Licensing

A license is an agreement between two parties that allows another to use a registered trade mark in commerce. Usually the agreement will be limited as to duration and scope and subject to a number of quality control measures which ensure the proprietor retains strength and integrity in his brand.

• A brand is developed
• Registration is obtained
• It is time to seek to increase profits & opportunities

Why Licence?

There are a number of benefits associated with the granting or taking of a licence. Put simply, a licence ‘out’ allows a proprietor to retain control over his brand, whilst opening up future markets and creating an extra revenue stream. A licence ‘in’ allows rapid expansion or entry into a marketplace without the exposure to the risk of setting up a new venture, and limits the financial liability to a payment based on profits.

In addition, the existence of a licensing arrangement will maximise the gain and value derived from advertising and marketing initiatives by increasing the consumer’s exposure to the product or service being provided under the trade mark.

• Turn an idea into money
• Create a second source of supply
• Increase visibility
• Increase the speed of market penetration
• Enter new or foreign marketplaces

The Essentials

If you are thinking about licensing there are a few issues that should be borne in mind. Firstly, one should remember that unless the licensee can add substantial value to your brand or is in a strong negotiating position, then an exclusive licence should not given.

Instead, you should think about a partial (limited) or non-exclusive licence. In this way, the permission granted to use the trade mark will be subject to certain provisos, such as use for limited periods or staggered royalty fees for continued use. Alternatively, geographical limitations may be appropriate to ensure that the licensee does not compete in an area or territory where you wish to give a licence to another user, or to use exclusively yourself.

Other than identifying the trade mark and the names of parties entering into the licensing arrangement, the nature of goods and/or services that will be offered under the terms of the licence must also be stipulated by the agreement. The trade mark registration being licensed may cover a wide range of goods and services, yet a licence can limit use down to just one or a few of the goods/services registered.

The benefit of licensing ‘out’ use of a trade mark for goods or services not yet in use by the trade mark owner is that it will prevent or provide a defence to a revocation action brought by another party against those goods/services that have not been put into use by the trade mark owner over any 5 year period.

It is commonplace for licence agreements to contain a clause setting out the ‘royalty’ arrangements. These are negotiated at the outset and can be reviewed. Payments can be on an annual basis, bi-annually, quarterly or whatever suits. Generally, they will be based on a percentage of net profits, but can be a fixed fee.

The Risk

Anyone thinking about tasking or giving a licence must consider the risks. Not only can an under-performing or uncontrolled licensee diminish the brand strength, but they could even bring about the complete demise of it. In this regard, a trade mark owner must waive any legal responsibilities over how a third party operates their own business in order to avoid negligent or criminal charges, and ensure quality is retained.

To this end stringent quality control measure and monitoring procedures need to be stipulated in the licence agreement from the outset to protect the trade mark owner’s reputation guarantee to deliver the same quality standards as their consumers will have come to expect. In order to maintain control, it is common for the licensor to require and be able to insist upon access to the manufacturing facilities or the premises where the services are provided, whilst also being able to assess/ inspect the finished product or their raw materials to which the trade mark will be applied or associated.

 

Thinking about licensing…? Contact the team at Albright IP

Here at Albright IP we can provide assistance in the drafting, negotiating, recordal and enforcement of any licensing agreements.

We know the formalities that are required, and will ensure that any licence agreement that you sign up to is recorded at the UK IPO, the Community Trade marks Office or any other appropriate registry in a jurisdiction to which the licence purports to have effect.

Trade mark rights can take years to establish and develop; the anxiety to exploit your rights for commercial gain, should not overshadow the need to ‘police’ and protect them. Please seek our advice at the outset, don’t wait for issues to arise.