Avoiding worldwide licensing pitfalls
Managing IP is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Avoiding worldwide licensing pitfalls

Licensing is becoming a more important tool for exploiting brands worldwide. Peter Leung finds out how to do it successfully.

In a session this morning, licensing experts from different countries will give tips on how to prepare trademark licensing agreements and how to avoid costly mistakes down the road

With the increasing globalization of brands, licensing is becoming an important tool for companies looking to expand into new markets. However, as moderator Shelagh Carnegie of Gowlings in Toronto points out, both the licensors and licensees have to be ready to spot the key issues that can cause headaches later on.

For example, both sides must ensure that they are clear and comfortable with the terms of the agreement on key issues involving not just royalties, but also taxes and product liability. These concerns are certain to be central to licensing agreements all around the world.

Attention to detail

Carnegie says that it is extremely important for the parties to ensure that they understand the finer details of the agreement. For example, with royalty payments, both sides need to be clear as to the structure of the payments, such as whether the royalties are off gross sums or net sums and whether there are any caps on payments for any given time period.

“Royalties are something that the parties absolutely have to nail down,” Carnegie says. “In fact, many agreements contain examples to help the parties understand how royalties will be calculated.”

There are also issues that may be more pertinent to one side of the agreement. For example, licensees need to ensure that the license provides the rights it needs to do its business, such as the right to advertise using the marks. Similarly, Carnegie points out that licensees need to have a clear understanding as to whether the license is exclusive, and whether the licensee will end up competing with the licensor in the same market.

Local issues

In addition to the concerns that are important in every licensing agreement, Carnegie points out that there are issues that are particular to certain jurisdictions. For example, in the European Union, licensees and licensors need to be particularly aware of the geographical reach of the licensing agreement to make sure that the rights granted do not bump up against those held by other licensees in other countries in the region.

Similarly, licensors entering into agreements in countries such as Canada and the U.S. must take care to have a certain level of control over the quality of service. Carnegie warns that if the licensor fails to have that level of direct or indirect control under the license, it may jeopardize the mark by undermining the distinctiveness of the brand, causing significant long term damage.

On this issue, Carnegie says that the biggest challenge is often ensuring that the licensor has that level of control under the agreement and exercises it. Though a licensor may make the effort to ensure that the licensing agreement has these provisions, sometimes they will fail to follow through exercising those rights after the agreement is finalized, even though these provisions were drafted for the licensor’s benefit.

However, licensors in countries such as Canada must also be concerned about inadvertently entering into a franchising agreement with the licensee, which has a separate set of laws and imposes additional legal requirements. One of the elements in finding that a licensing agreement is actually a franchising agreement is if there was significant control or assistance from the licensor to the licensee.

Because of the amount of material to cover in the session, Carnegie explains that in addition to the presentations, there will also be handouts of a sample licensing agreement along with the panelists’ annotations of the important sections.

CM02 Trademark Licensing: Best Practices will take place from 10:15 am to 11:30 am today.

more from across site and ros bottom lb

More from across our site

A 36-member team from Zhong Lun Law Firm, including six partners, will join the newly formed East IP Group
The Delhi High Court sided with Ericsson against Indian smartphone maker Lava, bringing the companies' nine-year dispute to a close
We provide a rundown of Managing IP’s news and analysis from the week, and review what’s been happening elsewhere in IP
Tennessee has passed the ELVIS Act, a law that fights against AI models that mimic the voice and likeness of music artists
Rob Stien, chief communications and public policy officer at InterDigital, says the EU has forgotten innovators while trying to solve an issue that doesn’t exist
As Australia’s Qantm IP leans towards being acquired by a private equity company, sources discuss what it could mean for IP firms
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
Nghiem Xuan Bac Pham, managing partner of Vision & Associates, discusses opportunities created by the US-China rift as well as profitability issues facing IP practices
Douglas Leite and two of his colleagues were intrigued by Bhering Advogados’s mission to grow its patent litigation practice
Each week Managing IP speaks to a different IP practitioner about their life and career
Gift this article