Trademark licence agreement

Weagree's model Trademark licence agreement is a standalone template to serve as a source for drafting the trademark-related clauses for a Franchise Agreement, or adjacent to a product manufacturing or reseller agreement.

This template for a Trademark Licence Agreement can be your source for tapping the trademark licensing-related clauses to be embedded in a Franchise Agreement. In a standalone context, a Trademark Licence Agreement is appropriate alongside a manufacturing agreement or reseller agreement.

Generally, standalone Trademark Licence Agreements are rarely used. They are typically incorporated in or combined with another agreement (that would be leading). For more background information about trademark licence agreements, see our dedicated chapter on this website.

In this Trademark Licence Agreement, the parameters for licensing a trademark are addressed. In addition to the core licence clause itself, the trademark licence contains clauses restricting the scope of licence (and thereby the trademark licensee) in their use of the trademark.

Trademark licence agreements and branding guidelines

An essential (if not crucial) part of the trademark licence agreement is an elaborate clause dealing with the branding guidelines (and requirements) imposed on the licensee. In using the licensed trademark, the licensee must comply with those guidelines as the licensor has defined them. Obviously, this is to prevent that the trademark is misused, genericises, otherwise loses its distinctive character or could become identified by unwanted style or characteristics inconsistent with the brand that the trademark embodies. Such brand guidelines should be developed and attached by the licensor (specific to their own business); the trademark licence agreement provides a framework for maintaining and developing such guidelines.

As a trademark is rarely (if at all) used without a product, product range or service, certain quality requirements apply. The Trademark Licence Agreement contains a clause deals with aspects that may be relevant for the licensor to ascertain that end-users recognise the trademark to part of licensor’s brand and proposition. This includes provisions that prevent sub-quality products or inferior goods.

Trademark licence fees

As a Trademark License Agreement will justify its own revenue, which are usually a revenues-related royalty or trademark licence fee, sample clauses are included to exclude revenues that should not count towards the licence fee, as well as a right to audit the revenue periodically reported by the licensee.

And while calculating a trademark licence fee is one thing, the payment of it should match with the business arrangement that the parties agreed. Sample provisions are included in this Trademark License Agreement.

Trademark Licence Agreements and intellectual property rights

Key elements in a Trademark Licence Agreement are arrangements regarding the entitlement of the licensee to intellectual property rights in the trademark. This relates in the first place to the registration of the trademark (in whose name?!) in the territory of the licensee. For more about trademarks as an intellectual property right, see our IP-dedicated chapter.

While in most jurisdictions it is nowadays not necessary anymore to stipulate that usage of the trademark accrues to the benefit of the actual owner of the trademark, this does not mean that the rights in various IP rights adjacent to the trademark (whether a derivative work based on the trademark or works in support of or used in connection with the trademark) must not be addressed.

The copyrights in such derivative works or other artwork should accrue to the licensor as well. At least, that is how this Trademark Licence Agreement is drafted.

Where IP rights are at hand, there is always a chance of infringement by third parties. In case of trademarks, it is crucial that if this happens, immediate (prompt) action is taken. This means that the licensee must report all identified acts of infringement upon noticing them. But it may in addition require that the licensee takes prompt action against the infringing party (contracting a law firm as the licensor may instruct).

It may be that the Trademark Licence Agreement (and the commercial or other parameters it may regulate) must remain confidential. In such case, in the framework of registering the trademark licence in the public registers (if desirable), certain must be summarised for such registration purpose.

Competition law restraints on Trademark Licence Agreements

Note that a Trademark License Agreement may well be licensed by a party with a so-called ‘dominant market position’. In such case, there are likely a number of limitations on the freedom to impose commercial or organisational measures on the licensee. YOU MUST SEEK THE ADVISE OF A COMPETITION LAWYER to assess if any of the provisions in this Trademark Licence Agreement are permissible and enforceable (not a violation of competition (antitrust) laws.

Clauses that are notorious for violating competition laws or regulations are those that (i) prohibit the licensee to challenge the validity of the trademark, (ii) require certain level of success, reflected in minimum royalty requirements, exclusivity vs. competitive brands, restricting the territorial limitations, for too long, or (iii) are overly divisive in the investments that the licensee must make (vs. its ability to earn back such investment).