Trade mark licence
Under a trade mark licence, the owner of a trade mark allows another party to use it for all or some of the goods for which it is registered and for all or part of the territory, without the trade mark itself changing hands (Article 2.32(1) BCIP).
If a manufacturer wants to put your name on its own product line or another brand proposes a joint collection, you license your trade mark. What you agree in that trade mark licence agreement decides for years how your name appears in the shops. At Liaise we draft trade mark licences for fashion, design and manufacturing brands under Dutch law. If you are the manufacturer or brand taking the licence, we go through the proposal with you.
Have you received a licence proposal or do you want to license your own trade mark? Call 020 675 88 21 or get in touch. Response within one working day.
Granting a trade mark licence or assigning the trade mark
With a licence you remain the owner of the trade mark and decide for which product groups and which part of the territory the other party may use it. With an assignment the trade mark is gone. An assignment that is not recorded in writing is void (Article 2.31(2) Benelux Convention on Intellectual Property, BCIP, in Dutch).
The law sets no formal requirements for a trade mark licence. That differs from copyright, where an exclusive licence has to be in writing. Even so, put a trade mark licence on paper too, because in a dispute a court looks at what was agreed and without a text you have little to show.
A licence can be exclusive or non-exclusive (Article 2.32(1) BCIP, Article 25(1) EU Trade Mark Regulation). Have it entered in the trade mark register once it is signed, as a licence only has effect against third parties after registration (Article 2.33 BCIP, Article 27 EU Trade Mark Regulation). Our page on building an IP portfolio explains how that works.
What your trade mark right does when a licensee goes beyond the agreement
A licensee who oversteps the limits of the licence is not just in breach of contract. On the duration, the form in which the trade mark may be used, the products, the territory and the quality, you can also invoke your trade mark right against that licensee (Article 2.32(2) BCIP, Article 25(2) EU Trade Mark Regulation). That gives you the same remedies you have against a counterfeiter, such as an injunction and the surrender of the goods.
Quality covers more than the fabric or the finish. Dior had prohibited a licensee for corsetry from selling to discount stores, to protect the brand’s luxury image. The licensee sold to a discounter anyway. According to the Court of Justice of the European Union, the trade mark owner can enforce such a prohibition through the trade mark right where the sale damages the luxury aura. The trade mark owner has then not consented to that sale. Without consent, the trade mark right is not exhausted either (CJEU 23 April 2009, Copad v Dior, C-59/08).
This only works if the limit is in the licence. So set out for which products and countries the licence applies and through which channels the licensee may sell.
Why you keep control of quality under your trade mark
A licensee decides how your trade mark feels to the customer. That is why a good trade mark licence includes an approval round for prototypes, packaging, campaign images and points of sale, with a deadline for your response.
There is a legal reason to take that control seriously as well. If a licensee uses your trade mark with your consent in a way that misleads the public about the quality of the goods, someone else can have the trade mark revoked (Article 2.27(1)(b) BCIP, Article 58(1)(c) EU Trade Mark Regulation). A licence also works in your favour. The licensee’s sales count as genuine use by you, so the trade mark stays alive for those products too (Article 2.23bis(6) BCIP, Article 18(2) EU Trade Mark Regulation).
Royalty, minimum turnover and exclusivity in a trade mark licence
The fee is usually a royalty, a percentage of the licensee’s net turnover, often with a fixed annual minimum. That minimum keeps an exclusive licensee sharp. If a licensee holds the sole right for eyewear or fragrance and leaves the trade mark idle, that product group is locked for everyone.
Agree what happens if the licensee does not reach the minimum turnover, for instance that the licence then becomes non-exclusive or that you can terminate it. Also set out how you check the turnover, with statements and a right to inspect the books.
Exclusivity for a country sometimes restricts where the licensee may sell. Such sales restrictions are subject to European competition rules, which we explain under the distribution agreement.
When a licensee may grant a sublicence
If a licensee wants your trade mark sold in another country or wants to place part of the product line with a partner, it will often ask for a sublicence. With a sublicence the licensee allows a third party to use your trade mark, within the limits of its own licence. The provisions on trade mark licences in the Benelux Convention and the EU Trade Mark Regulation do not say when that is allowed, so the answer lies in your licence agreement.
If the agreement says nothing about it, it is unlikely that you granted that power by implication, because with a trade mark licence you choose who uses your name. Even if you allow sublicences, you keep the choice by requiring your written approval for each party. Also set out that every sublicensee is bound by the same quality requirements, that the sublicence ends when the licence ends and that the licensee answers for the sublicensee. A sublicence of an EU trade mark can be entered in the register if the licence itself is registered too (Article 26(3)(b) EU Trade Mark Regulation).
Taking action against counterfeits when your trade mark is licensed
If the licensee comes across counterfeits of your trade mark, it cannot simply go to court on its own. It needs your consent, unless you have agreed otherwise. The holder of an exclusive licence can bring proceedings itself if you do not act within a reasonable period after being asked to (Article 2.32(4) BCIP, Article 25(3) EU Trade Mark Regulation).
A licensee can intervene in your proceedings to recover its own loss (Article 2.32(5) BCIP, Article 25(4) EU Trade Mark Regulation). For a Benelux trade mark, the licensee can bring an independent claim for damages only if the licence provides for it (Article 2.32(6) BCIP). You can also claim damages on the licensee’s behalf (Article 2.21(5) BCIP). Record in the licence who takes action against counterfeits and how you share the costs and the proceeds, so you don’t have to negotiate between yourselves while the copies are already in the shops.
More about tackling counterfeits →
A collab or co-branding with another brand
In a collab, two trade marks appear on one product. Each brand gives the other, or the party doing the manufacturing, permission to use its name. Legally, that usually means two trade mark licences in one contract.
The design is harder. Without an agreement, a design you come up with together often belongs to both of you or to whoever drew it. For a re-release you will then soon need the other party. Agree in advance who owns the designs, who may sell the remaining stock and whether the other brand may still mention your name after the collab. Our page on the R&D agreement explains how to deal with the rights in a joint design.
The end of a trade mark licence and the remaining stock
When the licence ends, there is often still stock bearing your trade mark in a warehouse. If the licensee sells that stock without an agreement, it does so without your consent and infringes your trade mark. A sell-off period of a few months, with a ban on sales through discounters, clears the stock without harming your brand.
Also agree what happens to labels, packaging and moulds bearing your trade mark. A registered Benelux licence is only removed from the register at the joint request of you and the licensee (Article 2.32(3) BCIP). So include in the licence that the licensee will cooperate. For an EU trade mark, either party can ask for the entry to be removed (Article 25(6) EU Trade Mark Regulation). For a licence with no end date, the rules on terminating a long-term contract apply.
A Benelux design or EU design can be licensed as well
For a registered design the rules are similar to those for trade marks. If the licensee goes beyond what was agreed on duration, form, products or quality, you can invoke your design right (Article 3.26(2) BCIP, Article 32(2) EU Design Regulation). The territory is not on that list, so selling outside the agreed country is mainly a contractual matter for a design. Our page on design law explains how to register a design.
A lawyer to draft or review your trade mark licence
We start from what you want the licence to achieve: income from a product group you don’t make yourself, a new country or a collab that makes your name bigger. Then we draft or review the licence itself. Because we also register trade marks at Liaise, we take care of the register at the same time.
Want to know what to set out in a trade mark licence? Get in touch or call 020 675 88 21.
