What is Trademark Licensing?

Trademark licensing is a method of transferring limited rights in which the trademark owner retains complete ownership of the trademark, while granting a third party permission to use the trademark under specific conditions. These rights are typically granted for commercial purposes in exchange for a royalty on the sales of goods or services sold under the licensed trademark.

The license does not transfer ownership or designate the third party as a registered user. Instead, it authorises the third party to use the trademark in a controlled manner for specific uses.

In India, The Trade Marks Act, 1999 governs trademark licensing. While the Act does not explicitly use the terms "licence" or "licensing," its provisions refer to “registered users,” which is the statutory mechanism for licensing under Indian law.

What are Trademarks?

According to Section 2(m) of the Indian Trade Marks Act, a mark includes a device, brand, heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging, or combination of colours.

As per Section 2(zb), a trademark means a mark capable of being represented graphically and which can distinguish the goods or services of one person from those of others. It may include:

• Shape of goods

• Packaging

• Combination of colours

Thus, a trademark may be a word, logo, symbol, shape, or combination used to identify and distinguish goods or services in the marketplace.

What is a Trademark Licence?

While The Trade Marks Act, 1999 does not specifically define trademark licensing, it is understood to be a legal arrangement in which the trademark owner grants consent to another party to use the mark under defined terms and conditions.

In general terms, a licence refers to authorisation or permission granted to perform an act. A trademark licence allows a third party to use the trademark in exchange for a royalty or other consideration, without affecting the legal ownership of the mark.

Who Has the Authority to Issue a Trademark Licence?

The authority to issue a trademark licence rests with the owner of the registered trademark.

Under Indian law, both registered and unregistered trademarks may be licensed or assigned. Trademark transfer may be conducted through:

• A licence (limited right to use)

• An assignment (complete transfer of ownership)

According to Section 48 of the Trade Marks Act, a person other than the registered proprietor may be registered as a registered user, provided all conditions set by the Act are fulfilled by both parties.

Conditions Required in a Trademark Licensing Agreement

To be valid and enforceable, a trademark licensing agreement must meet certain essential conditions:

1. Quality Control Clauses
   The agreement must include quality control measures to ensure the licensee does not degrade or damage the reputation of the trademark. The trademark owner must maintain control over the nature and quality of goods or services.
   
   

2. Territorial Scope
   The agreement must clearly define the geographical region in which the licence is valid. It may be restricted to specific cities, states, or apply nationally.
   
   

3. Duration of Licence
   The period for which the licence is granted must be clearly mentioned, including start and end dates, and conditions for renewal if applicable.
   
   

4. Royalty/Consideration
   The agreement must specify the consideration (payment or royalty) to be paid by the licensee to the trademark owner. This may be a fixed amount or based on sales or usage.
   
   

5. Termination Clause
   Conditions under which the agreement may be terminated must be included. This could include breach of terms, non-payment, or misuse of the mark.
   
   

6. Indemnity Clause
   An indemnity clause should be included to protect the trademark owner against legal liability, damages, or losses arising from the licensee’s misuse or illegal activities related to the trademark.
   
   
   

Advantages of a Trademark Licence

Trademark licensing offers multiple strategic and commercial benefits to both the licensor (trademark owner) and the licensee (user). These advantages contribute not only to brand growth but also to revenue generation, market expansion, and operational efficiency.

1. Financial Gain

Trademark licensing creates a mutual financial benefit for both parties involved. The licensor, who may have previously lacked resources, infrastructure, or market reach, can now monetise the trademark by receiving royalties from the licensee.

The licensee, on the other hand, gains the right to use an established brand and can generate profits by leveraging its market potential. This results in shared revenues, allowing both parties to benefit from the commercial use of the trademark.

2. Business Growth for the Trademark Owner

Licensing allows the trademark owner’s business to expand into new territories and sectors. The business is no longer confined to its original geography or distribution network.

By using the licensee’s market knowledge and distribution capabilities, the trademark owner can scale operations without making significant capital investments.

3. Expansion of Brand Recognition

The licensee often uses their own platforms, advertising strategies, and distribution systems to promote the licensed trademark, thereby enhancing its brand recognition in new or untapped markets.

This increases the visibility of the trademark across diverse consumer bases and geographic regions.

4. Increased Popularity of the Trademark

As the trademark is exposed to a larger audience, it becomes more familiar to consumers. This recognition leads to increased brand trust and can result in higher product demand.

Consequently, the trademark becomes more valuable and attractive for further licensing opportunities.

5. Reduction in Workload

Through licensing, the operational burden on the trademark owner is reduced. Since the licensee takes on production, marketing, or distribution responsibilities, the licensor can focus on strategic brand development and other core activities.

The licensee is also contractually obligated to maintain quality standards, thus ensuring the brand’s reputation is preserved without direct involvement from the trademark owner.

Trademark Licensing Process in India

The process of licensing a trademark in India involves formal registration of the licence agreement with the Trademark Registrar. The steps are governed by the Trade Marks Act, 1999, and must be strictly followed to ensure legal enforceability.

Steps to Obtain a Trademark Licence

1. Filing the Application (Form TM-U)

A joint application must be filed by both:

• The registered owner or licensor, and

• The proposed registered user or licensee

The application is made using Form TM-U, submitted to the Trademark Registrar.

2. Required Documents

The following documents must be submitted along with the application:

• Certified Copy of the Licence Agreement
  A written contract between the licensor and licensee outlining the terms and conditions of the trademark’s permitted use.

• Affidavit by Licensor
  An affidavit signed by the trademark owner containing:

  • The nature of the relationship between licensor and licensee

  • The goods/services for which the licence is granted

  • Any conditions or limitations on the trademark's use

  • The geographical area of permitted use

• Power of Attorney (if applicable)
  If any representatives are acting on behalf of the parties, a valid and signed Power of Attorney must be provided.

• Other Supporting Documents
  Any additional documents requested by the Trademark Registrar during the review process.

3. Review and Approval

After reviewing the application and supporting documents, the Trademark Registrar registers the licensee as a Registered User for the specified goods or services.

The entry includes the date of submission of the application and is published in the Trademark Journal within two months from the date of approval.

4. Confidentiality Measures

To protect commercial interests, the Trademark Registrar may, upon request, ensure that specific information (apart from that officially recorded in the register) is not disclosed to business competitors or the public.

If other licensees already exist, they must be notified accordingly as per the procedural rules for the registration of licensees.

Cancellation of a Trademark Licence

A trademark licence may be subject to cancellation for part or all of the goods or services it covers under Section 50 of the Trade Marks Act, 1999, which deals with Cancellation or Variation of Registration. The process is conducted by the Trademark Registrar and includes a prior notice and an opportunity for a hearing.

Grounds for Cancellation

Cancellation of a registered trademark licence may occur under the following circumstances:

• Breach of Agreement: If either party violates any clause of the licensing agreement.

• Improper Use of the Trademark: If the trademark is used in a manner inconsistent with the licence terms.

• Deceptive Use: If the mark is used to mislead or deceive consumers or the public.

• Suppression of Material Information: If essential facts are withheld during the licensing process.

• Fraud or Misrepresentation: If any party has engaged in fraudulent behaviour or provided false information.

The Trademark Office (TMO) will notify the trademark owner and any registered users likely to be impacted by the cancellation.

Official Fee for Cancellation: Rs. 4,500 per trademark.

Trademark Licensing vs. Trademark Assignment

Although both licensing and assignment allow a trademark owner to monetise their intellectual property, they are fundamentally different in terms of rights transferred, duration, and legal procedures involved.

Key Differences

Licensing allows brand owners to retain ownership while enabling usage by third parties, whereas assignment results in complete change of ownership.

Why Choose Fastzeal for Trademark Licensing Services?

Trademark licensing has become a key commercial strategy to extend brand reach without giving up legal ownership. However, a successful licence depends heavily on a clear, structured agreement, proper quality controls, and tax planning for royalty payments.

At Fastzeal, we ensure that all aspects of your trademark licensing process are handled professionally and efficiently.

Our Trademark Licensing & Registration Services Include:

• Comprehensive TM Directory Search
  To ensure your trademark is unique and eligible for licensing.

• Drafting Letter of Consent & Licence Agreement
  Professionally written to safeguard your rights and comply with legal standards.

• Guidance on Trademark Classification
  Our experts assist in choosing the correct class(es) for your application.

• End-to-End Filing Support
  We prepare and submit all documentation to the Registrar on your behalf.

• Regular Status Updates
  Stay informed throughout the licensing or registration process.

• Expert Advisory
  All your questions are answered with accuracy and clarity to support informed decision-making.