Trademark licensing is the regime under which a trademark registrant, by concluding a license contract, authorizes another person to use its registered trademark within an agreed scope. Licensing involves no transfer of ownership — the exclusive right remains with the registrant — and is the principal way to commercialize brand assets.
Legal Basis
Article 43 of the Trademark Law provides that a trademark registrant may, by concluding a trademark license contract, authorize another person to use its registered trademark. The licensor shall supervise the quality of the goods on which the licensee uses its registered trademark, and the licensee shall guarantee the quality of the goods on which the registered trademark is used. A party licensed to use another's registered trademark must indicate its own name and the origin of the goods on the goods bearing that mark. Where a registrant licenses another to use its registered trademark, the licensor shall submit the license to CNIPA for recordation, and CNIPA shall publish it. Without recordation, the license may not be asserted against a bona fide third party.
The Three License Types
- Exclusive license: within the agreed term and territory, only the licensee may use the mark; the licensor itself may not. The licensee's rights are the strongest, and it may independently bring infringement actions;
- Sole license: the licensor may use the mark but may not license any third party. The licensee may sue on its own if the licensor does not;
- Non-exclusive (ordinary) license: the licensor may use the mark itself and license multiple parties. The licensee must obtain the licensor's authorization to sue.
Core Clauses of a License Contract
A well-drafted trademark license contract should specify: the license type; the licensed trademark and its registration number; the approved goods scope; the territory; the license term (not exceeding the trademark's validity period); the royalties and payment method; quality standards and the supervision mechanism; rules for use of the mark; liability for breach; and termination conditions. Ambiguity about the license type is the number-one source of licensing disputes.
Obligations of Both Parties
The licensor's obligations: keep the trademark valid (renew on time), supervise the quality of the licensee's goods, and complete the license recordation. The licensee's obligations: guarantee product quality, indicate its own name and the origin of the goods on the products, use the mark within the agreed scope, and refrain from sub-licensing without permission.
Quality supervision is not a paper obligation. Quality problems with licensed goods both damage brand value and may expose the licensor to liability disputes in consumer claims.
Commercial Uses of Licensing
Trademark licensing is a powerful tool for asset-light expansion: franchising, brand co-branding, contract manufacturing and regional agency all rest on licensing as their legal foundation. For companies holding idle trademarks, licensing generates ongoing income without selling the right.
Practical Points
Assess the licensee's qualifications before licensing; for long license terms, mind the coordination with the trademark's renewal schedule; and when the licensing relationship ends or changes, promptly record a cancellation or modification. Whatever the license type, a written contract plus recordation and publication is the standard protection for both sides.
How these concepts apply in specific cases varies in detail; you may consult a recorded trademark agent at MyTMBee for case-specific analysis.