Owners of federally registered trademarks own the exclusive right to use their mark for the classes of goods and services in the United States. So, let's say you own a federally registered trademark for the Class 25, which is for clothing, footwear or headgear, and someone approaches you with an offer to license your trademark to them.
First, a bit of terminology. The owner of a trademark who grants to another party the right to use its mark is called a "licensor". The party who is granted the right to use the trademark is called a "licensee." I try to avoid hard to understand legal words when possible, so I don't like to use the word "licensee", i prefer "License Holder", or I will just use the party's name.
When drafting a contract for a trademark own to grant to a prospective, License Holder, here are a few contractual considerations to work through.
Will the trademark owner give the License Holder exclusive or non-exclusive right to use the trademark. Exclusive mean only the License Holder can use the trademark, not even the trademark owner. Non-exclusive means the License Holder and others can use the mark. Generally speaking, a prospective License Holder should pay more for the exclusive right to use the mark compared to the non-exclusive right to use the mark.
Geographical limitations are also a potential consideration. The trademark owner may want to license the right to use the mark in the Pacific Northwest; and again, we still have the exclusive and exclusive issue to work through in this agreement.
Trade channels are another consideration. The license grant could be limited to online sales, for instance, or to certain retail stores.
The actual goods that the License Holder can use the trademark on is a potential consideration. For example, our Class 25 trademark owner could grant the License Holder to use the trademark only on headgear, and not other clothing or footwear.
Royalties are also an important consideration. Royalties are "mailbox money" that can flow from a passive income stream that a trademark license could bring base on a percent of the License Holders's sales of goods that display the trademark owner's trademark. Of course, trust but verify; the trademark owner will want to have the right to audit the License Holder's sales to verify the accuracy of the royalty--mailbox money--payments.
While this list is not exhaustive, I would be remiss if I did not mention that the trademark owner will also need to have detailed rules about how the License Holder can use the trademark to make sure the use of the mark is proper and to avoid losing the mark for failing to police its use.
These are just some of the considerations to work through. Most people will need an experienced intellectual property attorney for a contract such as this, so consult your friendly IP attorney if this opportunity comes your way.
Contact Mark D. Walters