When entering into a trade mark licence agreement, there are certain representations that both the party in the position of licensor and the party in the position of licensee would be prudent to request from their prospective business partner. A representation is an incidental or collateral statement of fact on the faith of which a contract is entered into and, depending upon the language of the particular agreement, could be relied upon by the party to whom the representation is made in the event of a dispute regarding the licence agreement.

In order to protect their respective interests, it is prudent for each of the licensor and licensee to request that their prospective business partner represent and warrant that they have the corporate authority to enter into the agreement and that entering into the agreement does not violate any provisions of the other's certificate of incorporation or by-laws. Moreover, it is recommended that the final licence agreement contain a representation from each party that becoming a party to the proposed licence agreement will not violate, conflict with or constitute a default under any agreement or commitment to which the representing party is a party.

In addition, it is recommended that a trade mark licensor request certain specific representations of its licensee with respect to the prospective licensee's financial condition. For example, a licensor would be wise to include a provision in which the licensee represents that there is not currently pending any bankruptcy/insolvency proceedings. Similarly, a licensor may, in certain situations, want to request that its licensee make a representation as to its ability to make any payments required pursuant to the licence.

Likewise, there are certain licensor-specific representations that the party in the position of licensee may wish to request of its licensor. For example, it is reasonable to expect a licensor to represent that it has the right to license the trade marks as set forth in the licence agreement, that licensor is not a party to any agreement which grants to any other party conflicting rights to use the trade marks, and that the use of the trade marks as contemplated in the proposed licence agreement does not, to the licensor's knowledge, infringe upon any trade mark owned by any third party in the licensed territory.

The inclusion of what may appear on their face to be very basic representations can have a significant substantive effect in the event of a future dispute between parties to a licence agreement. Accordingly, regardless of whether a party is in the position of licensor or licensee, it should seek the advice of counsel prior to entering into a licensing arrangement.

Karen Artz Ash and Bret J Danow

Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022-2585
United States
Tel: +1 212 940 8554
Fax: +1 212 940 8671
karen.ash@kattenlaw.com 
www.kattenlaw.com