March 29, 2024
Entrepreneurship Knowledge Trademark

Licensing and Trademarks–How it Works

Licensing and Trademarks

Licensing and Trademarks–How it Works

Is licensing your trademark a good idea? What does it mean? How can you benefit from licensing, and what should you do going forward?

First, it’s critical to understand that licensing is a type of merchandising agreement. You are creating a partnership by aligning yourself and your brand with another entity. As with all partnerships, due diligence, clear expectations, and well-defined roles will help this collaboration run smoothly.

How It Works

The trademark owner (the licensor) provides for a second party (the licensee) to produce and distribute certain products or services under the specific terms of the trademark licensing agreement. Either party might initiate this agreement, but it will typically be the trademark owner.

This agreement doesn’t need to be in writing, but that is most certainly not a good idea. Making a solid case for your position might be difficult without documentation, and that is just the beginning of the potential problems with a verbal agreement.

Different Types of Licensing Agreements

Suppose you have a successful product or service and a trademark with goodwill and value in the marketplace. You suddenly find yourself overwhelmed and realize that manufacturing products or delivering services is not what you want for your life.

How can you eliminate these unwanted responsibilities and still make your fortune from your great idea and innovation?

Enter the Exclusive License, where you award the licensee exclusive commercial rights to your product or service and trademark. You, as the licensor, receive an upfront payment for entering the agreement. The licensee will receive future profits and is responsible for losses.

Sole License allows both the licensor and the licensee to use the trademark, but neither can license that mark to a third party.

The third type of licensing agreement is the Non-Exclusive License. The licensor, the licensee, and any other parties for which the licensor issues a license are free to use the same trademark.

Depending on your goals and interests, any of these variations can be highly beneficial when done correctly and with adequate safeguards for your brand.
The key is in crafting a solid and unambiguous agreement.

What Should Be in the License?

Your licensing agreement is specific to you and your brand. Every deal is customized to fit that situation, but they must all have some basic information beginning with the legal names of the licensor and the licensee.

Other essential items are:

  • What Type of License
    Exclusive, Sole, or Non-Exclusive
  • The Licensor’s and Licensee’s Business Structures
  • All Trademarks Contained within the Agreement
  • Geographic Territory
    Areas available for the licensee to operate.
  • Quality Control
    Establish clear standards regarding the quality and performance of the licensed products. Robust and precise quality control instructions are crucial to maintaining your brand’s integrity in the marketplace.
  • Payment
    Will you, the licensor, receive royalties?
    If so, how much and when are payments due?
  • The License End-Date
    How long will this license be in force?

Requiring the licensor to approve all advertising and promotional materials and the process and conditions for renewal are often part of this document.

Trademark licenses can be long and quite complex. If multiple trademarks, products, sophisticated financial structures, and various geographical regions are part of the agreement, you might easily reach 100 pages or more.

The Trade Marks Act of 1995

Pursuant to this legislation, all licensors must maintain control over the authorized use of their trademarks. Failing to maintain financial control over trading activities and quality standards of the products and services under your mark can mean the loss of your trademark rights.

Large concerns can afford legal staff to monitor trademark usage and pursue legal action to stop misuse or infringement. Small companies and individuals rarely have these luxuries.

Entering into a trademark agreement, as opposed to legal battles and attorney fees, is usually a better option for the average entrepreneur. It will cost you far less and should produce benefits you would otherwise not realize.

A Few Essentials

Your licensing agreement is there to protect you and your brand. You must clearly spell out your expectations regarding the licensee’s performance.

The licensee should clearly and faithfully represent your trademarks and allow your review and approval of any artwork before production. They should also maintain general commercial liability insurance.

You may also specify any sustainability or environmental programs or associations your brand adheres to and supports.

Summary

Licensing your trademark can take your brand to the next level. It offers significant opportunities for growing your market and your profits. With a good licensing agreement, you can increase brand recognition by leveraging your new partner’s marketing and distribution channels and reaching new audiences.

A beneficial agreement will also distribute your workload since the licensee will now be responsible for the production and quality of the goods and services within the license.

The partnership you form with your trademark licensing agreement can benefit your brand and your bank account significantly and indefinitely when appropriately crafted and managed.

Conclusion 

Do you have a plan for your trademark, A strategy for growth and future expansion with licensing?

The expert team at Trademark Factory® will help you formulate a strategy and guide your trademark application to approval with a 100% all-inclusive, cash-back guarantee of success.

With so much at stake and a complex bureaucratic system to navigate, having the peace of mind of knowing that knowledgeable and capable professionals are shepherding your application to approval can seem priceless.

Contact Trademark Factory® today and learn more about how we can help you achieve your dreams.

 

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