Trademark licensing under the Trademarks Act, 1999 allows the registered owner of a trademark to permit another party to use it for specific goods or services without transferring ownership. It is governed by the "registered user" and "permitted use" provisions in Chapter VI (Sections 48–55). This mechanism helps owners expand their brand’s reach, generate royalties and maintain quality control. It also aligns with the global standards like the TRIPS Agreement. Licensing ensures the trademark’s distinctiveness while offering legal protections which makes it a vital tool for businesses to grow strategically and safeguard their brand identity.
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What is Trademark Licensing?
Trademark licensing is when the owner of a trademark (called the registered proprietor or licensor) allows another person or company (called the licensee) to use their trademark for specific products or services. The owner doesn’t give away ownership of the trademark; they just permit someone else to use it under certain conditions. This process helps the owner expand their brand’s reach, earn money through payments (like royalties) and ensure the trademark stays unique and maintains its quality.
The Trademarks Law in India doesn’t directly use the word "licensing," but it allows this through the concepts of "registered users" (someone officially registered to use the trademark) and "permitted use" (allowing someone to use the mark with or without formal registration). These rules are mainly found in Chapter VI (Sections 48–55) of the Act, with key terms defined in Section 2.
The Act replaced an older law (the Trade and Merchandise Marks Act, 1958) to meet global standards, like those in the TRIPS Agreement. It simplifies procedures and strengthens trademark protection. Below, I’ll explain the key aspects of licensing, including definitions, rules, the process, requirements, benefits, how it differs from transferring ownership, quality control, cancellation, rights and important court cases.
To understand trademark licensing, you need to know a few important terms:
1. Trademark (Section 2(1) (zb)): A trademark is a unique sign, like a logo, name, or design, that can be shown visually (e.g., drawn or written) and helps identify one person’s or company’s goods or services from others. It can include things like the shape of a product, its packaging, or even specific color combinations.
2. Permitted Use (Section 2(1)(r)): This is the heart of trademark licensing. It means allowing someone to use the trademark under specific conditions. There are two types of permitted use:
By a registered user: A trademark officially registered with the Trade Marks Registry to use the trademark for certain goods or services, following any rules or limits set by the owner.
By a non-registered user: Someone who uses the trademark with the owner’s written permission, under similar conditions.
Importantly, when someone uses the trademark with permission, the law treats it as if the owner is using it themselves (Section 48(2)). This protects the trademark from being canceled for "non-use" (under Section 47, which allows trademarks to be removed if unused for too long).
3. Registered User: This is a person or company, other than the trademark owner, who is officially registered under Section 49 to use the trademark.
Also, Get to Know About Infringement of Geographical Indication.
Essential Rules for Trademark Licensing
Licensing is mainly managed through the registered user system, which makes the arrangement official and provides legal protection. Here are the main sections of the Act that govern licensing:
Section 48: Registered Users
This section allows someone other than the trademark owner to be registered as a registered user for some or all of the goods or services the trademark covers.
When a registered user (or someone with written permission) uses the trademark, it’s legally considered as use by the owner. This helps protect the trademark from being challenged or removed for non-use.
Section 49: How to Register as a Registered User
In order to become a registered user, the trademark owner and the proposed user must jointly apply to the Trade Marks Registrar (the government official who manages trademarks).
The application must include a written agreement (or a certified copy) between the owner and the user, detailing how the trademark will be used (e.g., what products, where and under what conditions) and an affidavit (a sworn statement) from the owner or their authorized representative, explaining:
The relationship between the owner and the user (e.g., how much control the owner has over the user’s use of the mark).
Whether the user will be the only one allowed to use the mark or if others can too.
The specific goods or services the user will use the trademark for.
Any conditions or limits, like quality standards or geographic areas.
Whether the permission is for a specific time period or unlimited.
Any additional documents the Registrar asks for.
If the application meets all requirements, the Registrar will approve the user’s registration for the specified goods or services. The Registrar will notify any other registered users of the trademark about the new registration. If requested, the Registrar can keep certain details (like sensitive business information) confidential to avoid sharing them with competitors.
Section 50: Changing or Canceling a Registered User
The Registrar can change or cancel a registered user’s status if the owner, user, or a third party requests it and when the Registrar decides it’s necessary (e.g., if the user isn’t following quality rules or if circumstances change).
Reasons for cancellation might include breaking the agreement, misleading information, or not maintaining quality standards.
Section 51: Checking the Agreement
The Registrar can ask for proof that the licensing agreement is still active. If it’s not, the user’s registration may be canceled.
Section 52: Registered Users Can Sue for Infringement
A registered user can take legal action against someone misusing the trademark (trademark infringement), as if they were the owner. The owner must be included in the lawsuit as a defendant, but they won’t have to pay legal costs unless they actively participate.
Section 53: Non-Registered Users Can’t Sue for Infringement
If someone is allowed to use the trademark but isn’t officially registered, they cannot sue others for misuse.
Section 54: No Assignment by Registered Users
Registered users can’t pass on their right to use the trademark to someone else (e.g., sell or transfer it), except in specific cases like changes in a partnership or company structure.
Learn about the procedures of Patent Registration.
How Does the Licensing Process Work?
You don’t have to register as a registered user to license a trademark since a written agreement for permitted use is enough. However, registering is highly recommended because it provides stronger legal protection and proof of the arrangement and especially if someone claims the trademark is not being used. Given below is how the process works:
Draft a License Agreement:
The owner and the user create a written agreement that explains the terms. The agreement must clearly state how the owner will control the use of the trademark to maintain its quality. The terms may include:
Where the trademark can be used (e.g., specific regions).
How long the permission lasts.
Any payments (like royalties).
How the owner will ensure quality (e.g., inspections or standards).
How the agreement can end.
Protections against legal risks (indemnification).
Submit a Joint Application:
The owner and the proposed user apply together to the Trade Marks Registrar using Form TM-U (as per the Trade Marks Rules, 2017). They must include the agreement, an affidavit with details about their relationship and terms and a fee (₹4,500 per trademark).
The application should be submitted within six months of signing the agreement.
Registrar’s Review
The Registrar of trademarks checks the application to ensure it meets all requirements, like proper quality control and public interest. If there are concerns, the Registrar may hold a hearing to discuss them.
Publication and Registration
If approved, the registration is published in the Trade Marks Journal (a public record). Other registered users of the trademark (if any) are notified. Once registered, the user gets official status as a registered user.
Renewal
The registration lasts as long as the trademark itself, which must be renewed every 10 years (under Section 25).
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Requirements and Conditions for Trademark Licensing
To license a trademark properly, certain conditions like having written agreement, good faith, quality control, specific scope and exclusive or non- executive must be met:
Written Agreement: A clear and written agreement is required for any permitted use detailing how the trademark will be used and controlled.
Quality Control: The owner must actively monitor and control how the user uses the trademark to ensure it meets quality standards. This might involve regular inspections or specific guidelines. Without this, the trademark could lose its uniqueness or value.
Good Faith: The licensing arrangement must be honest and in the public’s interest. The Registrar can refuse registration if it seems harmful or lacks proper control.
Specific Scope: The license is limited to certain goods, services, or geographic areas, as specified in the agreement.
Exclusive or Non-Exclusive: The owner can allow one user (exclusive license) or multiple users (non-exclusive license) to use the trademark.
Benefits of Trademark Licensing
Licensing a trademark has several advantages for both the owner and the user, like monetary benefits, market expansion, branding, legal protection and more. Let’s find out the benefits of trademark licensing:
Money: The owner earns royalties or fees, while the user benefits from using an established brand without building one from scratch.
Market Expansion: The owner can reach new customers or regions without investing directly, and the user gets to sell in those markets.
Stronger Brand: More people using the trademark increases its recognition and value.
Legal Protection: Registered use counts as use by the owner, preventing the trademark from being canceled for non-use. Registered users can also sue for misuse.
Shared Work: The user handles tasks like marketing or distribution, reducing the owner’s workload.
Importance of Quality Control and Risks of "Naked Licensing"
The owner must make sure that the user maintains the quality of the trademark. The licensing agreement should include clear rules for this, like standards for products or services. If the owner doesn’t enforce quality control, it’s called "naked licensing," which can cause serious problems:
The trademark might lose its distinctiveness (its ability to stand out as unique).
It could be considered abandoned which means that the owner loses their rights.
It might confuse or deceive customers if the quality isn’t consistent.
Indian courts have emphasized that quality control is essential to protect the public and the trademark’s value.
Get the Software License Agreement Template.
Difference Between Licensing and Assignment
Trademark licensing is different from trademark assignment, which is when the trademark’s ownership is transferred to someone else. Here’s how they are different:
Aspect | Licensing | Assignment |
Ownership | Stays with the original owner. | Transfers to the new owner. |
Duration | Temporary (e.g., for a set time). | Permanent (unless conditions apply). |
Rights | User gets limited permission to use. | New owner gets full rights, including the ability to assign further. |
Goodwill | Not transferred; stays with the owner. | Can include or exclude the brand’s goodwill (reputation). |
Registration | Optional (but recommended for users). | Mandatory for the transfer to be valid. |
Summary
Trademark licensing under the Trademarks Act, 1999 allows owners to let others use their trademark while keeping ownership and control. It’s a balance between growing the brand and protecting its value. By registering users and enforcing quality control, owners can expand their market, earn money, and avoid legal risks. For specific situations or disputes, it’s best to consult the Trade Marks Registry or a legal expert.
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Trademark Licensing: FAQs
Q1. What is the licensing of trademarks?
Trademark licensing lets the trademark owner allow someone else to use their mark for specific products or services while keeping ownership and control.
Q2. How to get a trademark licence?
To get a trademark licence in India, draft a written licensing agreement with the trademark owner and file a joint application in Form TM-U with the Trade Marks Registrar, along with the agreement, affidavit and prescribed fee.
Q3. What are the different types of trademark licenses?
Licenses can be exclusive (only one user) or non-exclusive (multiple users), and registered (official) or unregistered (based on written permission).
Q4. What is the cost of trademark license?
The fee for registering a trademark license is ₹4,500 per mark, as per the Trade Marks Rules, 2017.
Q5. Can I apply trademarks myself?
Yes, you can apply for a trademark license yourself by submitting the required documents and fee to the Trade Marks Registrar.
