Drafting a Trade Mark Licensing Agreement in Singapore
Why License Your Trade Mark?
Licensing your business’ trade mark can be an effective way of commercialising your intellectual property without taking too much risk.
For example, if your business has a trade mark for its restaurants, you could expand your business by opening new outlets under the brand identified by your trade mark, or by allowing another business to license your trade mark and set up a franchise.
The business licensing your trademark (the licensee) would then need to pay you an agreed fee, and will then be able to set up new restaurants using your trade mark, subject to the terms and conditions of the licensing agreement.
This effectively allows you to generate revenue as well as expand the reach of your trade mark without the business needing to undertake the risks involved in acquiring more capital, leasing new premises, purchasing equipment and managing the overheads of expanding the business itself.
This article will discuss:
- The difference between trade mark licensing and assignment
- How to license your trade mark
- The legal right for a licensee to sue for trade mark infringement
What’s the Difference Between Trade Mark Licensing and Assignment?
Licensing a trade mark means allowing another individual or business to use it while you retain the ownership of the trade mark.
This means that at the end of the term of the licence, all of the licensee’s rights to use the trade mark cease, while you continue to retain the rights of the trademark. This may however differ in the case of an exclusive trade mark (see below), where all rights to use the trade mark will return to you only after the end of the term of the licence. Additionally, trade mark licences do not need to be registered for them to be effective.
Assigning a trade mark, on the other hand, is similar to selling the trade mark by transferring the ownership of it to another party. Unlike with a licence however, once the trade mark has been assigned, the rights under the trade mark will not return to the original owner. Additionally, a trade mark assignment needs to be registered or it will not be effective.
How to License Your Trade Mark
Licensing your trade mark involves entering into a contract that includes certain key terms that need to be carefully considered and negotiated. After the contract has been signed, the licence may optionally be registered with the Intellectual Property Office of Singapore (IPOS).
1. Decide the terms of the licensing arrangement
The rights of both the trade mark licensee and the trade mark owner are determined by the terms of the licensing agreement.
Scope of the trade mark licence
First, the scope of the licence needs to be decided. A trade mark licence may be:
- General, meaning that the licence applies to all categories of goods and services the trade mark had been registered for, or
- Limited (or partial), meaning that the licence applies to only a limited number of categories of goods and services, out of all categories that the trade mark had been registered in.
Whether the trade mark is exclusive
Licences may also be exclusive or non-exclusive. An exclusive trade mark licence is one where no other business may use the trade mark for the duration of the licence, including the owner of the trade mark.
A non-exclusive licence means that there may be other trade mark licensees, or that the trade mark owner may continue using the trade mark, or both.
What the duration of the licence is
The contract must include whether the licence is for a limited or unlimited duration. If the licence will be for a limited duration, the contract should state the duration of the licence, whether the licence is renewable, and whether there are conditions that must be met for the licence to be renewed.
This is especially important in exclusive licenses, as the trade mark owner regains the rights to use the trade mark only after the exclusive licence has ended. It is therefore critical for trade mark owners to determine and state when the licence ends.
What licensing fee is payable
Another key term of the contract is the fee payable by the licensee to the trade mark owner. This fee may be paid in any form agreed upon by the parties. Common structures include lump-sum payment, monthly fees, a percentage of the licensee’s monthly revenue, or a combination thereof.
Whether there is a right to sub-license the trade mark
It is important for the contract to state whether the licensor is permitted to sub-license the trade mark to another business, and if so, what restrictions may be placed on such sub-licensing.
What controls the trade mark owner has over the licensor’s use of the trade mark
Finally, the agreement may contain certain restrictions and controls over how the licensee uses the trade mark and runs the business that is represented by the trade mark. This allows the trade mark owner to protect the trade mark by ensuring that the licensee does not tarnish the business reputation associated with the trade mark.
For example, an agreement licensing a trade mark for running a restaurant franchise is likely to:
- Require that the restaurant remain open during certain opening hours (for example, if a restaurant is known to be open for 24 hours a day, or at night);
- Require the restaurant to maintain the required standards of food safety and hygiene;
- Prescribe recipes that the restaurant must follow;
- Dictate how the trade mark is to be used and displayed;
- Provide protocols for service staff to follow.
2. Drawing up and signing a trade mark licensing agreement
The above details should be included in a contract which must be in writing and signed by both parties, especially the trade mark owner. This is a legal requirement under the Trade Marks Act.
However, notwithstanding how putting the terms of a trade mark licensing agreement in writing is a legal requirement, it is crucial that parties to such an agreement do so.
This is because the licence and business relationship may last for many years, and can include complex and detailed terms which may quickly be forgotten if they are not recorded in writing. Having the agreement in writing will help to minimise disputes regarding the terms of the contract later on.
3. Registering a trade mark licence
Registering the trade mark licence is not compulsory. However, it benefits the licensee by acting as notice of the fact that the licensee has legitimately acquired the right to use the trade mark to the extent specified in the particulars of the registered licence.
Registration also ensures that the trade mark owner will find it more difficult to later renege on his agreement by claiming that the trade mark was not validly licensed, or that the terms of the licence were different from what was agreed.
How to register a trade mark licence
Registration of a trade mark involves filling in and submitting Form CM6 to the Intellectual Property Office of Singapore (IPOS) and paying a registration fee of $60 per trade mark. The form can be downloaded from the IPOS website.
Form CM6 requires certain key details of the trade mark licence agreement to be provided, including:
- The particulars of the trade mark owner;
- The particulars of the licensee;
- The duration of the licence, if it is for a limited duration;
- Whether the licence is exclusive or non-exclusive;
- The classes of goods and services, that the trade mark has been registered for, that the licence applies to; and
- The signature of the trade mark owner to authorise the registration of the licence.
Legal Right for a Licensee to Sue for Trade Mark Infringement
In addition to any rights granted to it under the trade mark licensing agreement, the trade mark licensee has a statutory right granted by law allowing it to sue for infringement of the licensed trade mark. Without this statutory right, a trade mark licensee would not be able to sue a third-party for trade mark infringement as ordinarily, only the trade mark owner has the right to do so.
This allows a trade mark licensee to protect the licensed trade mark even if the trade mark owner does not wish to do so. However, this statutory right may be excluded in the trade mark licensing agreement.
The details of this right differ depending on whether the licence is an exclusive licence or a non-exclusive one:
In the event there is an infringement of the trade mark that the non-exclusive licensee has licensed, the licensee can request that the trade mark owner sue the infringer for trade mark infringement.
However, if the trade mark owner refuses to sue or fails to do so within 2 months, the licensee itself can sue the infringer, provided that the trade mark owner is made a part of the lawsuit either as a claimant or a defendant. This is unless the licensee has obtained the court’s permission to exclude the trade mark owner from the lawsuit.
An exclusive licensee can immediately sue anyone, except the trade mark owner, for trade mark infringement as if he were the trade mark owner.
If the exclusive licensee wishes to sue the trade mark owner for trade mark infringement, the licensee may be able to sue the trade mark owner for breach of contract instead. This is because the terms of an exclusive licence would prohibit the trade mark owner from using its own trade mark for the duration of the licence.
Trade mark licensing is a highly flexible way for businesses to commercialise their intellectual property – a class of business assets that is often overlooked. However, this flexibility comes with a level of complexity in these licensing agreements.
In light of the complex nature of trade mark licensing agreements and the large number of variables and eventualities that need to be considered, it is highly advisable for businesses to engage an intellectual property lawyer when entering into a trade mark licensing agreement.
An experienced intellectual property lawyer will be able to assist you in drafting a trade mark licensing agreements, or reviewing existing ones, while advising on issues such as:
- What terms are typically included
- What terms would be beneficial to your business (whether you are the trade mark owner or potential licensee)
- If there are any key risks to your business or to the goodwill of the trade mark that should be addressed in the agreement.
Finally, a lawyer will be familiar with the process of filling in the forms and submitting the necessary documentation for successful trade mark licence registrations.
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