Trademark Licensing Lawyer

A trademark license is a contract in which the trademark owner grants another party the right to use the trademark under defined conditions: scope of use, territory, duration, quality standards, and royalty terms. In the US, where a licensor fails to exercise adequate quality control over a licensee, a court may find that the owner has abandoned the mark through what courts call naked licensing (FreecycleSunnyvale v. The Freecycle Network (9th Cir. 2010)). In Canada, a licensee's use counts as use by the owner only if the owner has, under the licence, direct or indirect control of the character or quality of the goods or services (Trademarks Act s. 50(1)). We recommend a written agreement with enforceable quality control provisions.

Naked licensing occurs when a licensor fails to exercise adequate quality control over the licensee. In FreecycleSunnyvale v. The Freecycle Network (9th Cir. 2010), the court affirmed a grant of partial summary judgment holding that The Freecycle Network had engaged in naked licensing and thereby abandoned its trademarks; the court asked whether the licensor retained contractual rights to control quality, actually controlled quality, or reasonably relied on the licensee's own quality control. In Canada, a licensee's use counts as use by the owner only if the owner has, under the licence, direct or indirect control of the character or quality of the goods or services (Trademarks Act s. 50(1)).

In the Ninth Circuit, the question is whether the licensor (1) retained contractual rights to control the quality of the use of its trademark, (2) actually controlled the quality of the trademark's use, or (3) reasonably relied on the licensee to maintain the quality; the court held that a licensor that showed none of these had engaged in naked licensing and abandoned its marks (FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509 (9th Cir. 2010)). The Seventh Circuit held that owners who let others use their mark while retaining no control over quality had abandoned it, stating that trademark law requires decisionmaking authority over quality to remain with the owner of the mark (Eva's Bridal Ltd. v. Halanick Enterprises, Inc., 639 F.3d 788 (7th Cir. 2011)). We recommend quality control that you actually exercise, not just a clause saying you can: inspection rights, approval of new uses of the mark, product or service standards documents, and a way to review compliance. A licensing lawyer can help you design quality control provisions that are substantive enough to satisfy the standard and practical enough to actually exercise.

An exclusive license grants the licensee the sole right to use the mark in a defined territory or product category. The licensor cannot grant the same rights to others within that scope; whether the licensor may still use the mark itself within it depends on the agreement. A non-exclusive license allows the licensor to grant similar rights to multiple parties simultaneously. We recommend more careful quality control structuring for exclusive licenses, because the licensor has less visibility into how the mark is being used across the market.

Yes. A single license agreement can cover both US and Canadian trademark registrations. The agreement must clearly identify which registrations are being licensed in which territory, define the royalty allocation between US and Canadian revenues, and include quality control provisions that apply to use in both markets. Royalty allocations between territories may also have tax implications depending on where the licensor and licensee are incorporated, which is worth addressing in the agreement or with a tax advisor.

Royalty structures vary by industry and the nature of the license. Common structures include a percentage of net sales (typically 2% to 10% depending on the mark's strength, the exclusivity of the license, and the industry), a flat annual fee, or a combination of a minimum royalty guarantee and a revenue percentage. Minimum royalty guarantees are standard in exclusive licenses to protect the licensor against under-exploitation. A trademark licensing lawyer can advise on market-rate royalty benchmarks for your specific industry and license structure.

A template can document the basic terms of a license. We recommend checking that any license includes quality control provisions that are actually exercised, breach and termination mechanics, a clearly defined grant, and, where relevant, cross-border coordination. For a license involving a registered trademark and real business operations, we recommend having a trademark lawyer draft it.

Yes. You can license rights in a trademark application or in an unregistered mark established through use in commerce. The license should describe the mark and clarify that it covers the pending application or common-law rights, depending on the status. If the application ultimately does not result in registration, the terms of the license need to address what happens to the licensee's right to continue using the mark. A license based on an unregistered mark carries more uncertainty than one based on a registered trademark.

The first step is reviewing the license agreement for the breach notice and cure provisions. Most license agreements require the licensor to give the licensee written notice of the breach and a defined period to cure it before termination rights are triggered. If the breach is not cured within the cure period, the licensor typically has the right to terminate the license. Documented breach correspondence is important: a breach that was noticed and tolerated without a written response is harder to act on later than one that was promptly addressed.

A trademark license grants the right to use the mark while the licensor retains ownership of the registration. The licensee can use the mark within the scope of the license, but the trademark remains registered in the licensor's name. A trademark assignment transfers ownership of the registration itself to the assignee, along with the goodwill of the business associated with the mark. Under 15 U.S.C. § 1060(a)(4), an assignment is void against a later purchaser for value without notice unless it is recorded at the USPTO within 3 months or before the later purchase. Unlike a license, an assignment does not require ongoing quality control, because the assignee is now the owner of the mark, not a licensed user of it.