Managing Intellectual Property: the Benefits of Trade Mark Licensing

A trade mark is the brand under which a business sells goods and services. The mark is a device that conveys to the buyer some level of quality or indication of service level, which over a period acquires identity separate to that of the goods and services upon which it is applied. In this way, this brand adopted by a business portrays represents the image which customers of a business rely upon in selecting goods and services – it is an association with the brand.

Growing businesses looking to expand the markets in which the company’s goods or services are sold in and increase market share are able to secure their branding rights, protect their brand name, and licence that brand name under franchising, distribution agreements or advertising arrangements. Trade mark protection is available within the UK and across Europe with a single Community Trade Mark application.

Licensing of registered trade marks

Registered trade marks are personal property, and thus may be dealt with like any other property. The rights granted by the Trade Marks Act allow trade mark owners to prevent others selling goods or services using their registered trade mark without their permission. To do so would be an infringement. It is the licensing of the use of a trade mark in association with a certain quality of goods and services that allows companies to create additional revenue streams by exploiting their trade name in combination with other businesses that see the value in an association in approaching a market.

Permission in these arrangements therefore are entirely in the discretion of the trade mark proprietor - to allow a business to sell goods and services and use the registered trade mark in conjunction with them. This is the essence of licensing trade marks.

There are two fundamental terms of licence available. Primarily licences are of an exclusive and non-exclusive nature. Section 28(2) Trade Marks Act 1994 requires a licence to be in writing and signed by the person granting the licence. Trade Marks licences however may be limited to particular goods and services or apply to all goods and services which are protected by the registration, to a particular country or region or any other basis that is convenient to the trade mark owner.

Exclusive licences

Exclusive licences are licences that authorise the licensee to use the trade mark to the exclusion of any other person including the person granting the licence. An exclusive licensee may in turn grant licences provided they are granted the authority to do so in their licence agreement.

Exclusive licensees are granted the power under the Trade Marks Act to commence legal proceedings in their own right in the event of an infringement. This stands in contrast to a non-exclusive licensee, who does not hold rights. The power to enforce trade mark rights against infringers lies with the owner of the trade mark.

Non-Exclusive Licences

Non-exclusive licences authorise a licensee to use the trade mark and places no restriction on the trade mark owner in granting rights to further licensees to perform the same act. The licensee therefore does not have exclusive rights to use the trade mark as the trade mark proprietor retains the right to use the trade mark themselves and licence the use of the trade mark to other persons.

Non-exclusive licences may be granted on the same terms as exclusive licences, except that more than one person will be entitled to perform the particular act.

Benefits of Trade Mark Licensing

Risk within business is always a consideration when attempting to increase market share or expand into other markets. The risks involved in growing the business may be shared by contracting with partner companies to share the risk of growing the business, thus lowering barriers to entry into a market.

These agreements may come in the form of commission based agency agreements, distribution agreements or franchising agreements. They are all premised in some way on a licence of a trade mark. They reduce risk and costs of the owner of the trade mark expanding into new fields of endeavour. A distributor or agent may be able to offer specialist staff or premises within a territory to offer faster growth opportunities than may be achieved from attempting to grow the opportunity from a start-up perspective.

Conclusion

Trade marks protect the brand associated with the products and services a business sells. Building the brand and increasing market share enable a business to grow and become more profitable. One option is to licence a trade mark to another business in order to sell the products and services of the brand on behalf of the trade mark owner. The royalties that may be received through the licensing of trade marks should be given serious consideration when considering the expansion of a business into new areas.