Licensing a trademark abroad - for manufacture or distribution of goods or services - is not easy. Local laws can impact the enforceability of your agreements. And unenforceable or voidable agreements can jeopardize your trademark rights. Knowing the ins and outs of foreign laws will help you structure optimal license agreements. Here are seven issues all US brand owners should consider when licensing abroad:
- How trademark rights are secured. Unlike the US, many countries are "first-to-file" jurisdictions, where the first person to file a trademark application is considered the owner. In first-to-file jurisdictions, it is important to file a trademark application as soon as possible, ideally before licensees introduce your mark into the jurisdiction. This helps prevent a licensee, sub-licensee, or unrelated third party from filing an application first, securing a registration, becoming the legal owner in that country, and exposing you to additional expense, or even liability for infringement.
- Whether the activities planned in each territory constitute trademark use. Trademark "use" is, of course, required to maintain your trademark rights. But foreign jurisdictions have different definitions of what constitutes trademark "use." For example, manufacturing and shipping goods from the US, without more, may not constitute a "use" in some jurisdictions. While your specific distribution agreements may not invoke the trademark laws of these jurisdictions, you still need to consider them, lest you expose your brand to opportunistic third parties who may produce counterfeit goods, illegally sell imperfect goods, or attempt to register your mark.
- Whether a pending trademark application or registration may be licensed. Many jurisdictions prohibit the licensing of a pending trademark application, but allow the licensing of a registered mark. Because it can take a year or more to secure a trademark registration in some jurisdictions, understanding this requirement and the available means for working around it can help avoid unnecessarily delaying a licensee's activities or jeopardizing your rights in your mark. A few jurisdictions do not allow for the licensing of a trademark at all.
- Whether an unregistered mark may be used. In some countries, even if a pending trademark application may not be licensed, an unregistered mark may still be used. You will need to understand how licensing an unregistered mark affects your rights.
- What the payment structure will be. Some territories do not allow US companies to collect royalties unless there is at least a pending trademark application on file. Other countries require US companies to have a trademark registration, and to have recorded the license agreement.
- The general requirements for an enforceable license. Most jurisdictions have specific requirements for what must be included in a license and what may not be included. Common requirements include quality control provisions, limits on duration of the license, and when and how the license is signed, notarized, and recorded. Failure to adhere to these requirements can make it difficult to enforce the licensed trademark against unauthorized use by a licensee, sub-licensee or third-party. It may also render the license itself unenforceable.
- Whether your mark will be sub-licensed. If your licensee will sub-license the mark, all of the above should be considered for each of the territories where the sub-licensee will operate, as well as any special rules related to sub-licenses and sub-licensees.
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.
