As a trade mark owner, you might have heard about the ability to license your trade mark. Upon registration of your trade mark, you can use, sell and license your trade mark for the goods and services it is registered for. Essentially, trade mark licensing is the process by which a trade mark owner authorises another party to use their mark within certain parameters for a fee. To help you decide if this is a good option for your business, this article will take you through five tips to consider when licensing your trade mark in New Zealand.
1. Understand Licence Types
The first tip for licensing your registered trade mark is to understand the different licensing types available. The licensing types differ depending on who has the right to use the trade mark for the duration of the licencing agreement.
There are three primary ways licensing agreements are established. These are outlined in the table below.
| Licensing type | Description |
| Exclusive | An exclusive licensing agreement means the licensee is the only person able to use the trade mark in question. This prevents even the owners of the trade mark from using the mark. |
| Non-exclusive | A non-exclusive licensing agreement allows both the licensee and the owner of the mark (the licensor) to use the mark at the same time. This is a common arrangement for franchises, allowing all parties to the franchise network to have access to the same intellectual property simultaneously. |
| Sole | Sole licensing agreements allow the licensor, the owner of the mark, to use the trade mark along with the licensee. However, the licensor may grant only one licence. |
Once you know the differences between each type of licensing agreement, you can choose the option most suitable for you and your preferences.
2. Identify the Terms
Before licensing your trade mark, you should consider what the agreement will look like. This includes assessing the potential clauses you might include in the agreement. There are a few key elements that are prevalent in all licensing agreements. This includes:
- the type of licensing agreement;
- geographical limitations;
- duration of the agreement, including the date of commencement and any date of expiry;
- quality control measures;
- payment details, including whether there is an upfront cost or if it will be paid via royalties;
- details of both parties and the company structure;
- what will constitute a breach of contract; and
- dispute resolution options.
Once you understand the common terms of a licensing agreement, you will better understand the parameters of such an agreement and whether they are suitable for you.
Continue reading this article below the form3. Know the Benefits
Before licensing your trade mark, you should know the benefits. This will help you analyse whether licensing your mark aligns with your commercial goals.
Firstly, a common reason to license your mark is to earn passive income. Licensing agreements are typically provided in exchange for an initial licensing fee and royalty fees. This allows a business to profit from its trade mark without using it itself.
This also leads to the second main reason businesses license their trade marks. Trade mark licenses are a great way to increase brand awareness in new markets with little financial or investment. This increases the value of a trade mark and overall business with minimal effort.
4. Consider the Risks
In addition to its benefits, it is important to know the risks of trade mark licensing. These should be carefully considered before deciding if licensing is for you.
A key disadvantage of licensing agreements is the potential loss of control over your marks. Authorising the use of your trade mark by others can potentially damage your brand reputation if they misuse your mark.
In addition, the nature of licensing agreements means you increase competition. To mitigate this risk, you might want to only choose exclusive or sole licensing agreements.
5. Know How to Select a Licensee
Finally, you must know how to conduct a due diligence check on a prospective licensee. This is to both ensure they have the financial means to pay for the license, as well as to check they have the attributes of someone you want representing your brand and trade mark. Any misuse of your mark may not reflect well on you and any other licensees. This makes it important to carefully choose your licensees. To do this, you might want to establish criteria for who is eligible to enter a licensing agreement with you.
Our free Trade Mark Essentials in New Zealand guide explains how to register and defend your trade mark registration.
Key Takeaways
Trade mark licensing is the process by which a trade mark owner authorises another party to use their mark within certain parameters for a fee. Some key tips to know on licensing your trade mark include:
- understanding license types;
- identifying potential terms of the agreement;
- knowing the benefits;
- considering the risk; and
- Knowing how to select a suitable licensee.
If you have any questions about licensing your trade mark in New Zealand, our experienced trade mark lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Trade mark licensing is the process by which a trade mark owner authorises another party to use their mark within certain parameters for a fee.
There are several benefits to licensing your trade mark. Trade mark licenses are a great way for businesses to receive a passive income, enter new markets and increase brand recognition with less financial and time investment.
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