Trademark Licensing Attorney

A trademark license is a contract in which the trademark owner (licensor) grants another party (licensee) the right to use the trademark under defined conditions. The license defines the scope of use, the territory, the duration, quality control obligations, royalty terms, and what happens at termination. Unlike an assignment, a license does not transfer ownership of the trademark — the licensor retains the registration and all rights that come with it.

Naked licensing occurs when a trademark owner licenses the mark without maintaining genuine quality control over how it is used. Courts have found that a naked license severs the connection between the mark and the licensor's reputation — the core function a trademark serves — and can result in the mark being declared abandoned. The naked licensing doctrine applies in the US and Canada. A license with quality control provisions on paper that are never enforced in practice is still at risk.

A licensor must exercise actual control over the quality of the goods or services offered under the licensed mark — not just include a quality control clause in the agreement. In practice, this means inspection rights, approval processes for new uses of the mark, standards for labeling and packaging, and some mechanism for auditing compliance. Courts look at substance, not form: a quality control clause that is never exercised does not satisfy the requirement.

An exclusive license grants the licensee the sole right to use the mark in the defined territory or product category — the licensor cannot grant the same rights to anyone else and may not be able to use the mark itself within the exclusive scope, depending on the agreement's terms. A non-exclusive license allows the licensor to grant similar rights to multiple parties. Exclusive licenses typically command higher royalties and require more careful quality control structuring.

Yes, but the agreement must account for both systems. The US and Canadian trademark registrations are separate, and the license must correctly identify which registrations are being licensed in each territory. Quality control obligations apply in both jurisdictions. Royalty allocations between US and Canadian revenues may also have tax implications depending on where the licensor and licensee are based.

Trademark royalty rates vary by industry, the strength and recognition of the mark, the exclusivity of the license, and the licensed territory. Rates are commonly expressed as a percentage of net sales — typically 2% to 10% depending on the category — a flat monthly or annual fee, or a combination of a base fee and a revenue percentage. Minimum royalty guarantees are standard in exclusive licenses to protect the licensor against under-exploitation.

At termination, the licensee must stop using the trademark and destroy or return any materials bearing the mark. The agreement should specify a wind-down period, what happens to existing inventory, and whether the licensee retains any residual rights (typically none). Goodwill developed in the licensed territory during the license term belongs to the licensor, not the licensee. Post-termination use disputes are among the most common licensing conflicts.

It depends on the agreement's terms. A license without a fixed term can typically be terminated by either party with notice, provided the agreement includes a termination provision. A fixed-term license typically cannot be terminated early without cause, unless the agreement includes a for-cause termination right. A licensee who has invested significantly in building the brand in the licensed territory may have arguments against termination without adequate notice — these risks are managed through careful drafting of the term and termination provisions.

A sublicense is a grant by the licensee to a third party of some or all of the rights the licensee received from the licensor. Sublicensing is not permitted unless the original license agreement expressly allows it. When sublicensing is permitted, the licensor typically requires that any sublicense be in writing, that the sublicensee be bound by quality control obligations, and that the licensor be notified. The licensor remains responsible for enforcing quality control over the sublicensee's use of the mark.

In a franchise system, the franchise agreement functions as a trademark license: the franchisor grants the franchisee the right to use the brand under defined quality standards. The same naked licensing risk applies — if the franchisor fails to exercise genuine quality control over franchisee operations, the trademark can be challenged. Franchise agreements typically address this through operations manuals, inspection rights, and termination provisions tied to quality compliance.