Trademark Licensing Checklist

The questionnaire

A trademark license involves an agreement between two parties where one part who owns a trademark allows a second party to “license” the trademark’s use. The party that owns the trademark is the “licensor” and the party that is using the trademark is the “licensee.”

The trademark license agreement will discuss, generally, 1) the trademark, 2) the licensor and licensee, 3) the scope of the trademark rights,

4) and the nature and quality of the goods and services that the licensee may offer under the trademark.

But that is just a sweeping overview. To make sure that you have a complete licensing agreement you should go through the following checklist:
  • Make sure the key terms are identified and defined.
  • Identify who owns the mark—which would be the licensor.
    • But who owns the product designs?
  • What is the term of the license?
    • How can it be renewed? Automatic? By written agreement/notice of the parties?
  • Is the license exclusive or not exclusive?
  • What is the territory in which the license can be used?
    • Can the licensor compete directly with the licensee in the same territory?
  • What rights, if any, will the licensor retain?
  • Can the licensee sub-lease the license?
  • Are there terms regarding designing and obtaining approval for product design?
    • Can the licensee design the product?
    • Can the licensor give design input? Does the licensee have to consider such input?
    • Can the licensee modify designs?
    • Who designs packaging and labeling? Is approval needed? From who?
    • Who pays the costs of design?
    • Can the licensor control quality of the products?
  • Is manufacturing discussed?
    • Can the licensee manufacture?
    • How is the manufacturer chosen?
    • Can the licensor restrict who the licensee hires for manufacturing?
  • Are the royalty terms clear?
    • How is the licensor paid? Monthly? Quarterly? Yearly?
    • Is it a percentage? Flat fee? Based on sales? Combination?
  • What happens if unlicensed counterfeits are discovered?
    • Who enforces the licensing rights?
    • If damages are recovered, who retains?
    • Is there any obligation of the licensee to help prevent fraudulent products?
  • How does the license agreement terminate?
    • What is the step-by-step process?
    • Can the agreement be terminated unilaterally? For what actions?
      • Failure to pay royalty?
      • Failure to sustain business?
    • Can anyone cure an alleged default? How? What is the process?
    • What happens to the licensees inventory after termination is complete?
      • Do they have to sell it within a certain amount of time? Destroy it?
    • What happens if one of the parties files for bankruptcy?
      • What are the rights of each party?
      • Is the non-bankrupt party’s rights retained?
    • Make sure that the document is in compliance with state and federal laws.
    • Have a clause that the license agreement is the entire agreement between the parties and cannot be modified.
    • Waiver clauses.
    • What law governs?
      • What jurisdiction?
      • What venue? (court, arbitration?)
    • Aware of attorney’s fees?
    • Signed by both parties?