A trademark is transferable in two ways: Assignment and License. Assignment results in the transfer of the whole trademark, i.e. the initial proprietor cease to be the owner of the trademark. Simply put, assignment is the transfer of ownership of the trademark. A license, on the other hand, is the transfer of certain limited rights. There is no transfer of ownership in a license. In this blog post let us delve into the different modalities of licensing.
So, What does Licensing of Trademark Rights exactly mean?
When a trademark owner allows a third party to use his trademark, it is called licensing of a trademark. A trademark license usually takes effect on certain mutually agreed terms and conditions between the parties.
Why License Trademark Rights? (Benefits)
The most common reason for licensing a registered trademark or unregistered trademark is the extra revenue. Whenever you license your trademark the licensee will pay you a royalty (money for using your trademark). This royalty usually proves to be a good source of revenue.
Another reason for licensing your trademark is the expansion of geographical territory. Suppose you want to make your product available in other countries without wanting to undertake the cost of setting up a production unit in that country. The best option then is to license your trademark to a production unit in that country. This will ensure the availability of your trademark in that geographical area, without extra expenditure from your end.
Increased consumer recognition. This is probably the greatest advantage of licensing your trademark. Licensing ensures increased availability of your trademark. The more a trademark is used, the more it is recognized among the consumers, this increases the brand value of the trademark. In the long run, it has a positive effect on the business.
What about the quality of the Licensed Trademark?
The whole point of a trademark is so that consumers are able to recognize the source of the goods. The consumers associate the source with a quality of the goods. So won’t licensing the trademark put the quality of the goods in jeopardy? After all, it is not essential for the licensee to maintain the same quality of the licensor. This is why the onus is on the licensor to ensure that the licensee maintains the quality. The licensor can ensure this in two ways:
Usage control– The licensor will control the way in which the trademark is to be used by the licensee. The way in which the goods are promoted, marketing strategies etc. will be decided by the Licensor.
Quality control– The licensor will monitor the quality of the goods produced by the licensee before the goods are released in the market.
It is essential for the licensor to retain quality and usage control over the licensed trademark in order to protect the brand value of his business.
Licensing a trademark in India is an important tool for the proprietor to gain access to new geographical territories, increase his revenue, as well as enhance the brand value of his business by increasing the availability of his trademark far and wide.