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Q.What is involved in a trademark licensing agreement?
A.In the US, a trademark may be licensed to others. Licensing a trademark can result in income (royalties) from the licensee's use of the trademark and can also make the trademark more widely known (and hence more valuable) if more people come to recognize the trademark and identify it with quality services or products. In general, the more a trademark is used, the better for the trademark's owner. But, the trademark owner must control the nature and quality of the trademarked goods and/or services. Licensing without proper control over the product and services can result in the public buying goods which are not up to the standards expected by consumers, and in some cases, this is sufficient for a court to find the trademark owner has lost his or her rights to the trademark. Any licensing agreement should therefore include provisions covering: (a) the license's exclusivity and term; (b) the procedures for quality control; (c) indemnification; (d) defined commercial markets - territory; (e) accounting procedures for the calculation for royalties; (f) termination options for both the licensee and licensor; and (g) whether or not the rights under the license may be assigned.
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