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Trademark Licensing: Legal Protection for Your Brand Identity

  • Trademark Licensing allows an owner of a trademark to offer limited rights to another party for compensation while retaining ownership of the mark as provided in the Trade Marks Act, 1999.
  • A trademark licensing agreement should include clauses related to quality control, territory, duration, compensation, termination, and indemnification to protect the integrity of the brand.
  • Some benefits of trademark licensing include financial benefits, brand name recognition, business growth, popularity, and sharing the workload.
  • The licensee applies for a trademark license by filling out Form TM-U with supporting documentation, including a license agreement, affidavit, and power of attorney.
  • Trademark licensing grants permission for limited usage for royalties, whereas a trademark assignment permanently transfers title to the mark.
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Introduction

What are trademark Licensing?

Advantages

Process

Conclusion

Introduction

Trademark Licensing is a legal contract in which the owner of a registered trademark maintains absolute ownership of the mark while granting another party limited rights to use the mark for limited commercial reasons.

In simple words, the trademark owner (licensor) allows a third party (licensee) to use the trademark on products or services in exchange for a royalty or licensing fee. This agreement does not transfer ownership in the trademark nor does it create a registered proprietor — it simply allows a controlled use of the trademark under a set term.

In India, Trademark Licensing is governed by the Trade Marks Act, 1999. While the Act does refer to licensing explicitly, the pertinent provisions refer to “Registered Users” under sections 48-50, which effectively govern trademark licensing arrangements.

What are Trademarks?

According to Section 2(m) of the Indian Trade Marks Act, the term “mark” refers to a logo, label, name, signature, word, letter, number, shape of goods, packaging, or a combination of colours.

Pursuant to Section 2(zb), a trademark is any mark that can be represented graphically and can uniquely distinguish one person’s goods or services from another person. Marks may include unique shapes or packaging or unique symbols or combinations of colours that assist your customers in identifying the source of your product or service.

Essentially, trademarks provide a unique identifier for a brand (which may be a name, logo, design, or combination) that distinguishes your offerings in a market and establishes familiarity and trust with consumers.

What is a Trademark Licensing?

While the Trade Marks Act, 1999 does not contain a definition for the term “licensing,” it signals recognition of the concept when it highlights the rules surrounding a registered user. In general terms, a trademark licence is a form of permission given by the owner of a trademark (also known as the licensor) to another person (the licensee) to use that trademark on agreed goods or services.

The licensor retains full ownership of the trademark; the licensee receives the permission, under the agreed terms, to use the trademark, usually for a royalty or other licensing fee. A trademark licence allows businesses to expand their brand recognition without transferring ownership of the brand name, while still allowing third parties to commercially benefit from the trademark, a win-win for both parties.

Trademark Licensing

Who Has the Authority to Issue a Trademark Licence?

Only the owner or registered owner of the trademark is entitled to grant a trademark license.

According to Section 48 of the Trade Marks Act, 1999, a person other than the registered owner can be entered as a registered user of the trademark provided certain criteria are satisfied.

The Indian legal regime also permits the transfer of both registered and unregistered trademarks, in the form of licensing (permission to use) or assignment (permanent transfer of ownership). 

In this way, the licensor owns and retains the trademark intended for licensing to the licensee, though the licensee may use the trademark temporarily on the terms of the Trademark Licensing Agreement.

Conditions Required in a Trademark Licensing Agreement

A Trademark Licensing Agreement should be explicit regarding the rights, responsibilities, and standards of quality for the licensee and licensor. The licensor should include deals in the agreement to protect the trademark’s integrity and goodwill by insisting on quality assurance of the goods and services sold under the trademark so that customers can expect to receive a consistent standard complying with the trademark. 

Some terms that should be included in a Trademark Licensing Agreement in India include:

  • Quality control provisions: The licensor should conduct regular assessments of the licensee to ensure that the licensee is properly representing the trademark, and to protect the licensor’s goodwill in the trademark.
  • Geographic territory region of license: The trademark licensing agreement should specify the exact jurisdiction or area of market that the licensee is permitted to operate in and use the trademark.
  • Time period or duration of license: The licensing agreement should specify the duration of the agreement and conditions for renewal.
  • Royalty or consideration: The agreement should specify all terms of finances that can include a royalty percentage per sale or fixed fee payable to the owner of the trademark, by the licensee.
  • Termination: Outline the circumstances under which either the licensor or licensee may terminate the trademark licensing agreement.
  • Indemnification clause: The licensee should indemnify the licensor against any loss, misuse, or damage of the trademark and restore the trademark to the licensor in the event of violation.

A licensing agreement that is well drafted can help minimize loss of reputation, ensure compliance, and a mutually beneficial agreement in the relationship.

Advantages of a Trademark Licence

A Trademark License provides multiple strategic advantages and financial benefits for both the licensor (owner of the trademark) and the licensee (user of the trademark). Trademark licensing enables a business to grow, reach new customer bases with its brand, and share profits—all while the licensor retains full ownership.

Financial Benefit

Both parties will generate revenue from the trademark licensing contract. The trademark owner receives regular royalties for granting licensee rights to use the trademark. Additionally, the licensee may profit from using the established brand name to drive sales. The licensing approach enables the owner of the trademark to monetise and profit as a result of the trademark even if they do not have the size, resources, or visibility to develop the trademark into a standalone branded product or service.

Business Expansion

Licensing facilitates the trademark owner’s business expansion into markets beyond their current demographics. By teaming with capable licensees or distributors, brands can leverage the licensees’ regional capability to reach new locations and customers without incurring the huge cost of building infrastructure and marketing.

Increased Exposure for the Brand

Through licensing, the trademark receives greater exposure to the trademark in the new markets. The licensee is capable of leveraging their own resources to advertise and market the brands, which benefits the trademark recognition and credibility as it receives exposure to a broader audience or new customer base.

Growth in Recognition of the Trademark

As the brand is used and advertised by multiple licensees, the brand and goodwill strengthen. This results in increased sales volume and visibility for the brand, which contributes to the overall value of the trademark.

Workload Reduction and Partnership

Licensing establishes a win-win relationship for the licensor and licensee. The licensee accepts some responsibility for maintaining product quality and brand standards, relieving some of the operational responsibility from the licensor while maintaining brand consistency

How to Get a Trademark Licence in India?

To obtain a Trademark Licence in India, you need to file an application to the Trademark Registrar. 

The registered trademark owner (licensor) and potential licensee must both file an application in writing, using Form TM-U as well as the appropriate documentation, which include the following:

  • Certified Copy of the Licensing Agreement — The licensing agreement must be signed and certified outlining the agreement’s provisions, rights, and permitted use of the trademark.
  • Affidavit of the Trademark Owner — This affidavit must include particulars of the relationship between the licensor and the licensee, and the goods or services being provided by the licensee under the licensor’s trademark, including any limitations and conditions attached.
  • Power of Attorney (if applicable) — If the applicant has provided a representative or agent for the application.
  • Evidence or Documentation Supporting the Application — Any other documents deemed necessary by the Trademark Registrar.

Once the Registrar is satisfied with the completion and evidence provided in the application to register the user, the licensee will be duly registered as an authorized user of the trademark. The entry shall be made into the Trade Mark Registry as an entry as well as its date, and the registration shall be published in the Trademark Journal within two months of the application date. If there are other authorized registered users of the trademark, the others will be informed. Any sensitive information provided to the Trademark Registrar will be kept confidential and shall not be disclosed to competitors.

When Can a Trademark Licence Be Cancelled?

Section 50 of the Trademarks Act, 1999 provides for the cancellation or modification of a trademark licence, in whole or in part, in relation to some or all of the goods or services covered under the agreement. Before cancellation, the relevant party is given notice and an opportunity to be heard. A trademark licence can be cancelled for the following reasons: 

  • Breach of Agreement: Where one of the parties to the licensing agreement has violated the agreement. 
  • Improper Use: Where the licensee is using the trademark in a manner that is outside of what is permitted by the agreement. 
  • Misleading the Public: Where the use of the mark misleads or confuses the public. 
  • Concealment of Information: Where one of the parties conceals or misrepresents material facts. 
  • Fraud or Misrepresentation: Where one party makes false statements or engaged in fraudulent conduct.  

The Trademark Office will notify the trademark owner and any registered user affected by the cancellation. The official cancellation fee per trademark is ₹4,500.

Difference Between Trademark Licensing and Trademark Assignment

Both Trademark Licensing and Trademark Assignment help monetise a trademark, but they differ in ownership and scope of rights.

Aspect

Trademark Licensing

Trademark Assignment

Nature

Temporary right to use a trademark under a defined contract.

Permanent transfer of trademark ownership.

Ownership

Licensor retains ownership.

Ownership shifts entirely to the assignee.

Written Agreement

May or may not be written.

Must be in writing.

Registrar Filing

Registration is optional.

Must be recorded with the Trademark Registrar.

Duration

Typically time-bound.

Usually permanent.

Rights Transferred

Limited rights based on terms agreed.

Full and exclusive rights permanently transferred.

In summary, licensing allows a brand owner to expand usage while maintaining ownership, whereas assignment completely transfers ownership rights to another party.

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  • Obvious Process: Obvious timelines and regular updates at each step.
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  • Prioritizing Your Needs: Ongoing support will make the process as easy and smooth as possible.

Conclusion

Trademark licensing is a strategic approach to grow a brand’s footprint, produce additional revenues, and enhance brand recognition and reputation in the market without transferring the ownership of the brand. By permitting a party to use a trademark as specified in a licensing agreement, the licensor increases brand awareness, market reputation, and the value of the trademark will rise; the licensee benefits from marketing, and sales, utilizing a reputable, trusted brand in the marketplace.

Section 48–50 of the Trade Marks Act, 1999 governs the licensing of a trademark in India. Licensing provides a secure, substantiated model for the licensor and licensee to operate under that is lawful and within a legal framework. It is also prudent to develop a licensing agreement before you undertake the licensing of a trademark, and to file completed forms TM-U with supporting documentation. 

Working with professionals, like Diligence Certifications, you can be assured to have expert guidance and according to the law to make the documentation process, filing, and legal aspects of licensing as easy and stress-free as possible.

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Our Related Services

Trademark Objection

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Trademark Rectification

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Frequently Asked Questions

A trademark license is the legal agreement to allow another individual or entity the rights to use your trademark on specific goods or services. 

Only the owner of the registered trademark can register a license. 

Form TM-U is the form to register a trademark license with the Registrar. 

Yes, it can be canceled, for example, due to breach of terms, misuse of the trademark, or fraud, under Section 50 of the Trade Marks Act, 1999. 

Benefits of trademark licensing include brand development, royalty income, improved brand awareness, and the amount of work is shared with the licensee.

A license is the temporary use of the trademark, while an assignment is a transfer of ownership of the trademark. 

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