An overview into licensing of trademarks in India
Having written about assignment of trademarks in India in one of my earlier articles, I wanted to write about licensing in India as the two concepts can be confusingly similar to those who need to choose. Apart from pointing out the differences, this article also will comprehensively explain the concept of licensing of trademarks in India because we live in this era of globalization, where licensing has become so common for people who already have a big market for their trademark and for people who want to build one. So this is all that the parties to a licensing agreement need to know;
What is trademark licensing?
Trademark licensing is when you as a trademark owner authorise a third party to use your mark in course of trade in consideration of royalty over the sales of products or services licensed under the trademark. Generally, there is “classical trademark licensing” done under which the licensee can manufacture products using the trademark licensed. Other forms of licensing include merchandising, franchising etc. So trademark licensing is when a trademark owner allows others to use the mark without transferring of ownership.
Why should one license a trademark?
It’s the best way in which you can expand your business in regions you haven’t, already. More importantly, it is economically really beneficial for both the licensor and the licensee. To be more specific, from the licensor’s point of view, it is that effective business strategy that will only result in your already well-recognised trademark to become even more reputed. Like mentioned earlier, it is also a good way to expand your trademark’s geographical reach, improve brand visibility and other like things.
From the licensee’s point of view, it gives you the chance to associate yourself with a well-recognised trademark; thereby giving you an upper hand on your competitors.
Quality control – the most important part of licensing:
Because if you don’t exercise control over your mark, you might lose your rights over it. In my previous post on whether you can lose your trademark rights after registration or not, I’ve mentioned that lack of quality control is in fact one of the reasons why you could lose your trademark rights. The main purpose of exercising quality control is to ensure that the licensee puts up products that at least match up to the quality of the licensor’s products.
Key clauses in a licensing agreement;
1. The grant clause that includes the nature of property, the trademarks licensed, geographical territory, term of the agreement etc. should be clearly laid down;
2. Consideration in form of royalty and the percentage to be paid should be put down;
3. The quality control clause that includes established standards of use of trademark must be mentioned;
4. Grounds on which the licensor can terminate the agreement should be broadly included.
Procedure for registering as a registered user:
At the outset, one should know that it is not mandatory to get your licensing agreement registered with the Indian trademark office for a particular trademark. In fact, the Indian Trademarks Act, 1999 does not lay down an established procedure as it does in case of assignment of trademark. Nevertheless, the procedure to become a registered user is laid down under sections 48-54 of the Act. To do so, you have to jointly make a request along with the licensor within 6 months of entering into the licensing agreement.
While both registered and unregistered users are permitted users, only a registered user can initiate infringement proceedings against third parties after giving due notice or he may join the licensor/proprietor in trademark infringement. If you’re not a registered user, then you cannot do things that a registered user can.
Cancellation of registration as registered user:
Section 50 of the Act stipulates procedure for cancellation of registration as registered user. Either party may apply for cancellation in writing on various grounds like misuse of the mark licensed to the registered user or misrepresentation or non-disclosure of certain material facts by the proprietor or if the mark is no longer registered.
Finally, most people are not sure if they want to assign or license their trademark. Here are the differences that will clear your confusion, if any, and will let you make an informed choice:
When you assign your trademark, you also assign the ownership but when you license your trademark, you merely “rent” it out retaining your ownership and control over the mark; while assignment has to be compulsorily in writing, licensing does not necessarily have to be in writing; assignment can be made either wholly or partly; licensing is conferring of rights only for a specific period of time.