Licensing and trademarking

Businesses screen potential licensees to make sure they are financially secure and well run enough to use their trademark. That's why most licensors create requirements that new licensees must meet.

Harvard University is one example of an entity that regularly enters into trademark licensing agreements. Harvard's Trademark Program governs licensing of the university's trademarks on products sold domestically. These products typically include apparel, stationery, bags, and novelty items. Harvard will not license the university's trademarks on the following products:. The program gets coordinated using in-house resources, with staff responsible for managing the process, from identifying prospective licensees to contract negotiations.

Managing the program with in-house resources helps protect the university's name, values, and reputation. Generally, companies must fulfill a stringent set of requirements to get a standard trademark license from another business entity :. Example 1: Sally's registered mark "Sally's Samplers" for chocolate has boosted the sale of her boxed chocolates. When a large candy maker decides it wants to use the mark, the company offers to buy it from Sally.

If Sally sells the mark to the candy maker, she can no longer use it and the candy maker can use her mark however it chooses to do so. Example 2: After selling "Sally's Samplers" for a big sum, Sally decides to step away from her business to do some sewing and gardening.

When she moves into her rustic mountain retreat, she discovers a heart-shaped hoe in the garden shed. Her Aunt Lucy had made the hoe many years ago. Sally has witnessed how this business situation works. She wants to prevent her Aunt Lucy's good name from being treated in this way. She agrees to sell the rights to the mark, but not the right to create derivative marks. Since Sally is not familiar with trademark law , she doesn't realize her decision won't protect her against others who want to use "Aunt Lucy" in connection with products or services that meet Sally's disapproval.

Example 3: After the heart-shaped hoe incident, Sally promises herself that she won't make the same decision again. She develops a new invention called "Cat Call," a device that allows a cat owner to call a cat-back indoors after it takes an outdoor bathroom break.

The new invention skyrockets and Sally again gets offers from other brands. She decides to license the mark to a manufacturer that specializes in items for pets. The license restricts the mark's use to the specific product.

Drawings and diagrams attached as an appendix in the license agreement make the product itself clear. The agreement also limits the way the mark can be used to promote the product and the geographic area where the mark gets used. The license agreement runs only five years. At this time, Sally and this manufacturer can decide whether to renew the license. This decision gives Sally the control she wants, but it also reduces the mark's value for the entity that buys the mark.

Trademark law prevents unfair industry competition by making sure intellectual property remains distinctive so that consumers don't become confused among brands.

This law makes sure customers know what they're buying when they choose their favorite products. They should feel confident that products and services with a familiar trademark are of expected quality. Trademark law also gives trademark holders exclusive rights to their intellectual property and legal solutions if those rights get breached.

Except when a license agreement is involved, other businesses should not be able to profit from someone else's trademark. Trademarks protect the attributes that promote commercial goods or services, such as product names and logos.

Copyrights protect individual and original artistic works, such as novels or songs. If a logo is artistic, the logo could be protected by a trademark and copyright. Trademarks prevent businesses from creating the same or similar elements to promote their own goods and services that could confuse or mislead the public. A similar or even the same artistic work may be permitted under copyright law if the work created did not get influenced by original work.

The first person to use a mark in commerce owns the trademark. Copyrights don't rely on publication. But with someone in your corner with the same goals as you, it becomes easier to level the distribution of responsibility. Owning a trademark does not necessarily mean you have the skills, capital, or commitment to commercially exploit it yourself.

You may have expertise in a few areas, but chances are you are not an expert in all things. Hopefully, this is part of the reason you select the appropriate licensee. This type of agreement can offer a partnership with experience in the areas that you still need to spend time with and learn from. Consumers often base their purchasing decisions upon either.

Newer licensors have an opportunity to forge partnerships that can leverage an existing reputation. This can benefit both parties in the long term. Each of the previous advantages is ultimately an effort to increase financial returns for the trademark owner.

Regardless of where you are in the branding process, a licensing agreement may allow you a relatively passive income without losing any ownership rights. On one end, manufacturers are often willing to pay significant royalty rates for the right to identify their goods with an established and widely recognized trademark. On the other, increasing awareness of your brand by associating with another well-known brand brings additional revenue to you as well.

Seeing your trademark infringed upon can be a shock. Sometimes a better solution is to mitigate the damage — and quite possibly improve business greatly, too — by proposing a trademark licensing agreement to the infringer rather than threatening to sue.

This approach is a great way to build relationships, support goodwill, and foster consumer confidence. Depending on the terms of your agreement, you may end up giving up control over any number of elements, including packaging, distribution, cost, sales, marketing, or even how the product is produced. All of these issues should be addressed in the licensing agreement to the satisfaction of both the licensor and licensee. Your brand equity could take a huge hit should the licensee not meet the quality currently expected of your brand by your customer base.

It is important to understand what rights you are giving up in your agreement. Although not required by law, registering a trademark with the PTO confers many benefits on the trademark owner. For example, a U. Common law trademarks only create rights in the specific geographic territories where the owner is actually using it. Both types of trademarks are valid so long as your business continues to use them. However, registered trademarks must be renewed periodically with the PTO. Patents protect the rights of inventors.

A patent is a year exclusive property right granted by the PTO for an invention. A patent entitles you to exclude others from making, using, or selling your invention. Once your patent is issued, you have an obligation to enforce it against unauthorized third parties violating your rights.

Other types of patents often sought by businesses include:. Business method patents, which protect new methods of doing business, such as those used in banking, tax compliance and e-commerce, for example; and. Plant patents, which protect invented or discovered asexually reproduced plants that are new and distinct.

Read more here on Intellectual Property Protection. Licenses are contracts that transfer IP rights from the owner of the rights the Licensor to a third party who wants to use them the Licensee.

They can be exclusive rights are granted to only one Licensee or non-exclusive rights are granted to multiple Licensees.