Licensing of Unregistered Trade marks
The Indian Trade Marks Act provides provision for licensing of only registered Trade mark. Thus , the licensing of an unregistered Trade mark, thought cannot be registered cannot be registered with the Trade Marks Registry, the same can be affected through a valid license agreement between the parties.
Further, the Courts of India have declared licensing of an unregistered Trade mark to be unlawful and governed by common law. The Supreme Court of India cleared the position on this subject in Gujrat Bottling Co. V Coca Cola Company [1996 (16) PTC 89(SC)] holding, so for connection in course of trade with the Trade mark continues to exist between the goods and the proprietor of the mark, licensing of Trade marks whether registered or unregistered mark may be permitted.
Licensing of Registered Trade marks
The Trade Marks Act 1999 "permitted use means not only the use by a third person of a registered Trade mark as registered user, but also the use by a third person of a registered Trade mark with the consent of the registered proprietor in written agreement without registering that person as a registered user". However, the license for use of unregistered Trade marks is governed as per agreement executed by the Proprietor and the Licensee under the contract Act / common law. It is permissible to license an unregistered Trade mark.
Permitted use without recordal of Registered User is permissible under the Trade Marks Act 1999, which came into force on September 15, 2003. The details of registrations owned by the Registered Proprietor in India are to be mentioned in the written agreement and permitted use will be in respect of services and/ or goods covered under those registrations only.
A license agreement has to provide for quality control by the licensor by including such as:
Quality Control monitoring- A licensor may require access to a licensee's facilities, raw materials, finished products and records to monitor the licensee's adherence to the licensor's quality standards.
Trade mark Usage-The licensor may specify the manner in which the Trade mark will be used on or in connection with the goods and services of the licensee and on advertising and promotional materials.
Grant- It is important that this clause clearly specifies the Trade marks to be licensed, the exclusive or non-exclusive nature of the license, the geographical territory within which the license will operate, the duration and the area of activity or field of business for which the license has been granted.
Indemnity: It is important that the licensee indemnifies the licensee for any loss of reputation or goodwill resulting from the use of the mark in contravention of the Brand Usage Guidelines or other quality control provisions.
Termination: The Licensor should ensure during agreement that it gets a broad termination right to terminate the license agreement .It is also critical that the licensee negotiates a sufficient "sell off" period to sell off any licensed inventory, pursuant to termination of the license agreement. The Agreement may provide conditions in which the arrangement may be terminated.
ADVANTAGE OF RECORDAL OF LICENSE AGREEMENT
Recording a license of Trade mark is not mandatory as per the provisions of the Trade Marks Act, 1999. However, it is advisable to record the license Agreement. The License agreement recorded with the Registrar of Trade Marks will have evidentiary value to prove use, which can be done for registered marks, as use by the registered user will inure to the benefit of the registered proprietor. Certified copies of the entries in the Register can be admitted in evidence in all courts and in all proceedings without further proof or production of original documents. Whereas, it is difficult to prove the permitted use without production of original written agreement in the Court /Tribunal.
The registered user agreement functions to lessen the proof if the registered proprietor would need to establish a license relationship. If registered proprietor records the registered user document in India, the license relationship is “of record” in the Trade marks Registry. This would entitle registered proprietor to a presumption that the license is in effect and that the use under the license inures to the benefit of the registered proprietor. The registered proprietor would not need to offer detailed testimony about the license and its execution to establish its prima facie case. It is beneficial as licensor can rely upon his licensee use to avoid a cancellation charge and it is also beneficial in case of any opposition proceedings before the Trade Marks registry or litigation before the court.
PROCEDURE AND DOCUMENTS REQUIRED
According to Section 49 of the Trade mark Act 1999 the licensor and licensee shall jointly apply in writing to the registrar in the prescribed manner for the application for recordal of license agreement in respect of registered Trade marks only. Pending applications cannot be recorded in the agreement. The agreement is to be in writing and duly authenticated and need not be legalized. However if the document is not original, then a certified copy would be required.
- Registered user agreement -To be duly stamped as per the Stamp Act and signed by the Registered proprietor and Registered user and notarized before a Notary Public.
- Affidavit on behalf of Registered Proprietor - To be printed on Indian stamp paper and executed before Notary Public accompanied by Apostille certificate.
- TM-28 on plain paper to be signed by the Register Proprietor and proposed Registered user
- Power of Attorney duly executed by the Registered Proprietor before a Notary Public
- Power of Attorney duly executed by the Registered User before a Notary public
VARIATION OR CANCELLATION OF REGISTRATION AS A REGISTERED USER
The Act under Section 50 provides that the registration of registered user may be varied or cancelled inter alia, on the grounds that the registered user has used the Trade mark not in accordance with the agreement or the proprietor/ user has failed to disclose any material facts.
RIGHTS OF THE REGISTRED USER/LICENSEE
The registered proprietor along with registered user can avail the benefits of Sections 134 & 135 for filing suit for infringement of trade mark in the court, within the local limit of whose jurisdiction, the registered proprietor and or registered user carries on business or personally works for gain and not at the different locations, where the infringements take place..
Section 52 provides that subject to any agreement subsisting between the parties, a registered user may institute proceedings for infringement, in his own name as if be were the registered proprietor making the registered proper a defendant.
Whereas the Section 53 states that an unregistered licensee has no right to institute any proceeding for infringement, unlike the registered user under section 52.