In a trademark license agreement, the licensor who owns the trademark allows the licensee to use the trademark by way of a grant of license and for consideration of the licensee paying to the licensor royalty fees. Trademarks are distinctive signs or indicators-usually phrases, logos, slogans, designs, images, or combination’s thereof-that identify a specific company or organization. Trademark protection is only about five years, so owners must work at protecting their mark.
There are several critical elements to the trademark license agreement:
- Exclusivity - if licensor grants license to all companies in a certain market, the mark will be diluted; no one benefits and the mark is harmed, perhaps irretrievably;
- Quality control - licensee must produce goods that meet licensor’s standards, lest the public lose confidence in licensor; again, all parties could potentially be harmed;
- Usage - licensor must give examples of trademark so that licensee does not get creative and design a new version of mark; mark’s color, font, spacing, and so forth must remain unchanged; no additions, either, in terms of other images, slogans, grouping;
- Approval - licensor must make sure trademark is used only for the purpose envisaged by licensor; not to promote licensee’s other products or agenda; not in connection with politics, religion, drugs, alcohol, and so forth; and
- Monitoring - licensor must monitor and inspect licensee’s actions and products to ensure that preceding goals are met; licensor that does not monitor may be deemed to have abandoned mark in some cases.
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