Licensing under Section 38: Recording Permitted Use to Scale Safely
In our previous article we established the monetary value and financial leverage available for business owners, more specifically registered brand owners, through the hypotec/pledging route, business owners should not forget the unlocking business potential vested in trade mark licensing, in the commercial landscape.
What is Trade Mark Licensing?
Trade mark licensing involves the registered trade mark owner granting use permission to another party over the registered trade mark in return for monetary consideration. This can be done through a formal agreement where the trade mark owner (licensor) allows another entity (licensee) to use the trade mark under specified conditions. Licensing can be exclusive (only the licensee has the right to use the trade mark, excluding the registered owner), sole (use granted to both the licensee and the trade mark owner) and/or non-exclusive (multiple licensees can use the registered trade mark).
Section 38 of the Trade Marks Act 1993
Section 38 of the Trade Marks Act 1993 outlines the provisions for permitted use and registered users of trade marks, provided that such use is recorded in the register of trade marks. Section 38, protects the interests of both the licensor and the licensee, whilst giving legal recognition to the licensing arrangement.
Commercial Impact of Trade Mark Licensing
- 1. Revenue Generation: Licensing agreements can be a significant source of revenue for trade mark owners through royalty payments or licensing fees, resulting in a steady income stream, while the operational risks are with the licensee.
- 2. Brand Expansion: without the need for substantial investments, business owners may expand their market reach to new markets and customers.
- 3. Risk Mitigation: Whilst entering new markets, brand owners, can leverage the licensee’s market knowledge and expertise, whilst mitigating the associated risks of direct market entry.
- 4. Quality Control: Licensing agreements often include provisions for maintaining quality standards, protecting the brand’s reputation, ensuring that trade mark owners retain the control seat and avoiding possible brand dilution.
- 5. Legal Protection: Properly recorded licensing agreements under Section 38 provide legal protection for both parties – authorised use of the trade mark by the licensee, which in turn safeguards the trade mark’s value.
Conclusion
Understanding and using trade mark licensing as guided by Section 38 of the Trade Marks Act 1993, may significantly enhance a business’s commercial success and brand value. Licensing a powerful tool to explore opportunities for revenue generation, brand expansion, risk mitigation, quality control, whilst retaining legal protection.
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