License agreement: drafting & examples

Introduction

Do you want to offer your products and services abroad? Or do you want to bring your brand to the attention of a broader target group? Then it may be a good idea to issue a trademark license. In this way, you give another company permission to use your brand, subject to certain conditions, of course. To do this, you will need to draw up a trademark license agreement.

What is a trademark license?

Briefly, a trademark license means that the trademark owner gives another company permission to use its trademark. The licensee may supply or produce your protected product, service or technique (for a fee or profit share), while you as the licensee retain ownership. In practice, this is common. Licenses are given to outside companies, as well as to business units or subsidiaries. Franchise companies also use trademark licenses. This has the advantage that a company can be quickly marketed: the brand and formula are known and the company can conduct its business under the existing brand license. Licenses are also widely used to exploit the goodwill associated with a strong brand, a well-known athlete, movie star or cartoon character.

A trademark license has 4 characteristics. It involves commercial cooperation, legal and economic independence, permission to use the trademark and payment of a fee.

Forms of brand licensing

You can issue trademark licenses for various business activities:

• Licenses to recreate a product according to established agreements.
• Licenses to produce or use a technological invention.
• Licenses to use a brand, product or service.
• Licenses to market a product from and on behalf of the trademark owner.

Example brand license: Disney and Mattel

A current example of trademark licensing is the partnership between Disney and toy manufacturer Mattel. Mattel was granted worldwide licensing rights to the Disney Princess and Disney Frozen franchises. On that basis, Mattel may develop toy lines for Disney Consumer Products, Games and Publishing, including fashion dolls and figures. The collection will be launched at retailers around the world in 2023. In this way, Mattel leverages the rock-solid Disney brand, while Disney can count on the toy manufacturer's expertise and commercial reach. Both companies clearly benefit.

Brand license agreement

A trademark license agreement is a legal contract between the owner of a trademark (licensor) and another party (licensee) who receives permission to use the trademark for specific purposes and under certain conditions.

What does a license agreement say?

To avoid ambiguity and hassle later on, it is important to put the agreements between licensee and licensor on paper. It is a good idea to involve a lawyer in this, so that matters are properly arranged. A license agreement contains at least the following parts:

• The parties involved in the license.
• License type.
• The products or services to which the license applies.
• The licensed area.
• The rights and obligations of the parties involved.
• The term of the license.
• The amount of compensation (royalties) for granting the trademark license.
• The exclusivity of the license.
• Product quality.
• Monitoring license compliance.

Drafting a trademark license agreement

To draft a trademark license agreement, consider the following points:

1. Definitions and Parties: Name the licensor and licensee, their contact information, and define key terms used in the agreement.
2. Brand Description: Provide a detailed description of the brand, including the brand name, logo, trademark registration numbers, and any additional brand elements relevant to the license.
3. Licensing: Describe the rights granted to the licensee, such as the right to use the mark for specific products, services or in certain geographical areas. Also include any limitations and exclusions.
4. License term: Define the term of the license, including the start and end dates and any renewal options.
5. Fees and payment terms: Define financial terms, such as royalties, license fees, minimum guarantees, payment terms and reporting requirements.
6. Quality Control: Describe the quality standards and requirements that the licensee must follow when using the brand. This may include the use of approved materials, manufacturing processes and adherence to brand guidelines.
7. Intellectual property rights: Confirm that the licensor is the owner of the trademark and associated intellectual property rights. Also state the responsibilities of both parties in protecting these rights and addressing infringement.
8. Termination and Termination Conditions: Describe the conditions under which the license may be terminated, such as for breach of contract, non-payment, or failure to meet quality standards.
9. Liability and Insurance: State the responsibilities of both parties regarding liability and any insurance requirements.
10. Dispute Resolution: Define the procedure for resolving any disputes between the licensor and licensee, such as arbitration or mediation.
11. Applicable Law and Jurisdiction: Indicate the law applicable to the agreement and the jurisdiction competent to settle disputes.

Do you need to register a trademark license in the Trademark Registry?

It is not mandatory to register your trademark license in the Trademark Register of BOIP (Benelux Office for Intellectual Property), but it is very wise. As a licensee, you cannot claim damages against third parties without a registered trademark; only the trademark owner can do that. All in all, issuing a trademark license is a complex matter. It is therefore important to hire a good lawyer, who will ensure that the license is properly arranged for all parties involved and that the main risks are covered.

Also read more about inventing a brand name, inventing a business name, trademark protection and trademark infringement.