Trademark Licensing

Licensing has been defined as a formal business deal in which one company grants another company authorization to manufacture products. Protection, promotion, and profit are the three requirements for licensing. These are the fundamentals that must be followed in order to manufacture a product.

Licensing of the domains of intellectual property rights has become an increasingly important tool for the commercialization of intangible assets. Through licensing, the trademark holders can take advantage by gaining revenue through the different forms of franchising, merchandising, and brand extension. On the other hand, trademark licensing is an exclusive right granted to the owner and proprietor of a trademark for the purpose of granting authorization to a third party to use the trademark under mutually agreed terms and circumstances.

There are various forms of trademark licensing, which can be summarised below:

i.Franchising: It is a type of licensing in which the franchisee is allowed by the franchisor for using a particular business model and trademark, with the additional benefits of training, support, purchase of products, etc.

ii.Merchandising: It is a type of licensing in which the trademarks, designs, and fictional characters are licensed to be used for different products such as clothes, toys, and towels.

iii.Brand extension: It is a form of licensing in which the two individual companies come together for applying for a trademark on a new product that has been developed. It is also referred to as co-branding.

The trademark not only is referred to as the graphical representation of the commercial origin but also represents the symbols of quality and distinctiveness. These characteristics of a trademark can be safeguarded as long as the owner of the trademark maintains its right of licensing. One of the important aspects of trademark licensing is for presenting a uniform image and identity to the public at large. It has been considered an essential part of trademark licensing as the license agreement guarantees the rights to the licensor with respect to sufficient control mechanisms for protecting the identification and goodwill features of the trademark. This would also help the consumers in avoiding confusion since the capacity of the trademark to provide information about the products and the services gets protected, which essentially reduces the costs of the search.

In a generalized meaning, a trademark license is referred to as the form of a license in which the licensee has been accorded the right for using the trademark for purposes that exclusively belong to the holder of the trademark with respect to the functions of the trademark. The importance of trademark licensing are:

i.The license agreement can be a great help to the licensees, as they get benefitted from the goodwill and connotations associated with the name of the brand or trademark.

ii.Smaller firms and companies can provide goods and services with a well-known brand and thus can take advantage of the trademark’s appeal for generating customers.

iii.The license acts as a means for faster entrance into the market for the licensee, and at the same time generates additional revenue for the licensor.

iv.The companies sometimes adopt licensing for the purpose of providing greater recognition to their brands.

v.The license benefits the holder of the trademark by providing new channels of distribution and segmentation in the business.

In India, there has been no appropriate definition provided for the term license or licensing under the Trademarks Act, 1999. However, Section 48-Section 55 provides laws governing licensing. The registration of a licensing agreement forms the most essential part of the trademark licensing, although it is not essential to register trademark licenses.

i.Firstly, the form TM-28 is filled and is accompanied by other documents such as license agreements, affidavits, and other documents.

ii.An affidavit must be drafted that would contain the conditions and restrictions imposed by the license and all the other rights of the parties.

iii.The license agreement must include all the necessary particulars i.e., affidavits, royalty, and remuneration.

iv.Fourthly, the form must be submitted to the registrar for further process of registration.