Setindiabiz Team |Updated : June 18, 2024

Trademark Licensing in India – Types, Procedure, Benefits

Licensing of Trademark is a one-stop opportunity for market expansion, revenue generation, and brand enhancement at minimal costs. Explore the meaning & types of Trademark Licensing, its legal framework in India, and the procedure of its registration with the Registrar. Wondering why Trademark Licensing is beneficial? Read the blog to get all your answers!

Trademark Licensing refers to the contractual agreement between a trademark owner (the licensor) and another party (the licensee), whereby the owner allows the licensee to utilise the registered trademark in specific ways, under specific terms, and for a specific duration. Trademark Licensing is slightly different from Trademark Assignment, as there is no actual transfer of trademark ownership rights here, but only the right to temporary use is given to the licensed party. In the context of India’s dynamic business landscape, trademark licensing has empowered companies to expand their brand reach and grow their commercial potential to maximum heights.

By granting a trademark License, the owner of the trademark permits the licensee to utilise the trademark on their products, services, or in marketing campaigns as per the terms of the licensing agreement, creating a symbiotic relationship that benefits both parties. The advantages of trademark licensing are manifold. For businesses seeking to grow their brand presence, licensing trademarks offers a cost-effective and expedited means to enter new markets, expand product lines, or reach untapped consumer segments. Licensees, on the other hand, gain access to established brands, leveraging their reputation and consumer loyalty to enhance their revenue earnings.

What is Trademark Licensing? - Meaning & Types

Trademark licensing is a process by which the owner of a registered trademark, also called the licensor, grants the right to use his trademark, either fully or partially, to a third party, also called the licensee under a mutually agreed licensing agreement. This agreement is signed by both the parties, and the usership rights granted as a result is limited to a defined period, restricted to specific products /services and specific geographic boundaries only. The rights typically encompass the usage of the trademark on products, services, marketing materials, packaging, and other designated areas.

The advantages of trademark licensing are significant for both parties involved- the licensor and the licensee. For the licensor, it offers an opportunity to expand the reach of their brand beyond its core operations, and generate additional revenue through licensing fees and royalties. It also allows them to capitalise on the licensee’s expertise in manufacturing, distribution, or marketing, enabling a broader market presence without diverting resources from their primary business activities.

On the other hand, the licensee gains access to an established brand without the need to build it from scratch, saving time and costs associated with brand development. By utilising a well-established trademark, the licensee can enhance its market position, attract a larger customer base, and benefit from the existing consumer loyalty and recognition of the brand represented through the licensed trademark.

Types of Trademark Licensing

1. Exclusive License:

The licensee is the only user of the trademark. The licensor neither retains his right to use nor to grant further Licenses. However, he retains the right to exclusively own the trademark.

2. Non-Exclusive License:

The licensee is just one of the users of the trademark. The licensor retains his right to use and grant further Licenses as well. Even in this case, the exclusive right to own the trademark lies with the Licensor only.

3. Sole License:

The Licensee is the only other user of the trademark besides the licensor. The licensor does not retain his right to grant further Licenses, but retains his right to use and exclusively own the License.

4. Sub License:

The licensor and the licensee both have the right to use and grant further Licenses of the trademark to third parties. The Licensor, however, is the sole and exclusive owner of the trademark.

Legal Framework of Trademark Licensing in India

We can explore the legal framework for Trademark Licensing in the all encompassing Trademark Act of 1999. Although the Act does not exclusively use the term “Trademark Licensing”, the provisions for the same are made using the term “permitted use”. The licensee, as per the act, is termed as the “registered user” and the licensor, as the “registered proprietor”. Let’s go through the specific provisions for a better understanding!

1. Section 2, Trademark Act, 1999

Section 2 of the Trademark Act, 1999, grants “permitted use” of the trademark to a “registered user” for goods or services he deals with in his normal course of trade, and for which the trademark is originally registered.

2. Section 48, Trademark Act, 1999

Section 48 of the Trademark Act, 1999, defines a “registered user” as a person other than its registered proprietor, who has been granted the “permitted use” of the trademark, subject to his registration under Section 49 of the Act, and limited to scope of goods/services for which the trademark is registered.

3. Section 49, Trademark Act, 1999

Section 49 of the Trademark Act provides for Registration of the person who has been granted the right to “permitted use” of the Trademark by its registered proprietor. The section mentions all the procedures and requirements for such registration in detail. After the registration, the concerned person becomes a “registered user” of the mark under the Act.

4. Section 50, Trademark Act, 1999

Section 50 of the Trademark Act, 1999, provides for the cancellation of the “Registered User” by the Registrar based on certain valid grounds. These grounds for cancellation, along with its procedure, are also mentioned in Section 50 itself. We have discussed this section in detail further in this blog.

5. Section 52, Trademark Act, 1999

Section 52 of the Trademark Act, 1999, lays down the provisions related to Infringement of the Trademark License. The “registered user” of the Trademark has the right to institute a legal proceeding against the “registered proprietor” in case he infringes the agreement of Trademark Licensing signed between the two.

Trademark Licensing Agreement: Its Importance & Contents

A Trademark License Agreement is a legally binding document that establishes the rights and obligations between the proprietor of a registered trademark (licensor) and a third party (licensee). The agreement grants authorization to the licensee to manufacture, sell, or distribute products or provide services using the licensed trademark. This agreement ensures that the licensor retains the ownership of the licensed trademark and maintains control over the quality of the products it is being used for, while allowing the licensee to utilise it for commercial purposes.

A well-drafted Trademark License Agreement should include the following key elements:

• Parties: The agreement should clearly identify and include the names and details of the licensor (trademark owner) and the licensee (the party obtaining the License).
• Description of the Trademark: The agreement should provide a clear and precise description of the trademark being licensed. This includes specifying the registered trademark’s details, such as the registration number and the specific classes of goods or services it covers.
• Grant of License: The agreement should explicitly state the scope of the License being granted, including the specific products, services, or activities covered under the License. It should define the territory or geographic area in which the licensee has the right to use the trademark.
• Quality Control: The agreement should outline the licensor’s right to maintain quality control over the products or services offered by the licensee under the licensed trademark. It should establish the standards and procedures for quality control to preserve the reputation and goodwill associated with the trademark.
• Consideration: The agreement should specify the consideration or financial arrangement between the licensor and the licensee. This includes any upfront fees, ongoing royalties, or other monetary obligations that the licensee must fulfil.
• Term and Termination: The agreement should clearly state the duration or term of the License. It should also outline the conditions under which either party can terminate the agreement, including provisions for breach, non-performance, or expiration of the agreement.
• Rights and Obligations: The agreement should outline the rights and obligations of both the licensor and the licensee. This includes their respective duties in maintaining the trademark’s integrity, protecting its rights, and complying with applicable laws and regulations.
• Indemnification: The agreement should include an indemnification clause, specifying the responsibilities of each party in case of any losses, damages, or legal claims arising from the use of the licensed trademark.
• Non-transferability: The agreement should clarify that the License is non-transferable, meaning the licensee cannot transfer or sublicense the rights granted without the licensor’s prior written consent.
• Governing Law and Dispute Resolution: The agreement should mention the governing law that applies to the interpretation and enforcement of the agreement. It should also specify the mechanism for resolving any disputes, such as through arbitration or litigation.

To ensure the validity and enforceability of the Trademark License Agreement, it is essential to have a written agreement signed by both the licensor and the licensee. Seeking legal advice during the drafting and negotiation of the agreement is recommended to ensure compliance with the relevant laws and to protect the interests of both parties involved.

Trademark License Registration: Requirement & Procedure

Section 49 of the Trademark Act, 1999, makes it mandatory for the registration of the licensed user of a trademark with the Indian Trademark Registry. For this a joint application must be filed to the Registrar by the proprietor of the trademark and its proposed registered user in the TM-U form on the IPIndia website.

The form must be accompanied by certain documents required for Trademark License Registration, including:

• A copy of the Trademark License Agreement
• Affidavit by the Registered Proprietor of the Trademark, mentioning the terms of agreement, its duration, scope of goods or services, and any other limitations in use imposed by the agreement

Upon submission, the form is examined by the Trademark Registry Office, and if it is found to be correct, the Office registered the proposed user as the “registered user” of the trademark.

Cancellation of Trademark License Registration

Once the registration of the proposed user is complete, it stays valid unless cancelled by the Registrar. The Registrar has the power to make changes or cancel the registration of a person as a registered user of a trademark, under Section 50 of the Trademark Act. This can occur due to applications made either by the registered user or the registered proprietor of the Trademark. Additionally, even the Registrar is entitled to initiate the cancellation in his capacity. The grounds for cancellation and its procedure is mentioned in Section 50 of the Act itself. Here is a detailed explanation

Variation by the Registrar

The Registrar can change the registration of a person as a registered user for specific goods or services upon the written request of the trademark owner.

Cancellation by the Registrar on the Request of owner/registered user

• The Registrar can cancel the registration of a person as a registered user upon written application by the trademark owner, registered user, or another registered user who is affected by such registration.
• The specific grounds for cancellation may include:
  • The registered user using the trademark in a way that causes confusion or deception or goes against the agreement with the trademark owner.
  • The proprietor or registered user hiding or misrepresenting important information during the registration process.
  • Changes in circumstances that would have affected the decision to register the user.

Cancellation by the Registrar in His Own Capacity

• The Registrar can cancel the registration if there is a failure to enforce or comply with the agreement between the trademark owner and the registered user regarding the quality of goods or services associated with the trademark.
• The Registrar can cancel the registration if the trademark is no longer registered for specific goods or services.

Notice and Procedure for Cancellation

• The Registrar must provide notice to the registered proprietor (trademark owner) and other registered users (excluding the applicant) regarding any application for variation or cancellation.
• Before cancelling the registration, the registered proprietor and the registered User must be given a reasonable opportunity to be heard.

How is Trademark Licensing Different From Trademark Assignment?

Trademark License and Trademark Assignment are two distinct concepts in the realm of intellectual property rights. While both involve the use of trademarks, they differ in their scope and impact. A Trademark License grants permission to a third party to use the trademark under specific terms and conditions, while a Trademark Assignment involves the complete transfer of ownership rights of the trademark from one party to another. Let’s explore the key differences between Trademark License and Trademark Assignment.

Trademark License vs Trademark Assignment

What are the Benefits of Trademark Licensing?

Trademark licensing offers a multitude of advantages for both the licensor and the licensee. Let’s explore some of the key benefits of Trademark Licensing:

Market Expansion and Brand Reach

Through licensing, the licensor can expand the market presence of their trademark beyond their core operations or geographic boundaries. By partnering with licensees who have established distribution networks or market expertise, the licensor can penetrate new markets, reach untapped consumer segments, and increase brand visibility.

Revenue Generation

Trademark licensing provides a valuable source of revenue for the licensor. By granting Licenses and receiving licensing fees or royalties, the licensor can monetize their trademark without directly engaging in manufacturing, distribution, or marketing. This additional income stream can contribute to business growth and financial stability.

Brand Enhancement for Licensees

Licensees benefit from aligning themselves with a recognized and respected trademark. By leveraging the reputation, goodwill, and consumer loyalty associated with the licensed trademark, licensees can enhance their own brand image and credibility. This association can attract new customers, strengthen existing customer relationships, and provide a competitive edge in the market.

Reduced Time and Costs

For licensees, acquiring a License to use an established trademark saves significant time and costs compared to building a brand from scratch. By leveraging the existing brand recognition and consumer trust associated with the licensed trademark, licensees can expedite market entry, reduce marketing expenditures, and focus resources on product development and business operations.

Risk Mitigation

Trademark licensing allows the licensor to mitigate certain risks associated with brand expansion. By partnering with licensees who have industry expertise, local knowledge, or established market presence, the licensor can tap into their resources and share the burden of entering new markets or launching new products. This collaboration helps distribute risks and increases the likelihood of success.

Product Diversification

Licensees can benefit from the opportunity to diversify their product offerings through trademark licensing. By utilising the licensed trademark, licensees can introduce new products or services under an established brand, leveraging the trust and recognition already associated with the trademark. This diversification can open up new revenue streams and attract a broader customer base.

Conclusion

Trademark licensing in India offers businesses a strategic pathway to expand their market presence, drive revenue growth, and leverage established brand reputations. By understanding the legal framework, conducting due diligence, and adopting comprehensive licensing strategies, businesses can forge mutually beneficial partnerships, unlock new opportunities, and position themselves for long-term success in the dynamic Indian marketplace.

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Related Articles :

• Trademark Registration Benefits
• Types of Trademarks in India
• Exclusive Rights of Trademark Holder in India
• Trademark Meaning, Objective and Infringement