WHAT ABOUT LICENSING?

If you find yourself in the position to license your trademark, there are certain considerations you need to bear in mind.  From a business standpoint you need to be able to articulate the necessary terms of the license that will make sense for both you and your licensee.  From a trademark rights standpoint, you need to make sure that your trademark rights are not endangered by the terms of your license agreement or the subsequent conduct engaged in by the parties.

In trademark litigation, license agreements are frequently the subject of discovery requests.  One reason for this is because a license agreement may provide ammunition for an attack on the adversary’s trademark rights.  One way this can happen is through naked licensing – also known as a license in gross.

Our New York attorney provides guidance with trademark licence agreements

Naked licensing is the term for licensing of a trademark without appropriate supervision of the quality of the goods or services provided under the mark.  If you are found to have engaged in naked licensing of your trademark you can lose your trademark rights.  The reasoning behind this rule is the following.  A trademark is a symbol that indicates the source of the product or service.  Consumers are entitled to presume that products or services bearing a given mark emanate from the same single source.  When you license your trademark to another party you are giving that party the right to use your trademark on products or services.  But, because the products or services are being sold under your trademark, the message is being conveyed that they emanate from the same source as your other products or services designated by the trademark.  Thus, trademark law requires that you exercise control over the quality of the goods or services being sold under your trademark by your licensee. 

The exercise of control over the quality of the goods and services is accomplished by drafting appropriate quality control provisions into the license agreement, and then carrying out the quality control procedures during the course of the license term.  It is not enough to write quality control provisions into the agreement if the licensor does not actively engage in supervision of the quality of the licensed goods or services.

This is just one of many issues that are involved in the licensing of a trademark.  Be sure to consult with your attorney if you are contemplating entering into a license agreement.