When McDonald's allows a franchisee in Mumbai to use its golden arches, or when a fashion brand permits a local manufacturer to produce apparel under its label, that's trademark licensing at work. The brand owner retains ownership while granting another party the right to use the mark under specific conditions.
Trademark licensing India is governed by the Trade Marks Act, 1999, primarily through the provisions relating to "registered users" under Sections 48 to 54. Unlike trademark assignment, where ownership changes hands permanently, licensing allows the proprietor to monetize their brand while maintaining control over quality and usage.
For businesses looking to expand without heavy capital investment, or brand owners seeking to generate royalty income, understanding how to license trademark rights is essential. This article covers the legal framework, types of licenses, the registration process, key clauses for your agreement, and practical considerations you should know before entering a licensing arrangement.
What Is Trademark Licensing?
Trademark licensing is a contractual arrangement where the trademark owner (licensor) grants another party (licensee) permission to use the trademark in connection with specified goods or services. The licensor continues to own the mark. The licensee gains the right to use it, subject to the terms of the license agreement.
The Trade Marks Act, 1999 doesn't explicitly use the term "licensing." Instead, the statute refers to "registered users" and "permitted users." A registered user is someone formally recorded with the Registrar of Trademarks under Section 49. A permitted user is someone who uses the mark with the proprietor's consent but without formal registration.
The permitted use of a trademark by a registered user is deemed to be use by the proprietor under Section 48(2). This is a critical provision because it means the licensee's use of the mark counts toward maintaining the trademark's validity. Without this deemed use, a mark could face removal from the register for non-use under Section 47.
To enjoy these protections and maintain a legally robust licensing arrangement, having a valid trademark registration in place is the essential first step.
Trademark Licensing vs. Trademark Assignment
Business owners often confuse licensing with assignment. While both involve granting rights to another party, the two are fundamentally different in scope and consequence.
| Parameter | Trademark Licensing | Trademark Assignment |
| Ownership | Stays with the licensor | Transfers permanently to the assignee |
| Duration | For a fixed term or until terminated | Permanent and irrevocable |
| Control | Licensor retains quality control | Assignor loses all control |
| Revenue Model | Royalties or licensing fees | One-time or lump sum payment |
| Legal Provisions | Sections 48 to 54 of the Act | Sections 37 to 45 of the Act |
| Registration Form | Form TM-U (registered user) | Form TM-P (subsequent proprietor) |
| Use Case | Franchising, manufacturing licenses, co-branding | Brand sale, mergers, acquisitions |
Licensing preserves your ownership while allowing others to use the brand under supervised conditions. Assignment, in contrast, permanently transfers the trademark to a new owner. The choice between the two depends entirely on your strategic goals.
Types of Trademark Licenses
Trademark licensing arrangements come in several forms, each offering different degrees of exclusivity and control. Choosing the right structure impacts both the licensor's revenue potential and the licensee's competitive advantage.
An exclusive license grants a single licensee the right to use the trademark within a defined territory or for specified goods and services. Even the licensor cannot use the mark within the scope of the exclusive license. This arrangement is common in franchise models where territorial exclusivity drives the licensee's investment.
A sole license sits between exclusive and non-exclusive arrangements. The licensor and the licensee can both use the mark, but no additional licensees are permitted. This structure works well when the brand owner wants to continue operating in the same market while partnering with one additional user.
A non-exclusive license allows the licensor to grant usage rights to multiple licensees simultaneously. The licensor also retains the right to use the mark independently. This is the most flexible structure and is frequently used for manufacturing licenses where the brand owner wants broad market coverage.
A sub-license occurs when a licensee grants further usage rights to a third party. Sub-licensing is generally prohibited unless the original license agreement specifically permits it. The Trade Marks Act doesn't expressly address sub-licensing, making clear contractual terms essential.
Legal Framework: Sections 48 to 54
The statutory provisions governing trademark licensing India are found in Chapter VI of the Trade Marks Act, 1999. Here's a summary of the relevant sections.
Section 48 introduces the concept of registered users and permitted use. It establishes that a person other than the proprietor may be registered as a user of the mark. Crucially, Section 48(2) provides that the use of a trademark by a registered user is deemed to be use by the proprietor. This protects the mark from cancellation on grounds of non-use.
Section 49 lays out the procedure for registration as a registered user. The proprietor and the proposed user must jointly apply to the Registrar in writing, accompanied by the license agreement, an affidavit from the proprietor detailing the quality control measures, the goods or services covered, any territorial restrictions, and the duration of the arrangement.
Section 50 empowers the Registrar to vary or cancel the registration of a registered user. Grounds for cancellation include the user's failure to comply with the terms of the agreement, non-observance of quality standards, or the proprietor's failure to disclose material facts during the registration process.
Section 51 grants the Registrar the power to call for information about the licensing agreement at any time. This provision ensures ongoing regulatory oversight over licensed trademark usage.
Section 52 gives registered users the right to initiate infringement proceedings against third parties, provided the proprietor is joined as a party to the suit. This is an important enforcement tool for licensees operating in markets where counterfeiting or infringement is prevalent.
Section 53 restricts permitted users (those not formally registered) from bringing infringement actions. Only registered users enjoy this statutory right, making formal registration advantageous for licensees who want enforcement powers.
Section 54 prohibits registered users from assigning or transmitting their registered user rights. The license is personal to the registered user and cannot be transferred to a third party without the proprietor's consent and fresh registration.
How to Register a Trademark License in India
While recording a trademark license with the Registrar is technically voluntary, it's strongly advisable. Registration provides legal certainty, protects against non-use challenges, and gives the licensee standing to pursue infringement claims. Here's the step-by-step process.
Step 1: Draft the License Agreement. The foundation of any trademark licensing arrangement is a well-drafted license agreement. This document should specify the trademark covered (including registration number and class), the goods or services authorized, territorial limitations, the duration of the license, royalty or fee structure, quality control provisions, termination conditions, and dispute resolution mechanisms.
Step 2: Execute the Proprietor's Affidavit. Section 49(1)(b) requires an affidavit from the registered proprietor detailing the relationship between the parties, the degree of quality control the proprietor will exercise, whether the proposed user will be the sole registered user or one of several, and the specifics of the licensing arrangement.
Step 3: File Form TM-U. The proprietor and proposed registered user must jointly file an application with the Registrar of Trademarks using Form TM-U. The application should be filed within six months from the date of the license agreement.
Step 4: Submit Supporting Documents. Along with Form TM-U, submit the signed license agreement (or an authenticated copy), the proprietor's affidavit, identity and address proof of both parties, the trademark registration certificate, and a Power of Attorney if filed through an agent.
Step 5: Registrar's Examination. The Registrar examines the application to ensure compliance with Section 49. If satisfied that the proprietor exercises adequate quality control and the arrangement won't mislead consumers, the Registrar records the licensee as a registered user.
Step 6: Notification to Existing Users. Under Section 49(3), the Registrar issues notice to any existing registered users of the same trademark, informing them of the new registration. This maintains transparency across all licensed users of the mark.
Essential Clauses in a Trademark License Agreement
A poorly drafted license agreement can expose both parties to significant risks. Whether you're the licensor or the licensee, the following elements deserve careful attention.
The scope clause defines exactly what the licensee can and cannot do with the mark. Specify the goods or services authorized, the geographic territory, the channels of distribution, and whether the license is exclusive, sole, or non-exclusive. Ambiguity here leads to disputes.
Quality control provisions are not optional. The Trade Marks Act requires the proprietor to maintain control over the quality of goods or services offered under the licensed mark. Without adequate quality control clauses, the Registrar can cancel the registered user's registration under Section 50, and the mark itself can become vulnerable to cancellation.
Financial terms should cover the royalty rate or flat licensing fee, payment frequency, minimum performance thresholds, and audit rights for the licensor. Transparency on financial obligations prevents disagreements down the line.
Termination provisions must address how and when either party can end the arrangement. Common triggers include breach of quality standards, non-payment of royalties, insolvency, change of control, and expiration of the agreed term. The agreement should also clarify what happens to inventory and marketing materials bearing the trademark after termination.
If your trademark is approaching its expiry date, ensure you complete the trademark renewal before entering a new licensing arrangement. A lapsed trademark cannot be validly licensed.
Benefits and Risks of Trademark Licensing
For licensors, trademark licensing offers a pathway to generate revenue without direct investment in manufacturing, distribution, or new market entry. Royalties provide a steady income stream while the brand gains wider visibility. Franchising models, co-branding partnerships, and merchandising deals all rely on this mechanism.
For licensees, using an established trademark reduces the time and cost of building brand recognition from scratch. Consumers already associate the mark with quality, making market penetration faster and more cost-effective.
However, licensing carries risks for both sides. If the licensor fails to enforce quality control, consumer perception of the brand can deteriorate. Inferior products bearing a respected trademark erode its value over time. From the licensee's perspective, dependence on a licensed mark means vulnerability. If the licensor terminates the agreement or loses the trademark, the licensee's business faces immediate disruption.
Thorough due diligence before entering a licensing deal is critical. The licensee should verify the trademark's status through a trademark search report, confirm there are no pending disputes, and ensure the mark is registered and in force.
Conclusion
Trademark licensing India provides a legally structured way for brand owners to expand their reach while retaining control over their intellectual property. The Trade Marks Act, 1999 establishes the framework through the registered user provisions under Sections 48 to 54, offering both licensors and licensees defined rights and protections.
The success of any licensing arrangement depends on a well-drafted agreement, rigorous quality control, proper registration with the Registrar, and ongoing monitoring of how the mark is used in the marketplace. Whether you're licensing a brand for franchising, manufacturing, or co-branding, getting the legal structure right from the outset protects your investment and your reputation.
If you're considering licensing your trademark or entering a licensing arrangement as a licensee, professional guidance ensures your interests are protected. For assistance with trademark registration or any aspect of licensing your brand, consulting experienced intellectual property professionals is the most effective first step.
