Answer ... In order to avoid ambiguity, a licence agreement must be well drafted so as to provide details of the exact rights being granted to, and the restrictions being imposed on the licensee.
A trademark licensing agreement has certain integral parts, including:
- the main clause, which includes the nature of the property, the trademarks licensed, the geographical territory, the term of the agreement and so on;
- consideration in the form of royalties and the percentage to be paid;
- a quality control clause, which includes established standards of use of the trademark;
- the grounds on which the licence can be revoked and the licensor can terminate the agreement; and
- provisions on dispute resolution.
Answer ... It is not compulsory for a licence to be recorded at the Trademarks Registry. However, it is advisable to do so as, registration of the license affords statutory rights of action to the licensee in cases of infringement.
Answer ... The licensor must exercise proper quality control as per the contract over the use of the licensed trademark. However, under Section 50(1)(d) of the Trade Marks Act, 1999, if the licensor fails to do so, the registrar, either on his own or on an application by any person, may cancel the registration of the licence. Thus, the registrar may cancel the registration of a licence if the licensor has not exercised quality control accordingly.
Further, Section 50 of the Trade Marks Act, 1999 sets out various other factors for variation or cancellation of the registration of a licence, as follows:
- The licensee has used the trademark in a manner that does not accord with the agreement;
- The circumstances have changed since the date of registration;
- The licence applies to goods or services in relation to which the trademark is no longer registered; or
- The licensor or licensee has misrepresented or failed to disclose some material fact whose disclosure would not have justified the registration of the licence.
Accordingly, based on the aforementioned factors, the proprietary rights of the trademark will continue to be vested in the licensor, while registration of the licence may be cancelled. However, the registrar will give each party notice and an opportunity to be heard, before taking any adverse action.