TRADEMARK LICENSING IN INDIA

A trademark owner can give license to a third party to exploit/use the trademark and can
share/ transfer his rights. For the transfer of some of his rights, the Trademark owner needs to
make an agreement with the party whom he wants to share his trademark rights. So, A
Trademark Licensing is an agreement where a trademark owner permits someone else to use
the owner‟s trademark in connection with specific products or services. Trademark licensing
can be an effective and inexpensive way for a trademark owner to expand the use and public
recognition of its trademark. In licensing, the rights of trademark vest with the original
owner, few restricted rights are given to the third party such as usage of trademark, to sell the
products. The ownership exclusively lies with the registered proprietor, licensee has no right
to claim the ownership during the tenure of the agreement. The licensing of Trademark in
India has been quite Liberalised, Indian law does not permit Trademark sub-licensing. A
license agreement would be signed between the registered user and the third party. The
clauses mainly include royalty payment, rights & duties of both the parties, termination
clause and its consequences. Common examples for Trademark Licensing include
Merchandising partnership and plant breeders. The term License or Licensing is not
mentioned in the Trademark Act,1999. The term Registered user is used for licensee. Section
2(1)(r) of the Trademark Act,1999 defines “Permitted use” means the use of a registered
trademark by a registered user with the consent of registered proprietor. Section 48-55 of the
Act, are the laws governing the Trademark Licensing. Section 48 provides for Registered
Users.

TRADEMARK LICENSE AGREEMENT-

Trademark license Agreement is a document entered into between the proprietor of a

registered trademark and the third party where the licensor gives authorization to another
company (Licensee) to manufacture, sell, distribute the products under the particular
trademark. The License is given for a specific range of products for that the licensee obtains
exclusivity in a distinct territory. The licensee has to pay a certain sum of money and
royalties based on the sales value of the product sold under the license to the registered
proprietor (Licensor). Under this agreement, fashion and consumer products relating to sports
and entertainment are usually sold.
WHY TO GO FOR TRADEMARK LICENSING?

Trademark licensing widens the scope of the products which is covered under the TM. It also
extends the growth in terms of value and reputation of the TM product. It is beneficial for
both, the registered owner who is already established in his business who will get Royalties &
profit with the sale or distribution of TM product and the registered user or licensee who can
be a newcomer or a start-up company as he will get share in the profit and will get more such
benefits from the sale of TM products. Benefits from Trademark licensing

1. Expansion of Business of the Trademark owner- The Trademark owner allows the licensee
to manufacture the goods or provide services in different regions which is mentioned in their
agreement it leads to expansion of territory of the Licensor business. The licensee uses its
distribution skill and supplies goods and services to different regions and the business is not
confined to a particular region, it gets widespread into various areas or countries.

2. Expansion of Trademark’s Brand Name- Due to the territorial expansion by the licensee to
sell, distribute the product and services the brand gets its recognition, it becomes known to
the public. There is an increase in the popularity of the brand name or Trademark.

3. Monetary Benefits- The licensor gets the monetary benefit by licensing his trademark as
he gets profit as well as royalties by the licensee, this also leads to expansion of Brand value.
The licensee also gets a share in the profit for selling or distribution of the goods and
services.

4. Distribute workload – After this agreement is signed and approved, the licensor will have a
professional partner with whom he can share his work pressure. The licensee also gets certain
responsibility; he becomes responsible for quality checks on goods and services which
creates using this trademark.

Rights of the Registered User or Licensee?

The Registered trademark user is entitled to call upon the registered proprietor to initiate the
proceedings against infringement of Trademark. The registered user can institute proceedings
in his own name after one-month notice, if the registered proprietor neglects. The licensee has
no right to assign in respect to Trademark. He has the right to initiate the proceedings in his
own name for infringement as if he is the licensor or registered owner. The unregistered
trademark user has no right to institute any proceedings for infringement. The licensee should
cite trademark proprietor as co-defendant in any of such proceedings. If the trademark
proprietor is cited as co-defendant by a registered user, he will not be liable for any cost,
unless he takes part in such proceedings.

CHALLENGES WITH CHANGING TRENDS

The Trademark law does not create any legal responsibility of maintaining good or superior
quality but there is a criteria of quality control which is an essential condition in the
Trademark licensing. This is creating a new challenge for the regulation of licensing and a
bigger challenge in understanding the mechanism of Trademark Licensing.

IMBALANCE IN THE INTEREST PROTECTION OF LICENSOR AND LICENSEE

Some authors believe that there is imbalance in the interest protection of licensor and
licensee. Most of the laws are tilting in favour of Licensor but problem arises from Section 50
(1)(d) of the Trademarks act, 1999 which states that in an event of fault of the proprietor of
failing in maintain the quality control upon the licensee, the registrar can cancel the
registration of a registered user on his own or after receiving an application by any person.
The Trademark act, 1999 is silent about the necessity control of quality it can affect the
Trademark business of licensor, because of which it is recommended that the rights &
liabilities of Licensor & 12 Licensee should be clearly mentioned in the License agreement.
Both the licensor and licensee are interdependent on each other. For any mistake or wrongful
act both had to suffer. In some instances, it might go against the licensee, if the licensor omits
to do something the licensee has to pay for it. This problem can be solved by looking into the
License agreement, the relationship between the proprietor and licensee can be governed. The
statutory obligations of both the parties would be mentioned in the agreement. The licensee
must operate and apply the trademark on goods and services under the overall quality control
of the proprietor. There should be quality control maintained by Licensee and regularly
checked by licensor to avoid problems in the business. There is an urgent need for a proper
legal framework to correct the imbalance in this licensing.

CONCLUSION

Trademark license agreement should express terms regarding degree of control exercise by
the licensor over licensee. The trademark proprietor should ensure quality control over the
product. The license will be revoked if any consumer makes an application to the registrar
stating non existence of quality control or the registrar confirmed this in his findings. As per
Indian framework on Trademark, the licensing is under the strong protection of the trademark
by ensuring quality control and connection in the course of trade. The licensing is an effective
practice for the exploitation of trademark. It helps both the registered proprietor and
registered user in the growth of their respective business and brand recognition as the licensee
has to maintain a degree of control over the standard and quality of goods and services which
he sells or distributes in the name of Trademark. Trademark owner should avoid exclusive
licenses that can be read as assignment.Uncontrolled licensing misrepresents the connection
of the trademark owner with the goods and services that are under the control of the
trademark. There should be an authority to look over the unregistered user whether they are
maintaining the quality control on the trademark goods. Section 53 of the act defines the
benefit of registration as the registered user can deprive the unregistered licensee of the right
created by section 52, which says the registered user can institute infringement proceedings
against the infringers in his own name.Unregistered licensee does not enjoy this benefit.
Registration of licensing creates credibility from both legal and judicial point of view. There
is a need for a pro-competitive arrangement for the liberal licensing approach otherwise it
will be harmful for certain sectors of the economy where there is absence of effective
antimonopolistic supervision in the procedure of Trademark Licensing.