A“licence” in common parlance is a permission given by an owner to a proposed user to use the owner’s property with or without conditions. Although, the concept applies to trademarks, India’s Trade Marks Act, 1999, does not define the word “licence” per se. Instead, the act defines the term “permitted use”.
Trademark Licensing Basics (India)
The concept of permitted use of a trademark recognizes both licences granted to a licensee registered under the act and licences granted to an unregistered licensee who has a written licensing agreement with the proprietor of a trademark. A licence to use an unregistered trademark is not expressly dealt with under the act but is accepted as a common law licence.
Under the act, permitted use by a licensee registered under the act as a “registered user” or common law licensee should be: (i) in relation to goods or services with which the user or licensee is connected in the course of trade; (ii) in respect of which the trademark remains registered for the time being; (iii) for which the user or licensee is registered as a registered user or by consent of the proprietor in a written agreement; (iv) in compliance with any conditions or limitations to which such permitted use is subject and to which the registration of the mark is subject.
Identification of trade source or origin and assurance of a particular standard of quality being an essential function and purpose of a trademark, trademark licensing to third parties is generally accepted by courts and the trademarks office with certain riders. If a trademark licence does not pass the accepted tests of a bonafide licence, the distinctiveness of a trademark could be jeopardized, also making a registered trademark vulnerable to cancellation.
Primarily, in a trademark licence, the licensor has to adequately control and supervise the quality of the products or services provided by the licensee under the licensed trademark. A connection in the course of trade between the proprietor and the trademark should be reflected in the licence.
Dealing in a trademark as a commodity in its own right and not primarily for the purpose of identifying or promoting merchandise in which the proprietor is interested may be considered as “trafficking” in trademarks.
A licence and consequently the licensee of a registered trademark may be recorded in the trademarks register as a “registered user” by filing the prescribed joint application of the registered proprietor and the licensee. An application has to be accompanied by the licence agreement, or a duly authenticated copy, as well as an affidavit by the registered proprietor or some authorized person which includes: (a) particulars of the existing or proposed relationship between the registered proprietor and proposed registered user, including information showing degree of control by the registered proprietor over the permitted use; (b) whether the licensee is the sole registered user or any restriction as to persons who may be registered as registered users; (c) goods or services in respect of which registration is proposed; (d) conditions or restrictions, if any, on the permitted use; (e) duration of permitted use granted in the agreement.
A licence agreement has to be filed for registration at the trademarks office within six months from the date of the agreement. The agreement must disclose the terms of royalty or remuneration payable to the registered proprietor for the permitted use and provide means for terminating the permitted use when the relationship between the parties or control by the registered proprietor over the licensee ceases. The agreement must also contain a condition that when the registered trademark is used by the licensee, except for export, the licensee must clearly state that the mark is used only by way of permitted use.
The registrar of trademarks, before refusing or conditionally accepting an application, gives a notice in writing to the parties stating the grounds on which he proposes to pass the order and informing them of their right to be heard. If the parties apply for a hearing, the registrar after hearing both the parties passes any necessary order either refusing or accepting the application with conditions.
If the registrar is satisfied that the application and the accompanying documents comply with relevant provisions of the act and the rules, he is required to register the licensee as a registered user.
Subject to any agreement subsisting between the parties to a licence, a registered user may institute proceedings for infringement of the subject trademark in its own name as if it were the registered proprietor, naming the registered proprietor as a defendant, in which case the rights and obligations of such registered user will be concurrent with those of the registered proprietor.
Kavita Mundkur Nigam is an associate at Krishna & Saurastri Associates.
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