In France, a trademark license agreement is an agreement by which the owner of a trademark (the licensor) transfers the rights to use his trademark to a third party (the licensee), usually in exchange for a royalty, often proportional to the result (sales, profit) of the exploitation.
Contrary to the trademark transfer contract, the license is not subject to any specific formalism and writing is not mandatory.
This being the case, it is strongly recommended in practice to frame the brand license by a written contract detailing precisely in its clauses :
The brand concerned
The license can be for one or more brands. For example, on a word mark and its declination in semi-figurative form.
The trademarks concerned must be precisely identified, in particular by indicating their respective registration numbers.
Products and services concerned
The license may cover all or part of the product(s) and/or service(s ) covered by a trademark, so it is important to define precisely the contours of the license by listing the product(s) and/or service( s) covered.
The license may be for a fixed term or an indefinite term.
It is important to specify this point in the contract, as well as the conditions for renewal or early termination of the license.
The license may cover all or part of the territory covered by the trademark, so it is important to specify this point in the contract as well.
Whether the license is exclusive or not
The license can be granted on an exclusive basis (the licensor refrains from exploiting the trademark itself and granting licenses to third parties) or on a non-exclusive basis (the licensor reserves the right to exploit the trademark and grant other licenses to third parties).
It is particularly important to clearly define the exclusive or non-exclusive nature of the license and the conditions of the exclusivity, if any, i.e. whether it is complete exclusivity or limited to certain product(s) and/or service(s), territories, distribution channels etc.
Financial terms of the license
The trademark license is very often granted in exchange for the payment of a royalty by the licensee, which can take several forms, for example
- It can be fixed: the amount of the fee is fixed in advance and cannot be revised, except by mutual agreement between the parties;
- It can be proportional: the calculation of the amount of the royalty is made on the basis of the turnover or profit made by the licensee and corresponds to the percentage previously fixed by the parties;
In this case, the royalty can be very variable and depends on the activity of the licensee.
Therefore, in order to guarantee the interests of the licensor, it is customary for the license agreement to provide for a minimum sales target to be reached by the licensee.
- It can be mixed and combine both types of fees.
For example, the contract can set a guaranteed minimum fee and a percentage of the turnover achieved, with an adjustment at the end of each period according to the target set.
- The obligations of the licensee, in particular as regards the conditions of use of the trademark.
It is also important in practice to specify in the license agreement the obligations of the licensee as to the conditions of exploitation of the license, especially in order to preserve the image of the brand and the quality of the product(s) and/or service(s ) attached to it.
For example, the contract may include: quality criteria for product(s) and/or service(s), the places and conditions of production, manufacture, distribution and sale of the product(s) and/or service(s), the graphic charter and the communication media to be used by the licensee in the context of communication on the brand, etc.
In addition to the formalization of a written contract detailing the above-mentioned points, it is also strongly recommended to register the license in the Trademark Register so that it can be enforced against third parties.
In fact, article L.714-7 of the Intellectual Property Code states the following principle:
“Any transfer or modification of the rights attached to a trademark must, in order to be enforceable against third parties, be entered in the National Register of Trademarks.”
In addition, Article 27 of Regulation (EU) No. 2017/1001 of the European Parliament and of the Council of June 14, 2017 lays down the same principle with respect to European Union trademarks.
In light of the foregoing, trademark owners are strongly advised to be assisted by professionals specialized in intellectual property(lawyers or attorneys) in the negotiation, drafting and execution of trademark license agreements.
Update on trademark enforcement
Article L.716-4-2 of the Intellectual Property Code states that: ” The civil action for infringement is brought by the trademark owner or by the licensee with the owner’s consent, unless otherwise stipulated in the contract. However, the beneficiary of an exclusive right of exploitation may take action for infringement if, after a formal notice, the owner does not exercise this right within a reasonable time. ”
The Bouchara firm assists you in particular in :
- Negotiations between licensor and licensee;
- Drafting the license agreement;
- The follow-up of the execution of your brand licensing contracts;
- Litigation procedures relating to the validity and performance of the license agreement;
- The contractualization of your operations in the field of trademarks (license agreement, franchise agreement , commission-affiliation agreement, assignment agreement, etc.);
- The filing of your trademarks before the Intellectual Property Offices in France and abroad(INPI, EUIPO etc…) and the possible related registrations (license, assignment etc…);
- Protection and defense of your intellectual property rights(opposition, nullity action, forfeiture action, infringement action, etc.).