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Trade mark licences, what are they and why have one?
It is common for businesses to register trade marks in the name of a director or shareholder and then use the trade mark as their own. Often this happens where the trade mark was registered by a director before the company was incorporated and then after incorporation little thought is given to it.
This is rarely a difficulty while the registered proprietor of the mark and the business are getting along and no third party infringes the trade mark. Matters then rapidly become complicated when the registered proprietor and the business part ways or the business wants to take action to stop a third party from infringing the mark. The business then discovers they do not have the necessary rights to use or enforce the trade mark.
Even if the business and the registered proprietor of the mark get along, with the owner being a private individual they are the proper claimant in any infringement proceedings. As an individual they are also unlikely to be able to reclaim VAT on legal costs or offset legal costs against the business’ profits.
The simplest way to deal with this is for the registered proprietor (as licensor) to grant a full, exclusive licence to the business (as licensee) to use the trade mark, accompanied by a short form licence which is registered at the Intellectual Property Office.
What are the benefits of registration?
Although there is no statutory requirement that licences should be registered, registration can give some significant advantages to licensees without publicising to the world (particularly competitors) the commercial terms of your agreement. A short form licence can be registered in place of the full agreement, providing the licensee with the advantages of registration whilst protecting confidentiality.
The first advantage of registration is to put third parties on notice of the licence. This ensures that any third party who subsequently acquires rights in the subject matter of the licence will be bound by the licensee’s interest in the trade mark so that they cannot argue they were not aware of the licence. Without registration third parties will not be required to honour the terms of the licence unless they had actual knowledge of it.
The second advantage relates to infringement proceedings. Usually the only person authorised to bring proceedings against a third party is the registered proprietor of the trade mark. The main exception to this is an exclusive licensee, who usually has the same rights to enforce the trade mark. Registration provides an easy way of establishing that the licensee is entitled to bring proceedings. Registration usually needs to be done within six months from grant of a licence.
Finally, registration can provide a level of comfort to prospective investors and financers that the business is actually entitled to use the trade mark. This can increase their confidence in the business and help ease any refinance, investment or sale process.
If you need any assistance regarding this matter, please speak with our team of intellectual property solicitors.