Advantages if you are a Licensor -

It enables you to reach markets you would ideally not have been able to;

It requires minimal investment on your part to enter new markets;

You earn royalty without much effort or capital being invested in a particular market.

Advantages if you are a Licensee-

It enables you to enter a market with an established and trusted brand;

It saves you the time required for developing a brand for a new product or service.

Things to remember while Licensing

Trademark licenses should always be in writing and signed by both parties and the following pointers should be remembered while preparing the License Agreement –

Who: The Parties - The names and addresses of the parties should be clearly mentioned. How the Licensor derives its title to the mark should be specified. It is always prudent for the Licensee to look into whether the Licensor actually is the owner of the trademark or not and whether it has the right to license the mark.

The Grant: The agreement should specify exactly what rights in respect of a trademark are being granted, whether the license is - exclusive or non-exclusive, transferable or non-transferable etc. The agreement should also specify how long the license will be valid for, what is the territory within which the trademark is permitted to be used and in respect of which specific goods and services it may be used. It’s always better to have a very detailed elaboration of the exact rights being provided under a license agreement. This avoids future conflict between the parties.

What: The agreement should specify the trademark exactly. It should be specified if the trademark is registered or not. It is always prudent to have the trademark registered in the territory for which the license is being granted. For example, if the trademark is being licensed for use in the USA, it would be best to have it registered in the USA or at least an application for registration of the trademark should be pending in that country.

For how much: The consideration for granting the License should be specified in the agreement. It is open to the parties to decide a suitable consideration. For example, it may be in the form of a one-time license fee or it may be a periodic royalty. Royalties generally bear a relationship with the amount of goods sold or extent of services provided under the licensed marks.

Quality Control: It may happen that the Licensee may use the trademark in an irresponsible manner by providing shoddy products/services thereunder. Thus, from the standpoint of a Licensor, it is imperative that the License Agreement should specify quality control measures that a Licensee must take in order to ensure that the trade mark retains its goodwill. The Licensor should be aware that as the owner of the trade mark, the licensor gives an implied warranty/assurance to consumers about the quality of the goods/services.

Termination: Precise terms must be provided for either party to terminate the license and how goods or services bearing the trade mark ought to be dealt with after termination.