Licensing of a mark is when a trademark owner authorizes a third party to use its mark in consideration of a Royalty. Example : Where an owner of a brand authorizes and allows a third party to use its brand/mark in the course of trade for goods/services. The most important thing to remember is that ‘licensing’ is not sale of the mark or absolute transfer. The ownership to the mark is retained by the owner/holder and only a limited right to use, sell products under the mark etc are given to the third party.

Apart from the apparent monetary benefit, the main benefit of licensing is expanding the reach of the said mark. By licensing the mark to many parties, let’s say in many territories, the mark tends to become more popular and known and this in turn would help in more licensing.

Quality Check
But the same licensing could also destroy the repute of the mark if left unchecked. It is important to implement proper checks and controls when licensing a mark. The expected standard of the goods/services, regular quality check for the goods/services, etc should be incorporated in the agreement lest the mark is used for inferior quality products or in a manner that turns out to be detrimental to the very character/nature of the mark.

The other key features would include territory covered under the license agreement, the term of the licensing, consideration, termination and indemnification.

Registration as a Registered User
It is to be noted that registering the license agreement with the TMO is not mandatory. However it is always advisable to register the same as it does form a record and might turn helpful, if there are any disputes in future.

A registered user is an entity who is authorized to use a particular trademark and a licensee would fall under the said category. The Trademarks act defines it as a person who is for the time being registered as such under section 49.

The Trademarks Act also mentions a term ‘permitted use,’ that is what kind of usage of the mark would be permissible under the Act and this encompasses licensing as well.

Permitted use is defined under section 2(1)(r) as “ in relation to a registered trade mark, means the use of trade mark
i) by a registered user of the trade mark in relation to goods or services

  1. with which he is connected in the course of trade : and
  2. in respect of which in the trade mark remains registered for the time being : and
  3. for which he is registered as registered user and
  4. which complies with any conditions or limitation to which
    the registration of registered user is subject : or

ii) by a person other than the registered proprietor and registered user in relation to goods or services.

  1. with which he is connected in the course of trade and
  2. in respect of which the trade mark remains registered for the time being : and
  3. by consent of such registered proprietor in a written
    agreement and
  4. which complies with any conditions or limitation to which
    such user is subject and to which the registration of the trade mark is subject”

The definition per se would show how the written agreement between the owner and the licensee is the significant element.

Section 49 of the act lays down that the owner of the mark and the proposed user should jointly apply for the prospective user to become a registered user of the said mark. The application is made in Form TM-U. The agreement between them, essentially the licensing agreement and an affidavit by the proprietor putting forth the details of the license including the relationship of the parties, duration of the use of the mark, goods/services for which it shall be applicable etc. It is to be noted that the application has to be made within 6 months of date of the agreement. The official fee for making an online application in this case is Rs 4500 for each mark.

If everything is satisfactory, the TMO shall register the user as the ‘registered user’ of the mark and publish it in Journal and intimation of the same shall be sent to the trademark owner and other registered users for the same mark.

If the TMO is not satisfied, a hearing might be appointed where the parties might endeavour to correct the deficiencies and satisfy the TMO.

Cancellation of Registered User
A cancellation of registered user status may be made in same Form TM-U. A cancellation could be initiated by the proprietor or the registered user or any other registered user of the same mark. The circumstances which are permissible for cancellation are

  1. violation of the written agreement
  2. use of mark as to cause deception/confusion
  3. misrepresentation or non-disclosure of some material fact(s) by either of the parties
  4. the circumstances have changed since the date of registration in such a way that at the date of such application for cancellation they would not have justified registration of the registered user
  5. that the registration ought not to have been effected having regard to rights vested in the applicant by virtue of a contract in the performance of which he is interested :

Any cancellation or any omission which the TMO might make shall be notified to the other registered users who are inclined to be affected by such cancellation and also to registered proprietor.

The official fee for filing an online application for cancellation is Rs 4500 per mark.