What is a Trademark License Agreement?

A trademark license agreement is a contractual document that a trademark owner can use to grant another person or company the right to use the trademark. Trademarks are exclusive rights, born out of intellectual property law, that identify the source of a good or service. Each country has its own rules for who can be granted a trademark and the circumstances under which trademark ownership attaches, but exclusivity is a universal trademark attribute. Owning a trademark means owning all rights to use the mark within a certain sector of the marketplace. A trademark license agreement is a way for a trademark owner to grant other parties some rights to use the trademark without transferring ownership.

Trademark rights are valuable in part because they definitively label the source of goods or services. Trademark owners can and often do build the reputation of their brands around the trademark, so that when consumers encounter the trademarked term, they think of the owner’s products. There are times, however, when it makes good business sense to allow other select persons or businesses to use the trademark in some capacity. Sometimes this use is in joint marketing, or in a fusion product. Other times, it is used for derivative sales, franchising, or other business expansion.

Most of the time, use of a trademark by someone other than the trademark owner is allowed through a specific trademark license agreement. In the agreement, which is usually in the form of a written contract, the owner sets out the terms of the licensee’s use. The specifics of what a licensing agreement must contain to be enforceable vary greatly from jurisdiction to jurisdiction. Form trademark license agreements are available from several international trademark bodies and associations, but it is usually best to consult a trademark attorney or trademark license lawyer familiar with the local rules before drafting and relying on a trademark license agreement.

Still, some drafting tips remain constant. Regardless of where it is executed, a trademark license agreement will usually contain four core pieces. First, it must identify the trademark. Second, it must name the licensor and licensee, and must specifically set out the trademark right or rights to be licensed, including the country or territory in which the trademarks are in use. Finally, the agreement must identify what types of goods or services the licensee can offer under the trademark, and the minimum quality that those offerings must represent.

A trademark owner who does not enforce a licensee’s quality of offerings can, in many places, find his trademark in jeopardy. All of this points back to the exclusive nature of trademarks. Consumers rely on trademarks to indicate a certain known quantity of goods or services. Licensees who abuse the trademark or who affix it to inferior goods corrode the trademark’s value and diminish consumer confidence. In many countries, including the United Kingdom and the United States, poor quality control over a trademark can lead to its transfer or cancellation.

Trademark licensing agreements are not required for all uses of another’s mark. Many uses, including in comparative advertisements, are usually deemed fair use, and the permission of the trademark owner is not required. Trademark license agreements are generally used in the context of sales or services rendered under the trademark name. In these types of situations, use without a license agreement would typically be trademark infringement.