Licensing of a trademark is the process where a registered proprietor of a trademark authorises a third party to use the mark in the course of trade without transferring the ownership of the mark. The most important thing to remember is that ‘licensing’ is not sale of the mark or absolute transfer. The ownership to the mark is retained by the owner/ holder and only a limited right to use, sell products under the mark etc. are given to the third party.
Who can grant a TM License?
The owner of the registered Trademark can grant the license. A license to a registered Trade Mark in India can be of two kinds:-
- A simple license agreement which is with respect to permissive use and
- A Registered User wherein the license agreement is registered with the Registrar of Trade Marks. In this license certain rights accrue to the licensee as per statute.
Why is a TM License Granted?
A trademark license is granted to legally permit a third party to make use of the Registered Trademark. It is a common practice by companies to provide TM License in other areas so that their trademark can have a wider reach and can be commercially used.
Apart from the apparent monetary benefit, the main benefit of licensing is expanding the reach of the said mark. By licensing the mark to many parties, the mark tends to become more popular and known and this in turn would help in more licensing and a wider customer base.
Registration as a Registered User
It is to be noted that registering the license agreement with the Trademark Office is not mandatory. However it is always advisable to register the same as it does form a record and might be helpful in case of a future dispute.
Under Section 49 of the Trademarks Act, registered user is an entity who is authorized to use the trademark and a licensee would fall under the said category. The Act also mentions a term ‘permitted use,’ that is what kind of usage of the mark would be permissible under the Act and this encompasses licensing as well.
Section 49 of the act lays down that the owner of the mark and the proposed user should jointly apply for the prospective user to become a registered user of the said mark. The application is made in Form TM-U. The licensing agreement and an affidavit by the proprietor putting forth the details of the license including the relationship of the parties, duration of the use of the mark, goods/services for which it shall be applicable etc. is also to be filed along with the Application. It is noteworthy that the application has to be made within 6 months of date of the agreement. The official fee for making an online application in this case is Rs. 4500 for each mark.
If everything is satisfactory, the Registry will register the user as the ‘registered user’ of the mark and publish it in Journal and intimation of the same shall be sent to the trademark owner and other registered users for the same mark.
Cancellation of Registered User
A cancellation of registered user status can be made in same Form TM-U. A cancellation could be initiated by the proprietor or the registered user or any other registered user of the same mark. The circumstances which are permissible for cancellation are:-
- a)violation of the written agreement
- b) use of mark as to cause deception/confusion
- c)misrepresentation or non-disclosure of some material fact(s) by either of the parties
- d)the circumstances have changed since the date of registration in such a way that at the date of such application for cancellation they would not have justified registration of the registered user
- e)that the registration ought not to have been effected having regard to rights vested in the applicant by virtue of a contract in the performance of which he is interested :
The official fee for filing an online application for cancellation is Rs. 4500 per mark.
The downside to licensing is that it could also destroy the repute of the mark if left unchecked. It is important to implement proper checks and controls when licensing a mark. The expected standard of the goods/services, regular quality check for the goods/services, etc. should be incorporated in the agreement lest the mark is used for inferior quality products or in a manner that turns out to be detrimental to the very character/nature of the mark.
The most crucial takeaway from this discussion is that you should know your rights as the owner of the Trademark and how to maximise the mark’s utility in a way that it would earn you greater profits.
Another important thing to keep in mind is to seek legal counsel as soon as you decide to license out your trademark. This way you can ensure that an agreement is drawn up keeping in mind your interests as the owner of the mark and any future complications can be accounted for in the Agreement.