When you registered your trademark with the USPTO, you may not have considered one day allowing others to use it. Now, as your business expands and your brand is becoming more recognizable, it may be time to consider licensing your trademark. Trademark licensing is an agreement in which a registered trademark owner, the licensor, grants another party, the licensee, permission to make and distribute products or services under that trademark. The licensee pays the licensor a fee to use the trademark, either paid in royalties, a lump sum, or another payment type agreed upon by both parties.
Licensing a trademark can have many benefits, including increased brand awareness and additional revenue. However, those benefits can only be seen when the process to license the trademark has been done properly. Creating a trademark licensing agreement that is fair to all parties involved, yet still protects your mark, can be a challenging process. Consider the following information about how to properly license a trademark.
How Do You Properly License a Trademark?
- Create requirements for prospective licensees. Know how they intend to use the mark in the future.
- Get it in writing. Develop a detailed licensing agreement that is signed by both licensor and licensee.
- Work with an experienced trademark attorney, who has knowledge in both drafting agreements and enforcing proper use.
- Establish brand guidelines that clearly dictate how and where the trademark can be used.
Create Licensee Requirements
Your trademark is a valuable asset for your business. Just as you wouldn’t let just anyone drive a company vehicle or run your manufacturing equipment, you shouldn’t let just anyone use your trademark. First, analyze the potential licensee’s business plan. Is the business financially stable? Is it well managed? These are important factors to consider, as you wouldn’t want to grant trademark rights to a failing business, or one that may misuse the mark in the future.
Next, determine how the potential licensee intends to use your trademark. As the trademark owner, you are still responsible for the quality control of the products and services offered under the mark. In addition, your brand’s reputation is tied to the use of your trademark, no matter who is using it. Therefore, it is critical to know how your trademark will be used and where it will be displayed. Many universities, who frequently license their trademarked logos, have requirements prohibiting licensees from displaying the mark on certain items such as alcohol and tobacco products. Establish the requirements that best reflect your brand before you enter into a licensing agreement.
Get it in Writing
A trademark licensing agreement does not need to be written down to be legally enforceable, but a simple word-of-mouth licensing agreement is much more challenging to enforce. For this reason, it is highly recommended that a written agreement is created and signed by both the licensor and the licensee. A written agreement will provide both parties with a clear understanding of the licensee’s rights and will be easier to enforce should a trademark dispute arise.
Be sure to be thorough in the agreement, including all necessary information. Each licensing agreement is different and based on the needs and wishes of the parties involved. However, most licensing agreements should include the following:
- The legal names of both licensor and licensee
- The type of license being offered (exclusive, sole, or non-exclusive)
- Any trademarks being included in the agreement
- The geographic region where the licensee may offer goods or services with the trademark
- The products or services the licensee may offer with the trademark
- Quality control provisions that outline how the trademark may be used.
- Payment information (Will licensor receive royalties, a lump sum payment, etc.?)
- Effective dates for use of the trademark by the licensee