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Trademark licence agreement

Definition : Trademark licence agreement


In a context where trademark image is a strategic lever, many businesses seek to derive value from this intangible asset through a trademark licence agreement. This legal mechanism makes it possible to build the reputation of a trademark, to reach new markets or to generate revenue without producing the relevant goods or services oneself.

The licence rests on an intellectual property right. It allows the proprietor or owner of the trademark to exploit it indirectly through a licensee, while retaining ownership of the asset. Less restrictive than a franchise, it leaves the licensee greater freedom, while regulating the use of the trademark.

What is a trademark licence?

A trademark licence is an agreement by which the proprietor (or licensor) authorises a third party (the licensee) to use the trademark in the course of its business. In return, the licensee pays a royalty, either fixed or proportional to turnover.

The licence does not transfer ownership, but grants a limited right of use (limited in time, territory, goods or services). It may be exclusive or non-exclusive. Unlike a franchise, the licence agreement does not provide for the transfer of know-how. The licensee therefore exploits the trademark with greater autonomy.

A trademark must be protected before it can be licensed

Before granting rights to exploit a trademark, the proprietor must make sure that it is indeed the owner of a valid right, by registering the mark with the INPI or the EUIPO. The trademark must be distinctive, lawful and available.

An unregistered trademark may, in theory, be the subject of a licence agreement, but without an official filing the Protection is inadequate. The licensee could then call its obligations into question. To ensure that the rights are effective, formal Protection remains essential.

Entering into a trademark licence agreement

Benefits for the proprietor:

  1. Generating revenue through the royalty without managing the exploitation.
  2. Extending its reputation to other territories.
  3. Testing a market at lower cost.

The licensor retains ownership of the trademark while deriving value from an intellectual property right. The agreement governs the relationship with partners and can support the growth of the business.

Benefits for the licensee:

  1. Exploiting a well-known trademark to grow its sales.
  2. Benefiting from a secure legal framework.
  3. Avoiding the investment involved in creating its own identity.

The licensee may exploit the trademark rights while remaining independent. This enables a business to launch an activity quickly without creating a new trademark.

Contents of the trademark licence agreement:

Even though writing is not mandatory, a clear agreement is strongly recommended. It should set out:

  • The identity of the parties.
  • The trademark concerned.
  • The scope of the rights granted (territory, goods, services).
  • The term of the agreement.
  • The royalty: amount and method of calculation,
  • The conditions for termination or renewal.
  • The obligations of the licensee (quality, image, compliance).
  • Specific clauses (non-competition, advertising, sub-licensing…).

This contractual framework is essential to prevent any dispute and to secure the use of the trademark.

Caution

Since a trademark licence is an agreement between businesses, it may fall within the scope of competition law. Certain clauses, such as excessive exclusivity or resale bans, may be held to be anti-competitive. The agreement must therefore comply with the legal framework in order to avoid being declared void.

The licence should also be distinguished from the franchise, which is more structured and involves obligations of assistance and the transfer of know-how.

Mandatory recordal with the INPI

To be enforceable against third parties, the licence agreement must be recorded in the national trademark register kept by the INPI (Article L.714-7 of the French Intellectual Property Code).

Without this formality, the rights of the licensee could be called into question, in particular in the event of an assignment of the trademark. The licensor could be held liable if this causes loss to the licensee. Recordal guarantees the Protection of both parties.

In short, the trademark licence agreement is an effective legal tool for deriving value from an intellectual property asset. It allows the proprietor or owner of a trademark to profit from it without losing its rights, and the licensee to exploit a recognised sign for its own goods or services.

Its success depends on rigorous drafting, a sound assessment of the legal issues at stake and compliance with the rules of competition law. Instructing an attorney makes it possible to secure the use of the trademark, to ensure the Protection of the parties and to optimise the development strategy of the business.



This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats is a patent litigation firm. Matters outside that field, trademarks, designs, copyright, IT contracts, are handled by practitioners the firm works with regularly, and by the firm itself where they attach to a patent dispute.

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