Trademark License Agreements

Trademark License Agreement – What You Need to Know

Trademark license agreement is a legal contract between a trademark owner and another party that have agreed to use the trademark on preapproved terms. A trademark owner can commercially exploit its brand through its own use or by licensing others to use the brand. However, a trademark owner risks devaluing or even losing its trademark rights through licensing if it fails to obtain and enforce key contractual protections in the license agreement.The complexity and length of trademark license agreements vary depending on a variety of factors, including:

  • The relationship between the parties
  • The types of licensed products or services
  • The value and duration of the licensing arrangement

Elements of Trademark License Agreement

There are several elements to a trademark licensing agreement. One of the most important ones is to properly demonstrate that the licensor remains in control of the quality of the goods or services sold in connection with use of the mark. This provision regarding quality control is one of the most central elements integral to trademark licensing agreements. The quality control provision of a trademark licensing agreement must ensure that the licensor of the trademark has set standards to maintain the goodwill attached to the mark that consumers of the goods or services have come to rely upon.

Where the licensor exercises no quality control (also called a naked license), the licensor risks abandonment of the mark. Common requirements under the quality control provision of a trademark licensing agreement may include, but are not limited to, the ability to audit the licensee’s accounting records or bookkeeping, reviewing and approving prototype and production samples for any new products, inspecting of the licensee’s facilities, internal audits of the licensee’s protocols, reviewing of media and advertisement use printed in connection with use of the mark, requiring proper disposal of defective or rejected products or other materials bearing the mark, and reviewing customer service comments and complaints.

However, one needs to be careful with the amount of quality control. Too much of it risks having the license construed as a franchise agreement and increased exposure to product liability claims.

Licence Grant

Ensure that the license grant clearly addresses the licensed mark; the specific goods and services covered by the license; and the specific licensed uses of the mark for the licensed goods or services, for example, sale, distribution, and advertising and promotion.It should also address any restrictions on the trade or distribution channels to be used by the licensee; exclusivity, for example, particular goods or services or geographic areas. Moreover, whether the licensee can sublicense some or all of its rights, and, if so, any conditions that the licensee must satisfy before entering into a sublicensing agreement and what control the licensor will have over the sublicensee; and an express reservation to the licensor of all rights not expressly granted to the licensee.

Exclusivity

There are several types of trademark licenses. The licensor may grant to the licensee an exclusive license. An exclusive license grants the rights to the licensee to the exclusion of all others, including the licensor. An exclusive licensee has the contractual right to exclude all others from its particular area of exclusivity.A non-exclusive license grants the rights to the licensee, but does not preclude the licensor from granting similar licenses to others, so the licensor can license the same rights to third parties as well as use them itself.A sole license is one that grants the rights to only the licensee, but not to the exclusion of the licensor. Therefore, a sole license prevents the licensor from granting other similar licenses, but does not prevent the licensor itself from using the licensed rights. This is appropriate where the licensor is already operating in or plans to operate in the license territory.

Consideration and Payment Terms

The financial terms of trademark license agreements vary based on the particular transaction. A trademark license agreement can be fully paid-up and royalty-free, or it may require payment of a license fee, ongoing royalties, or other consideration. License fees and royalty provisions vary greatly.The licensor may consider requiring the licensee to pay fixed license fees at set dates during the term of the license, which would likely be instead of payment of royalties based on the licensee’s sales of licensed products or services. If the parties agree to these fixed fees, the parties should ensure that the agreementincludes a payment schedule setting out the payments and corresponding due dates.Earned royalties are ongoing royalties the licensee pays to the licensor calculated against an agreed royalty base. The method parties use to calculate earned royalties depends on a variety of factors. The most conventional approach is a royalty paid on a recurring basis calculated as a percentage of the net sales price of the licensed products.The royalty rate itself depends on many factors, such as the value and strength of the licensed trademark, territory, degree of exclusivity, etc. It is not uncommon for trademark licensors to set minimum sales objectives or expectations in the licensing agreement.A well-drafted trademark licensing agreement will also be specific when it comes to how the licensor is to be paid, how often payments may be made, and what consequences there will be if payment is late.

Geographical Scope of Trademark License

The geographical scope of a trademark licensing agreement is another important element of a trademark licensing agreement Because a licensor may license the trademark to multiple licensees, it is important for the licensing agreement to clearly address the geographical areas that the licensee may use the trademark. For instance, a licensor may grant trademark rights to different licensees based on the continent, state, or city they are in.

License Duration – Term and Termination

The duration and right to terminate provisions of a trademark licensing agreement are also important because it gives the licensor the ability to license the trademark for a short amount of time in order to see whether business relationship is profitable enough to renew for another term.

Similarly, the right to terminate the agreement is important for the licensor because it allows the licensor to terminate the agreement immediately upon the licensee’s misuse of the mark or for other breaches of the agreement. This way, the brand owner of the mark can stop the erosion of the goodwill associated with the mark if a licensee fails to meet the standards of quality that consumers have come to expect in relation to the original provider of the goods or services associated with the mark.

Risk Allocation

The parties to a trademark license agreement typically allocate risks in the trademark license agreement through indemnification, limitation of liability, representations and warranties, and insurance provisions.Trademark license agreements typically include basic representations and warranties concerning each party’s corporate authority to enter and be bound by the agreement, and the licensor’s ownership interest in or other basis for its control of the licensed trademark and ability to grant the license set out in the agreement.Licensors are also typically unwilling to represent and warrant that use of the licensed mark as permitted by the agreement does not infringe a third-party’s trademark rights.A trademark license agreement often includes an indemnity provision that requires each party to be liable and indemnify the other party for certain claims, for example, third-party claims resulting from the other party’s breach of the agreement. A licensee generally seeks to have the licensor indemnify the licensee for any third-party intellectual property infringement claims asserted against the licensee for using the licensed trademark. A licensor often seeks to have the licensee indemnify the licensor for third-party product liability claims relating to the licensee’s use of the licensed trademark.To back up the indemnity, the licensor may want to include a provision requiring the licensee to maintain insurance policies to cover third-party claims arising from defective licensed products the licensee distributed, and the licensee’s indemnity obligations regarding any product liability claim.

Definitions Section of Agreement

Definitions, common to most business contracts, are also an important part of especially more complicated trademark licensing agreements. In order to avoid confusion between the parties, it is important for the licensor to clearly set forth what specific words or terms used in the agreement mean so that there is no confusion between the parties and to avoid potential conflict if litigation happens to arise.

Other provisions

Trademark license agreements often include other provisions. We list here some typical ones without further explaining: sublicensing, subcontracting, license recordation, trademark enforcement, most favourable licensee, licensor audit rights, taxes, sell-off period, condifentiality, assignment, marketing and advertising requirements.

General Contractual Terms

Trademark license agreements will have the same general provisions that appear in business contracts, which include but are not limited to: description of the parties; governing law; jurisdiction; severability; entire agreement.

How can Vedinor help you?

There isn’t one type of trademark license agreement that would fit all purposes and businesses. You should discuss with an experienced intellectual property counsel about your situation and what is the best solution for you.

We here at Vedinor often draft international trademark license agreements on a cost efficient flat fee. Email us at communications@vedinor.com for a quote or schedule a free consultation to get your trademarks in order.

5 Essential Provisions in Social Media Influencer Agreements

Every type of agreement has its own tricks and traps. The contract made between the advertiser/brand and influencer is a unique agreement. There are several issues you should pay attention to when you are signing one. One of the most obvious and top-priority provisions include the influencer’s services in detail and compensation. In this article, we will not talk about them but other things that should not be ignored.

Depending on whether you are an advertiser or an influencer, some of the other provisions are more important to you. Although in an excellent agreement there aren’t any unimportant clauses, some terms are always more central. In this article, we will share 5 clauses that we think should be carefully formulated in an influencer agreement.

LEGAL COMPLIANCE – WHO NEEDS TO FOLLOW THE LAWS?

Depending on the jurisdiction, the brand is also responsible for following the relevant regulation if the influencer does not. For example in Finland that is the case. In most jurisdictions, the advertiser has a duty to inform the influencer about the relevant legislation, such as consumer protection and marketing laws.

Falling foul of the relevant laws puts you on the risk for sanction and negative publicity. For example, in many jurisdictions, it has been made clear that using only the social media platform tool to mark commercial collaboration is not sufficient.

We recommend using a clause that requires the influencer to acknowledge and comply with the relevant laws, regulations and soft law instruments in your jurisdiction. It is good practice to include a written guidance that has the relevant legislation and guidelines that needs to be followed.

It is important to bear in mind that being in compliance with relevant legislation benefits both parties of the influencer agreement. In today’s world, ignoring legislative obligations and requirements in social media influencer marketing campaigns can be hazardous for both the influencer and the brand.

Consumers are fully aware of the sponsored content on social media and they don’t generally like if they see advertisement that is not clearly disclosed as such. Non-compliance with legislation affects negatively on the influencer’s and brand’s reputation. Making sure legal compliance is in the top priority for parties should, therefore, be highly important for both parties.

Do not forget to include writing about following the terms and conditions of each platform and not infringing others’ intellectual property rights.

If someone paid for your ticket to paradise, do not forget to disclose it.

CONFIDENTIALITY – WHO HAS TO BE HUSH-HUSH?

Social media influencer agreements often contain confidentiality provisions to protect sensitive information both parties may learn during the agreement’s term. For example, the brand might launch a new product or tell other sensitive information to the influencer. Often it’s also in the advertiser’s interest to keep the influencer from sharing the terms and conditions of the influencer marketing campaign.

It can also be that the influencer discloses to the brand something that they want to stay confidential, for example about their metrics. Quite often the writing of confidentiality provision is such that it only obligates the influencer. If two-way confidentiality is desired by the parties, pay special attention to the writing of this clause.

Usually, unless there is a large quantity of confidential information, a separate confidentiality agreement is not necessary to broaden the scope of the protection provided by a well-drafted confidentiality provision. On the other hand, a separate non-disclosure agreement might be needed if confidential information is shared during the negotiations before signing the final contract.

Remember to decide whether the confidentiality will survive expiration or termination of the agreement. Sometimes the confidentiality obligations should only survive for a certain period after termination of the contract, and if that’s the case, it should be clearly stated.

SCOPE AND OWNERSHIP OF INTELLECTUAL PROPERTY – WHO OWNS WHAT?

There is a lot of intellectual property (at least copyright and trademarks) related to the influencer agreement. The brand owns intellectual property, for example its’ trademarks. The influencer will usually be creating content for the brand and owns the copyright for that unless nothing else is agreed. Sometimes the influencer has trademarks, perhaps their own name is trademarked, and the brand can not use it without a license.

Therefore, negotiating the scope and ownership of intellectual property is a huge part of the deal. From the influencer’s point of view, assigning the copyright ownership of the content that has been created is not very alluring – unless the compensation is very good. The brands don’t often want to pay that much extra for owning the copyright. That’s why it’s quite usual to agree upon licensing the copyright to the brand.

From the brand’s point of view, the license should be as extensive as possible. It’s good to consider where they want to use the posts, photos and names: only “repost” on social media or also on other platforms, such as in print? Pay also attention to the time the license is valid.

Sometimes the brands forget to permit a license to their logo and other trademarks. From the influencer’s point of view, in that case, there is a risk that the brand could accuse the influencer of trademark infringement if something goes wrong. From the brand’s point of view, it is never good practice to allow anyone to use your trademarks and logo without a license.

EXCLUSIVITY – WHAT ELSE CAN BE PROMOTED?

Influencers are loved and respected for their authenticity. Part of that authentic image is engaging with several brands and products. Their followers value their opinions which is the point of using them in marketing campaigns and collaborations.

In the influencer’s interest is to be as unlimited as possible when it comes to choosing brands they work with. Of course, working with two or several competing brands from the same sector is not good for the influencer’s creditability either.

From the brand’s point of view, an influencer-led campaign may easily lose its effect if the influencer goes on to promote a competitor’s brand or products not long after. Many nasty disputes are caused because of not including an exclusivity provision in the contract. However, negotiating about exclusivity may be hard and expensive when dealing with the major influencers. Micro-influencers are more willing to agree on exclusivity.

It is good to say explicitly in the influencer agreement what is prohibited: name the direct competitors and define similar products or services. Don’t forget to set a time limit for this obligation.

When drafting an exclusivity clause, make sure it’s in compliance with relevant laws.

TERM AND TERMINATION – WHAT HAPPENS WHEN THE CAMPAIGN IS OVER?

Normally the relationship between the influencer and the brand is not meant to be eternal, and in any case, it never will be. Even if the co-operation is for longer time, there should still be provisions about the term and termination.

In the brand’s interest is to obtain strong termination rights for reputational damage, failure to comply with applicable legislation and breach of the terms of the agreement.

If the advertiser sets special success results, the influencer needs to be very careful that they understand what is actually expected from them. The measures of success need to be in clear writing.

One important thing to consider related to the termination is survival of other clauses in the contract. Which provisions shall still apply after the termination? Think especially confidentiality, exclusivity and ownership of the IP.

HOW CAN VEDINOR HELP YOU?

If you are dealing with influencer campaigns and need help with contracts, we are more than happy to assist and advise you. We bring to the table the following combination: our profound understanding of this unique form of marketing, an in-depth understanding of social media and how different platforms work, and a sound legal experience. If you are interested in our influencer marketing related services, please schedule a free consultation, email us at communications@vedinor.com or reach out to our Partner, Legal Counsel Anne Nyström directly.

Advantages and Disadvantages of a Cease and Desist Letter

A cease and desist letter we mean in this context is a legal document used in situations where you think someone is infringing your intellectual property. It literally demands (or requests) the other party, the alleged infringer, to “cease”, i.e. immediately stop, and “desist”, no longer continue. The condition set in the letter is normally that if the alleged infringer doesn’t comply with the letter’s terms and conditions, legal action will be taken. This means normally a lawsuit.

ADVANTAGES OF A CEASE AND DESIST LETTER

A cease and desist letter has many advantages. One of the most significant ones is that when used correctly, it has a huge potential in preventing long, expensive trials. If the alleged infringer respects your conditions and stops the infringing actions, you have just avoided a messy lawsuit phase. Obviously, not always the owner if the IP plans to take further actions, but if that’s a possibility for you, you should consider the potential benefits related to this scenario.

The second benefit is actual especially in relation to trademarks. By sending cease and desist letters to alleged infringers, you are gathering concrete evidence of the actions you take to defend your mark. This kind of evidence can sometimes become very much needed, because one condition to keeping the trademark is that you enforce your rights when needed. It can also be very useful in future disputes.

One other advantage is that very likely, you’ll get to know the basis for the alleged infringer’s defense if the alleged infringer sends a response to the letter. Even if the alleged infringer wouldn’t comply with your demands, you have now learned his defense and can prepare a counterclaim. If you need to go to litigation, it is expressly valuable to know the alleged infringer’s defense in order to effectively object it.

An important practical advantage is that you may get evidentiary support for a finding of willfulness and enhanced damages if the alleged infringer ignores the letter. This is sometimes worded in the cease and desist letter to make it more likely that the alleged infringer stops their actions.

RISKS OF A CEASE AND CESIST LETTER

One very common and easily actualising risk is the label of “bully”. The internet is filled with published cease and desist letters from companies all kinds and size. On the social media, the letters can easily be shared and get negative publicity to the owner of the IP. The general public does not often take the side of the intellectual property right owner in these situations. This is more likely when the alleged infringer is individual and the rights owner a large, powerful corporation.

Nevertheless, this is one very big concern related to cease and desist letters. You want to make sure you have a good case and that the tone of your letter is appropriate in the relation to the alleged infringement and the alleged infringer. For example, sharing your logo on personal social media account should be addressed in a constructive way, when someone copying and selling your authorial works reserves stronger words.

The second risk lies in the situation where the IP owner doesn’t follow up on the letter in a timely manner. In these situations, depending on the jurisdiction, the alleged infringer may get a benefit of different kinds of defences and waivers.

HOW CAN VEDINOR HELP YOU

Anne Nyström has a profound understanding of trademark and copyright infringements and the enforcement, both online and offline. She’s extremely experienced on infringements occurring on social media, and is happy to provide her advice on your situation. “If someone is allegedly infringing your rights on internet or social media, it’s important to gather evidence as soon as possible. Take screenshots of everything you can before taking any actions”, she says.

An experienced lawyer can help you to choose the best strategy in your situations after knowing all relevant facts. If you think someone has infringed your IP rights, do not hesitate to contact us communications@vedinor.com, directly partner, European trademark attorney Anne Nyström at anne.nystrom@vedinor.com or book a free consultation.