfer of marks. All aspects of the trademark, including registration rights, the ability to create derivative works, income, royalties, and claims, are transferred to the new owner during a trademark assignment.
What are the key aspects to consider for a trademark license agreement?
Gathering information about the potential licensee's business
Companies must conduct a comprehensive evaluation of potential licensees' business potential. This evaluation process ensures that the licensees have the required resources and expertise to maintain the high standards of the products or services associated with the trademark. This step is critical to safeguarding the company's brand reputation and keeping its customers' loyalty.
Seeking due-diligence
Thorough research is crucial before entering into any agreement. It is recommended that searches be conducted with the United States Patent and Trademark Office (USPTO), Doing Business As (DBA) filings, and other government agencies to obtain a trademark license and online directories to ensure that the licensor has complete and exclusive rights to the property.
For instance, the USPTO could provide important information about the mark's value and scope, whereas the DBA can help brand your company. Hiring a professional to help you with your investigation is advisable, as comparing trademarks requires specialized knowledge of what marks are considered confusingly similar or deceptive.
Non-transferable ownership rights
It is essential to understand that no ownership rights are transferred during this exchange.
Reviewing the agreement
During the initial agreement signing, both parties should thoroughly review the agreement to ensure all the necessary deal points. Be clear and specific with your expectations and terms. Communicate effectively to avoid any misunderstandings and achieve successful results. Moreover, businesses should periodically review and update their licensing agreements to keep up with changes in the market, the industry, and the law.
Signing copies of the agreement
After drafting the agreement, both parties must sign two copies: one for the licensor and another for the licensee.
Recording with the authorities (United States Patent and Trademark Office)
After both parties have duly signed the agreement, it is highly advisable to register the document with the United States Patent and Trademark Office (USPTO) and ensure the legality of the trademark. It would convey the message to the public about the parties that possess the legitimate right to use the mark. Furthermore, recording the agreement may also safeguard the licensor from any allegations that they have surrendered or lost their rights to their trademark.
Monitoring the quality standards and appearance
Trademark licensing heavily relies on quality control, which ensures the reliability of the products or services that bear the licensed trademark. As the trademark owner, you need to ensure that the licensee uses your trademark in a way that upholds its quality standards. However, balancing too much and too little quality control is also essential.
If there is no quality control, there is a risk that your licensee may not use your trademark up to the standards expected, leading to a loss of its uniqueness. For instance, a trademark of your business on every other product will no longer signify its unique selling proposition. Additionally, such trademark usage on low-quality products will dilute their quality. A trademark that is too generic loses its distinctiveness. Therefore, it is crucial to carefully incorporate quality control into trademark licensing.
Engaging a notary (if required)
Depending on the nature of its terms, decide to have your agreement notarized. It can limit later challenges to the validity of a party's signature.
Contacting an attorney
If your agreement involves significant risks and complex terms, contact an attorney to help draft a document that meets your requirements.
How to draft a trademark license agreement?
Here are the crucial components of a trademark license agreement.
Introduction
This section details the parties involved in the agreement, including any relevant information about their organizations. The parties in the agreement are referred to as "licensor" and "licensee." The "licensor" is the party that licenses their interest, and the "licensee" is the party that receives it.
Recitals
This section provides critical background information about the parties and includes the intent to license rights in the licensed marks. It is a good practice to specify the industry in which the licensed marks will be used (if the licensee operates in multiple sectors) since using the mark will be restricted to this sector.
Grant of license
This section describes the extension and acceptance of the license of the trademarks and service marks. A clear and detailed description of the licensed property helps here.
No assignment or transfer
This section describes that a license provides only specific and limited rights to the licensee. The licensee can't sell or transfer its rights, which are only partially and temporarily offered. It mandates that the licensee seek the licensor's advanced written permission to perform an assignment or transfer.
Territory
This optional section delimits the geographic territory where the licensee can use the licensed marks. It allows the licensor to restrict the licensee's rights further.
Term
This section outlines the duration of the agreement and the license. It specifies that the agreement will remain in effect until terminated or services are completed.
Termination
This section explains the circumstances that may result in the termination of the agreement before its term ends. These can be:
- The party who wants to terminate the agreement must provide written notice promptly.
- They must also inform the other party about the notice period required for the earlier termination or notify them of a breach.
- Specific actions related to how the licensee uses or doesn't use the licensed marks can trigger the automatic termination of the agreement.
- If the agreement is terminated, the licensee must stop using the licensed marks immediately.
Consideration
This section explains the fees that the licensee pays to the licensor to obtain a license for their property. These fees can include the license issue fee, royalties, per-unit royalty, and minimum royalty. It also specifies the payment frequency, such as a one-time lump-sum fee or a series of installments made over time.
Maintenance of records and audit rights
This section describes the licensee's requirement to maintain accurate books and records about sales made according to this agreement.
Ownership and use of marks
This section defines the licensor as the rightful owner of the licensed marks. It limits the licensee's actions, which may undermine the licensor's ownership of the licensed marks.
- The licensee must notify the licensor before taking any action against a third party for infringement, and the licensor must approve in writing.
- The licensee may only use the licensed marks related to its business with the licensor's prior permission.
- It emphasizes that the licensed marks are the only marks of the licensor that the licensee is given the right to use.
Quality standards
This section outlines the quality standards that the licensee must adhere to when manufacturing or selling products using the licensed marks. It enables the licensor to establish these standards, evaluate the associated products, specify requirements for representative samples, and provide other necessary specifications.
Marking on products
This section outlines that the licensor has the right to require the licensee to indicate that any products sold under the licensor's trademark are being used under license only, meaning that the ownership is not fully transferred.
To use a trademark correctly, it must be in the correct format and include the registered trademark symbol (®) to indicate that it is a registered trademark. This symbol notifies others that the owner has all the rights and privileges associated with the registration. The licensee must also use this symbol when using the trademark and ensure that the brand is always represented consistently to maintain its integrity and value.
Representations and warranties
This section mentions the parties' promises under the agreement that they agree to enter the deal based on the conditions listed in this section. These terms relate to the licensor and the licensee having the legal right and ability to complete their obligations.
Licensor: The licensor promises that the trademark is its sole intellectual property and that it is the only business with the authority to license the marks; it has not sold or transferred the marks to any third party and has the authority to enter the agreement. Once the deal is signed, the license will be effective without anyone else's input. This section assures the licensee that no companies can claim about the marks being sold.
Licensee: The licensee establishes its authority to enter into the agreement and confirms that it has the resources to obtain the license.
Documentation
In this section, the licensor agrees to assist with any necessary paperwork to complete or record the license. For instance, this could include filing information about the license with the USPTO or paperwork filings on an international level. The licensee is responsible for helping maintain the licensed marks and supporting the licensor in maintaining the licenses' registrations.
Indemnification
This section outlines each party's responsibilities in case of future issues and protects them from any adverse consequences arising from the other party's negligence or intentional misconduct.
No agency relationship
It explains that the parties are not in an agency or any other relationship except that of a licensor and a licensee. This is an important legal distinction to prevent any obligations imposed on the parties by the law.
Assignments and delegations
This section specifies that parties can only assign or delegate their rights under this agreement if they do so in writing.
Governing law
This section allows the parties to choose the governing laws of the state to interpret the document.
Amendments
This section states that any changes to the agreement are only effective if such changes are made in writing.
Notice
This section provides information about the designated locations where the parties can send official or legal communication. The parties should mention the postal addresses of the licensor and the licensee here.
Severability
This section states that even if one part of the agreement is later invalidated, the terms of the agreement as a whole will still be protected. For instance, the entire document won't be undone if a state law forbids choice-of-law clauses. Instead, only the section of the trademark licensing agreement that pertains to the choice of law would be nullified, while the rest of the agreement would still be enforceable.
Waiver
This section aims to clarify that if one party allows the other to disregard or violate a responsibility outlined in the agreement, it doesn't mean that the party forfeits the right to demand that the other party fulfill those obligations (or any other obligations) in the future.
Entire agreement
This section confirms that the executed document represents a comprehensive and conclusive agreement between the parties.
Headings
This section explains that the headings at the beginning of each section are meant to organize the document. Any interpretation of the clauses shouldn't be based on the headings.
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