Licensing- Don’t Risk Losing Your Trademark

Licensing – Don’t Risk Losing Your Trademark

If your business has reached the stage where you are looking to expand abroad or diversify into different markets, licensing your brand could be the ideal way of achieving this.

With licensing, it doesn’t matter if you haven’t the staff or the money to fund your expansion.  You license your brand to a third party that already has the staff and resources available within the target market in which you wish to expand.

The positives are many: it can be a lucrative move and can generate additional revenue for your business; it can increase your brand awareness; and it can help create new products for your brand without running the risk of failure on your part.

Licensing

Licensing Without Controls

However, licensing has its downsides, too, which can be exacerbated if you don’t manage your licensing effectively.  One of the biggest concerns to be aware of is loss of control.  So, whilst licensing can boost your brand’s strength, it could equally damage your brand’s reputation.

This is the risk you run if a third party is licensed to use your brand without any restrictions.  It’s not just your brand’s reputation that could be damaged; in some cases, a lack of monitoring on how a third party is using your brand name could result in you losing the rights over the name.

Eva’s Bridal Shop

Take the case of Eva’s Bridal Shop in Chicago .  In 1966, Eva Sweis opened a bridal shop under the brand name, Eva’s Bridal.  The brand built a reputation for providing top quality goods and services.  Eva obtained trademark rights in that name.

The trademark was used for generations; friends and family were allowed to set up bridal shops under the Eva’s Bridal label.  But in 2007, Eva’s Bridal attempted to take legal action against a former licensee for trademark infringement as he was using the trademark after the license had expired.  On the surface, this appeared a fairly simple case of infringement.

However, the original licence agreement exerted no control over the way the trademark was used, and the court ruled that this therefore eliminated Eva Bridal’s trademark rights in that name.

This is because licences over a trademark granted without any regulations or restrictions, are considered to be abandoning the trademark, no matter how long you may have previously had the rights over it.

Therefore, it is vital to ensure when you license a trademark to a third party, it is  not just an agreement stipulating how much you are licensing a trademark for, but also to ensure you have control over the way the trademark is used.

Trademark as a Symbol of Trust

Trademarks are there primarily to indicate to the public the origin of goods, and to protect them from confusion.  It enables the public to rely on a brand as a signifier of quality, or standard, and is a symbol of trust.

Therefore, if you are planning on licensing your business, be sure to introduce quality controls, and limit the distributor’s rights to sub-license the trademark.

How to License Effectively

The first consideration when approaching a licence agreement is to describe what is being licensed, and to take account of the extent of your trademark portfolio.  What specific products or services are covered and in which geographical areas?  Who will be responsible for filing further trademarks, and who will bear the cost of these?

As a general rule, it’s important for you, the licensor, to retain responsibility for the trademark registration.  The licence will be for a specific period of time and may impose a number of conditions.  In return, the licensee agrees to pay you royalties and is willing to do so because you have something that’s popular.

Licensing can be an invaluable tool to some business owners wishing to expand their brand, so, it is essential to make sure that licensing helps rather than hinders your business.

If you have had any experiences of licensing which you would be willing to share, I’d love it if you left a comment below.

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