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What is the Purpose of Trade Mark Licensing?

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Trade mark licensing is a legal agreement that allows one party (the licensor) to grant another party (the licensee) the exclusive right to use their trade mark for specific purposes under certain conditions and for a defined period. In New Zealand, trade mark licensing serves several important purposes for both licensors and licensees. This article will delve into the purpose of trade mark licensing, including its benefits to both parties and best practices for entering into a trade mark licensing agreement. 

Purpose of a Trade Mark Licence

The primary purpose of trade mark licensing is to extend the reach and value of a trade mark. Trade marks are valuable assets that represent the goodwill and reputation of a business or brand. By granting a licence to use a trade mark, the licensor can expand the brand’s presence and generate additional revenue streams.

On the other hand, licensees can leverage the established reputation and brand recognition of the licensor’s trade mark to enhance their own business operations.

Benefits for Licensors 

Trade mark licensing can bring several benefits to licensors in New Zealand. We explore these benefits below.

1. Revenue Generation

Licensors can generate additional revenue through trade mark licensing by charging licence fees and royalties. These fees can provide a consistent income stream for the licensor, which can be especially beneficial if the licensor is not fully utilising the trade mark themselves or if they want to expand their business into new markets without directly operating in those markets. 

2. Brand Expansion

Trade mark licensing allows licensors to expand their brand presence into new markets, territories, or product categories without investing in new business operations. This can help licensors reach new customers and increase brand visibility and recognition. 

3. Brand Protection

By carefully selecting and monitoring licensees, licensors can maintain control over the quality and reputation of their trade mark. This helps to protect the brand’s integrity and ensure that it is used consistently and appropriately. This ensures the safeguarding of the brand’s value and reputation. 

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Benefits for Licensee 

Licensees can also reap several benefits from trade mark licensing in New Zealand. Such benefits are outlined below.

1. Brand Recognition

Licensees can leverage the established reputation and brand recognition of the licensor’s trade mark to gain instant recognition and credibility in the market. This can be especially valuable for new businesses or businesses entering new markets, as it reduces the need to invest in developing their own brand. This can save them significant costs and resources regarding branding, marketing, and legal protection.

2. Access to Established Markets

Licensees can gain access to established markets where the licensor’s trade mark is already well-known, saving them time and effort in building brand recognition from scratch. This can be particularly useful for businesses seeking to expand their operations or enter new markets quickly. 

Trade Mark Licensing in New Zealand 

In New Zealand, a trade mark licence must be in writing and signed by both parties to be enforceable. The licence must also specify the:

  • trade mark being licenced;
  • scope of the licence (i.e., the specific goods or services covered);
  • duration of the licence; and 
  • any quality control measures that the licensee must comply with. 

In addition, the licensee’s use of the trade mark must not result in the trade mark becoming generic or mislead the public about the relationship between the licensor and licensee. The licensor also must monitor and exercise quality control over the licensee’s use of the trade mark to maintain the brand’s integrity.

Importantly, failure to comply with these requirements may result in the trade mark licence being unenforceable. This may also jeopardise the validity and enforceability of the licensor’s trade mark itself.

Best Practices for Trade Mark Licensing

When entering into a trade mark licensing agreement in New Zealand, it is essential to follow best practices to ensure a successful and legally compliant partnership between the licensor and licensee. We outline key best practices to consider in the following section.

1. Clearly Define Licence Terms

The licence agreement should clearly define the scope of the licence. It should also specify any restrictions or limitations on the use of the trade mark to avoid potential disputes in the future. 

2. Quality Control

The licensor should include provisions in the licence agreement that outline the quality control measures the licensee must follow to ensure that the trade mark is used consistently and appropriately. This may include regular inspections, testing, or monitoring to maintain the integrity and reputation of the brand. 

3. Monitor and Enforce

The licensor should actively monitor the licensee’s use of the trade mark to ensure compliance with the licence agreement and quality control measures. You should quickly address any unauthorised use or misuse of the trade mark. Likewise, enforce your rights to protect the brand’s value and reputation. 

4. Protect Intellectual Property

The licence agreement should include provisions that protect the licensor’s intellectual property, including trade mark registrations, copyrights, and other proprietary rights. This may include clauses on trade mark infringement, intellectual property indemnity, and dispute resolution mechanisms. 

5. Seek Legal Advice

It is strongly recommended to seek legal advice from a qualified intellectual property lawyer in New Zealand when drafting and negotiating a trade mark licensing agreement. This ensures that the agreement is legally sound, compliant with local laws and protects the rights and interests of both parties.

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Key Takeaways

Trade mark licensing is an excellent way to extend the reach and value of a trade mark. Trade mark licensing also provides several benefits for both licensors and licensees. Some key benefits of trade mark licences for licensors include:

  • revenue generation;
  • brand expansion; and
  • brand protection.

On the other hand, some key benefits of trade marks for licensee include:

  • brand recognition;
  • access to established markets; and
  • opportunity to utilise established intellectual property.

If you need assistance preparing a trade mark licensing agreement 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.

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