The licensing of trademarks is a procedure in which a registered proprietor allows a third party to use the registered Trademark in the course of business without any transfer of Trademark ownership. The trademark owner may grant licenses to one or more individuals to use the mark in connection with all or a part of the goods or services for which the trademark registered. Additionally, the owner may impose certain restrictions on using such marks through the conditions included in the license agreement. This article discusses Trademark licensing and the benefit of licensing a trademark in the UAE.
WHAT IS TRADEMARK LICENSING?
In Trademark licensing, a trademark owner (Licensor) grants permission to another (Licensee) to use that trademark on mutually agreed terms and conditions.
TO WHOM A TRADEMARK LICENSING GRANTED?
It may be given to any individual or third party with whom the trademark holder wants to do business or promote the brand.
WHO CAN GRANT TRADEMARK LICENSING?
As per the UAE Trademark law (Federal Law No. (37) of 1992), the trademark owner may grant licenses to one or more individuals to use the mark for all or a part of the goods or services for which the mark is registered.
WHAT IS THE TERM OF TRADEMARK LICENSING?
As per Article 30 of the UAE Trademark law, the term of Trademark licensing shall not exceed the term specified for the protection of Trademark.
DIFFERENT WAYS OF LICENSING TRADEMARKS
There are different ways of licensing a trademark in the UAE:
(1) Franchising Agreement
Franchising and trademarks are closely connected. Franchising a company entails granting franchisees a license and authorization to use the franchisor’s trademarks. Franchising is an agreement in which the franchisor, usually a brand owner, grants permission to exploit the brand to the franchisees (third party). As a franchisor, you will advise franchisees on how they may and may not use your trademarks. The key to franchising is the licensing of intellectual property rights, particularly trademarks. It may be an advantageous method to launch your own company while operating under the umbrella of a well-known brand. Franchisees would pay an initial fee and then monthly royalties to the franchisor. In exchange, franchisors may provide a broad range of services to franchisees. Along with trademarks and logos, they offer a comprehensive method of conducting business to franchisees.
(2) Merchandising License Agreement
A merchandise licensing agreement outlines the conditions under which the owner of intellectual property, such as a trademark, service mark, or copyright, gives a party known as the licensee the right to distribute, advertise, and sell the property in film television programs, video games, etc.
(3) Brand Extension
Brand extension is a marketing approach that entails introducing a new product under an existing brand name already well-known in a different product area.
This approach enables the new product to join the market with built-in brand recognition. While customers may be unfamiliar with the latest product, they are usually acquainted with the brand that produced it, which increases the likelihood of successful market penetration.
Example: While Apple was a technological firm that exclusively manufactures computers (MACs), its product range quickly expanded to iPods, iPhones, Apple Watch, and Ear pods.
Two or more well-known trademarks, not necessarily of equal standing, may combine in one product to give it a new attraction for the same audience or enter a new market. When both brands work together, they will profit more than if they market themselves separately.
Example: Lexus, Toyota’s luxury vehicle brand, and Coach, a company known for its high-quality leather accessories, teamed together to create the Lexus Coach Edition, a Lexus luxury car with inside finishes made of Coach leather.
(5) Component or ingredient branding
Ingredient branding is a marketing technique in which a component or ingredient of a product or service provided its own identity. The use of that ingredient’s trademark in packaging, promotion, or on the host product itself may encourage customers to buy that product. For example, Teflon is a chemical used in certain types of saucepans that helps keep food from sticking during cooking. However, it has become a trademark.
Read also: Why a Business Needs a Trademark in UAE?
BENEFIT OF A TRADEMARK LICENSING FOR BUSINESS
(1) Additional source of income
Trademark Licensing allows an owner of a trademark to license the use of the mark to as many users or licensees as he or she wants, and each of these users will generate extra income.
(2) Helps in the Expansion of business
A trademark licensing agreement enables a business to grow into a new country or area by allowing a company to produce products or offer services for which the right to use a trademark licensed.
(3) Helps in business collaboration
Through Trademark licensing, a business may collaborate with another to use that partner’s production, distribution, sales, and marketing capabilities to earn profit.
(4) Brand recognition in the market
The Trademark licensing assists the owner in making a previously unknown brand well-known in the market. The licensee may help the brand owner in marketing the brand.
(5) Reduce the workload of the licensor
The licensee is accountable for the continued quality of the products. Trademark licensing enables the trademark owner to be stress-free in terms of product quality.
The purpose of this article is to provide a general overview of the subject. At Farahat & Co, our Trademark and intellectual property specialists help trademark owners in writing trademark licensing agreements. If you have any questions about trademark licensing or interested in licensing your Trademark, please contact us; we will gladly help you.