Licensing lets you “rent out” your trademark while keeping ownership — a powerful way to expand your reach and reputation. But get one clause wrong (quality control) and you can lose the mark entirely. Here’s what both sides need to know.
What is trademark licensing?
Trademark licensing is when the owner authorises a third party to use the mark in trade, for royalty on sales — without transferring ownership. “Classical” licensing lets the licensee manufacture products under the mark; other forms include merchandising and franchising.
Why license?
It’s the best way to expand into new regions, and economically beneficial for both:
- Licensor — an effective strategy that makes an already-recognised mark even more reputed, extending geographical reach and brand visibility.
- Licensee — the chance to associate with a well-recognised mark, gaining an edge over competitors.
Quality control — the make-or-break clause
The most important part: exercise control over the mark, or you may lose your rights. Lack of quality control is a recognised ground for losing trademark rights after registration. The point is to ensure the licensee’s products at least match the licensor’s quality.
Key clauses in a licence
- Grant clause — the nature of the property, marks licensed, territory, term;
- Consideration — royalty and the percentage payable;
- Quality control — established standards of use; and
- Termination — the grounds on which the licensor may terminate.
Registered-user status (Sections 48–54)
Registering the licence with the Registry is not mandatory — the Act sets no fixed procedure as it does for assignment. But you can become a registered user under Sections 48–54, by a joint request with the licensor within 6 months of the licence.
The difference matters: while both registered and unregistered users are permitted users, only a registered user can initiate infringement proceedings (after due notice) or join the proprietor in a suit. An unregistered user can’t. Cancellation of registered-user status (Section 50) can be sought by either party on grounds like misuse, misrepresentation/non-disclosure by the proprietor, or the mark no longer being registered.
Licensing vs assignment
Still unsure whether to assign or license? The differences:
- Assignment transfers ownership; licensing merely “rents” the mark, keeping ownership and control.
- Assignment must be in writing; licensing need not be (though a written licence is strongly advisable).
- Assignment can be whole or partial; licensing confers rights only for a specific period.
The takeaways
- Licensing keeps ownership — you rent the mark; assignment transfers it.
- Quality control is essential — lose it and you can lose the mark.
- Register as a user (Sections 48–54) — only registered users can sue for infringement.
- Spell out the terms — grant, royalty, quality control and termination.
Frequently asked questions
What’s the difference between licensing and assigning a trademark? Licensing lets a third party use the mark while you keep ownership and control; assignment transfers ownership. Assignment must be in writing; licensing need not be (though it should be).
Why is quality control so important in a licence? Because failing to control how the mark is used can cost you your trademark rights — the purpose is to keep licensed products up to the licensor’s quality.
Do I have to register a trademark licence in India? No — it’s not mandatory, but you can register as a registered user under Sections 48–54, which lets you initiate infringement proceedings.
Can a licensee sue for infringement? Only a registered user can initiate infringement proceedings (after notice) or join the proprietor; an unregistered permitted user cannot.
Legislation referred to
- The Trade Marks Act, 1999