Licensing is the key to brand expansion. As stipulated in articles 42-45 of Law No. 20 Year 2016 on Trademarks and Geographical Indications, licensing has been a highly useful tool for entrepreneurs in advancing their trademarks and maximizing its true potential.
Of course, To ensure that your licensing endeavor runs smoothly and effectively, you have to have a proper licensing agreement. We have compiled several essential information regarding licensing agreements that you ought to keep in mind.
Before you proceed, perhaps you’d like to read about why trademarks are important for all companies, even startups. Read our article here Four Reasons Why Trademark Protection is Important for Startups.
4 Important Elements of Trademark License Agreement
1. Proper Definitions
Agreements must contain well-defined terms. Essential components such as the IP subject being licensed, the parties involved, the license term, the permissible territory of use, royalties, the licensor’s ownership stake, etc must be properly defined in a precise manner to avoid ambiguity, misunderstandings, and potential disputes.
2. Rights and Obligations
You need to outline the rights granted by the licensor to the licensee, specifying the scope of use, duration, and any limitations or restrictions. Simultaneously, there also need to be the obligations of both parties, encompassing responsibilities related to confidentiality, usage of marks, payment schedules, usage, of any specific performance expectations, etc.
Licenses are available in both non-exclusive and exclusive varieties. The proprietor of a non-exclusive license is able to negotiate licensing agreements with multiple parties. Conversely, exclusive licenses impose limitations on the licensor to a single licensee.
4. Quality Controls
It is crucial to include adequate quality control provisions in the license agreement to prevent licensees from tarnishing the brand by selling substandard products or services. Apart from stipulating that any utilization by the licensee shall accrue to the advantage of the licensor, it is advisable to incorporate the following quality control provisions:
- Instructions specifying where and how the marks are to be utilized;
- Whether others are permitted to sublicense their use;
- Indicators of quantifiable quality for the goods or services that may bear the mark.
Quality control is crucial because the public recognition of the mark is much more detrimental to the licensor than to the licensee. Insufficient attention to quality control in a licensing agreement may ultimately lead to the dilution of the trademark.
These four elements are crucial to keep in mind while you enter a licensing agreement. Furthermore, attain the services of a professional IP law firm specializing in trademark law to ensure the best possible result.
Trademark License Drafting Tips
Drafting is the first step to making a licensing agreement. Below are the essential ingredients that outline the proper licensing agreement:
1. Establishing Clarity Regarding Licensee Prerequisites
The term “licensor” refers to the proprietor of the registered trademark, in a trademark license agreement. The licensee is the entity that remunerates you monetarily in return for the authority to manufacture or distribute products bearing the licensor’s trademark.
Precision and care is needed regarding which trademark rights are being licensed and what the licensee is and is not permitted to do regarding your trademark. Moreover, indicate in the license agreement any circumstances where the licensee would be prohibited from using your trademark.
2. Establishing Unambiguity Regarding the Agreement’s Duration and the Payment Schedule
Errors in the duration and payment terms of a trademark license agreement can result in expensive disputes and vulnerabilities, despite the fact that these provisions do not constitute a substantial portion of the agreement. Specify not only the duration of the agreement but also the consequences that ensue at its conclusion.
3. Ensure that the Trademark License Agreement Contains All Pertinent Details
It is crucial to clearly specify the geographical area in which the licensee is authorized to sell the licensed products and to identify the courts that possess the authority to adjudicate any conflicts that may arise in relation to the agreement.
Similarly, it is necessary to avoid unintentionally rendering your agreement void by providing an incorrect listing of the legal name of one of the parties.
Those are some tips to follow in drafting a proper licensing agreement. You can rely on the most professional IP law firm to ease you in trademark license agreement.
Do & Don’ts Checklist
To ensure that everything goes well, you should know several things that must be embraced and avoided:
- Do–Become well-informed regarding your licensorship;
- Don’t–Accept an imprecise explanation of the subject matter being licenced;
- Do–Specify in detail each restriction outlined in the license;
- Don’t–Ignore geographical as well as temporal restriction provisions;
- Do–Notate whether clauses are revocable or irrevocable;
- Don’t–Remain complacent regarding discussions pertaining to royalties and fees;
- Do–Inquire about any updates to a software license agreement;
- Don’t–Assume indemnification concerns are routine.
Moreover, you might be interested in learning about the different types of licences from other regimes of IP. Read our article about Creative Commons License.
In conclusion, conducting a trademark license agreement is not a simple thing to do. There are many important components that need to be crafted properly and precisely to ensure your licensing agreement. To ease your process, acquire the services of the most recommended intellectual property law firm which offers a trademark matters solution– Am Badar & Am Badar Law Firm. Contact us and get more insights about trademarks!
Reviewed by Wulan Chorry Shafira & Nabil Argya Yusuf