Protect And Expand Your Business by Trademark Licensing
“My distributor registered my trademark behind me!”
“My distributor’s advertisement does not suit my business image.”
“Is it possible for me to control my Distributor’s advertising and promotional activities?”
These are some of the most typical problems faced by trademark owners who have not signed a proper trademark licensing agreement with his distributor / reseller. Worse case, they did not register his trademark or leaving a loophole(s) in the trademark registration before appointing a distributor / reseller.
In this article, we are going to discuss why you, as a trademark owner, need to sign a Trademark Licensing Agreement with your distributor / reseller.
YOU ARE GIVING RIGHTS TO USE YOUR TRADEMARK
The relationship between you and your distributor/ reseller is not limited to the supply and sale of your products. When you supply your products under your trademark to your distributors/ resellers, you are also giving them the right to use your trademark. This is known as Trademark Licensing.
Without you knowing, some distributors/ resellers may register the trademark under their name to seek protection of the trademark while others may go on to create a variety of advertisement and promotions for the sale of your products. Although these initiatives would prove helpful for the protection and recognition your brand, issues may arise in the future when you want to claim ownership of your trademark, or your trademark is used in a manner which may tarnish the goodwill and reputation of your trademark or is in conflict with your business’s image. Hence, it is advisable to sign a Trademark Licensing Agreement with your distributor / reseller.
Under the Malaysian Trademarks Act 2019 (“Trademarks Act”), a trademark is recognized as personal/ moveable property. It may be the subject of a security interest while a trademark licence is regarded as a ‘registrable transaction’.
Generally, Trademark Licensing is done by way of Trademark Licensing Agreement between the trademark owner (“Licensor”) and the person receiving the authority to use that trademark (“Licensee”) such as manufacturers, distributors and resellers.
When licensing your trademark to others, it is recommended for the terms and conditions of the licence to be listed out and put in writing.
ACKNOWLEDGEMENT AND PREVENT LOSS OF TRADEMARK OWNERSHIP
It is always prudent to include a clause in the Trademark Licensing Agreement that your Licensee acknowledges that you are the owner of the trademark, and that he shall not register the trademark without your consent. If he has, he should transfer the ownership of the trademark back to you upon request.
Although there are other ways to claim back the legal ownership of a trademark, it is always better to have the acknowledgement in writing, so that the true ownership of the trademark is undisputed, and the Licensee is contractually bound to return the trademark to you.
Not all Licensees would register your trademark in bad faith. Some might genuinely wish to protect their exclusive right on the use of the trademark. In the circumstances, you should always ensure that your trademark is comprehensively protected, to enhance your distributor / reseller’s confidence on your products and trademark.
CONTROLLING THE USE OF YOUR TRADEMARK
Apart from the issue of ownership, you might also want to control your Licensee’s use of your trademark in order to protect the image, goodwill and reputation of your trademark. Also, to ensure that your Licensee uses your trademark in the way that is consistent with your corporate image and plans. The commonly known controls are the manner of use, geographical area and time period in which a Licensee can use the trademark.
You could impose such limitations and control your Licensee’s use of your trademark by inserting such clauses in your Trademark Licensing Agreement. For example, your agreement could set out that:
Your Licensee has to manage the marketing of your products bearing your trademark;
All advertising materials or marketing campaigns for your products prepared by your Licensee must first obtain your approval before it is published or executed;
Your Licensee is only allowed to market and sell your products in a certain place or region.
By licensing your trademark to others, you may leverage on the resources of your Licensees to expand your business; increase the recognition of your product and trademark; and provide other streams of income for your business through the collection of licensing fees.
TRADEMARK LICENSING MUST BE IN WRITING
Although it is a requirement for licensing of a trademark to be done in writing under the Trademarks Act, it does not mention that the licence can only be granted by way of a standalone Licensing Agreement.
- Section 69(3) of the Malaysian Trademarks Act
As such, the terms of the trademark licence can be incorporated in writing into other agreements you may have with your Licensees such as a Manufacturing Agreement, Distributorship Agreement or Reseller Agreement.
WHAT ARE THE RIGHTS OF A LICENSEE?
The right of a trademark Licensee arises from the Trademark Licensing Agreement which you have signed with him. It is also a form of contract hence governed by contract laws.
Be that as it may, the Trademarks Act has laid down the rights of a Licensee in 2 scenarios, namely in cases where your trademark is infringed and where the Licensee is an exclusive Licensee.
Where there is an infringement of your trademark,
your Licensee has the right to bring infringement proceedings in his own name;
he is entitled to call you on to initiate infringement proceedings if the infringement affects his interests, this is subject to the Trademark Licensing Agreement,;
he may bring the infringement proceedings in his own name if you refuse or do not take infringement proceedings within 2 months after being called upon by your Licensee.
- Section 70 of the Malaysian Trademarks Act
Where an Exclusive Licence is granted,
Your Licensee is entitled to the same rights and remedies as you, subject to the Trademark Licensing Agreement;
He has the right to bring infringement proceedings against infringers.
- Section 71 of the Malaysian Trademarks Act
As we can see from the above, it is important to have a Trademark Licensing Agreement in order to comprehensively safeguard your rights as a Trademark Owner. Contact us today for free consultation about drafting your Trademark Licensing Agreement!
Registered Trademark, Patent and Design Agent
LL.B (HONS), CLP
Advocate & Solicitor (Non-Practising)
Disclaimer: The above information is merely for general sharing and does not constitute any legal advice. Readers are advised to seek individual advice from professionals.
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