When to Use a Trademark License Agreement
The following are some common business situations where a trademark licensing agreement may be beneficial:
- A company can license its trademark to a manufacturer with established distribution channels so that it can make and market new items under the brand name;
- For new product or service launches, temporarily licensing a recognized, trusted brand name can instantly give you better visibility and credibility with consumers;
- Granting merchandisers permission to use your trademark helps extend your trademark’s reach into new product categories and revenue streams;
- In co-branding partnerships, trademark licensing agreements govern each partner’s use of the other’s trademark;
- A major component of franchising operations is trademark licensing. The franchisee markets goods and services under the franchisor’s name using the franchisor’s trademark and strategy.
Terms and Parties of the Trademark License Agreement
When drafting a trademark license agreement, there are two core parties involved:
- The licensor: The person, business, or entity that holds the legal rights and ownership of the trademarks being licensed. They provide the other party with particular licenses for the use of their trademarks.
- The licensee: The party utilizing the trademarks under the terms the licensor sets. The licensee receives limited rights to apply the trademarks to their products, marketing, etc., but only in the ways explicitly allowed in the licensing agreement.
There are also a few critical terms that need to be clearly spelled out:
- Scope of license: This is the authorized scope of usage (where and how the licensee may use the trademark). This can involve limitations on the kinds of goods or services that it can be used for.
- Duration of agreement: The period during which the licensee is granted the right to use the trademark.
- Territory: The geographical area where a licensee is legally permitted to use a trademark.
- Royalties or license fees: The price the licensee should pay the licensor for the right to use the trademark.
- Quality control measures: Particular branding and quality requirements the licensee must meet to utilize the trademark.
How to Create a Trademark License Agreement
There are several crucial steps required for drafting a trademark license agreement sample:
- Identify the parties: List the licensor’s and the licensee’s full names and contact information.
- Describe the trademark: Provide an in-depth overview of the trademark. This could be a wordmark, symbol, brand label, logo, etc.
- Outline the scope of the license: Define the precise terms for how the licensee can use the trademark. Where can they use it? What contexts or applications are allowed? Any limitations on timing or geography? Lay it all out.
- Establish royalty or license fee details: State the amount the licensee should pay for the trademark, the payment schedule (monthly, quarterly, etc.), acceptable payment methods, and any other financial specifics.
- Enlist quality control measures: Finally, include standards around quality control that the licensee must follow when using the trademark. This ensures they maintain the brand’s reputation and use the trademark consistently and adequately.
A trademark license allows brand owners to grant authorized third parties the right to use their trademark while still maintaining control and setting clear boundaries. A sample trademark license agreement is paramount for any brand, especially those looking to expand their market. This document establishes a framework that controls the parties’ relationship and is legally binding.
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