Trademark licenses are agreements where trademark owners (“licensor”) allows a third party (“licensee”) to use the licensor’s trademark in connection with certain goods and services.
Trademark licenses allow trademark owners to give permission to other parties to use their trademarks in connection with specific goods or services, usually in exchange for money. Trademark licensing is beneficial to many trademark owners with popular brands but not the capital, know-how, or capabilities to fully leverage the value of their trademarks.
For example, the New York Yankees are well known around the world. The Yankees owners are focused on putting together the best baseball team possible through the draft, free agency, hiring the right managers and more. They are not, however, experts at manufacturing t-shirts, hats and apparel. So to make more money, the New York Yankees license their trademarks, such as their famous NY logo, to companies that produce apparel, hats, stickers, towels and nearly anything you can think of.
The New York Yankees license their logo to New Era to produce caps bearing their famous logo
Other examples of large companies that license their trademarks are food franchises (such as McDonalds), independent Coca-Cola bottlers, government tourist agencies (such as the I <3 NY trademark), gas station brands and more. In fact, everyday most people are involved in transactions with an underlying trademark license, for example whenever someone walks into a privately owned franchise store like Chik-fil-A and orders a chick sandwich.
Although not required, it is extremely important for trademark owners to put all of their license agreements into writing to avoid potential litigation over unclear verbal agreements and commitments. Trademark license agreements should include:
Who is the licensor and who is the licensee
The territory the license applies to i.e. worldwide, certain countries, certain states, etc…
What goods or services the license covers
Any duties required by the licensor such as minimum marketing requirements
It is also important for the trademark licensor to include specific quality control provisions. For examples, a brand like the New York Yankees does not want their famous logo on poorly constructing t-shirts that fall apart after only a few washes. In addition, the licensor has the duty to ensure the quality control provisions are being met by the licensee. ALthough rare, in cases where the licensor does not enforce any quality control standards, their trademark rights can be attacked by third parties and a court may conclude the trademark was abandoned.
Other terms that the licensor or licensee may want in the trademark license include a) whether the license is exclusive or non-exclusive, b) the length of the license, c) what compensation the licensor owes to the licensee, d) if the license can be renewed, and e) the consequences of breach of the agreement by either party.
One thing that makes trademark licensing easier is applying for and obtaining a trademark registration with the United States Patent and Trademark Office (USPTO). Trademark registrations confirm trademark ownership, the goods and services owned, provide added trademark benefits and more. It also allows all third parties to know they cannot use that trademark unless they obtain a trademark license from the owner.
In conclusion, trademark licensing is an effective way for brands to maximize their trademarks worth when they do not have certain expertise, enough capital or cannot expand into new markets as efficiently as a third party partner.
Do you have a trademark you would like to license but do not know how to enter in a license agreement? Contact us today for a Free Trademark Consultation and one of our attorneys will get back to you within twenty four hours.