The trademark license, as one of the means of using trademarks, has, in practice, encountered many unexpected disputes due to illegal and improper use. How then should one legally and properly license trademarks? And, what may benefits will the rights holder gain after going through the administrative procedures? This essay summarizes the author’s opinions on these issues.
I. How to make the trademark license record
(By Albert Chen) According to the Measures for Recording Trademark Licensing Contracts (“Measures”), the rights holder, either the owner of the trademark or the licensee, or the trademark agency representing these parties shall apply for recordation of the trademark license. If the licensors are foreigners or foreign companies, however, the record must be handled by trademark agencies. In the application, the applicant shall submit the licensing contract recordation application, a duplicate of the licensing contract, and a copy of the trademark certificate. If the documents are in foreign languages, translation shall also be provided.
When the materials do not meet the recordation requirements, the Trademark Office will return them with an explanation. The applicant shall remedy its materials according to the critique provided by the Trademark Office and resubmit them to the office again within a month after their return.
It is also stipulated in the Measures that the application shall be made again under the following circumstances:
(1) Change in the scope of the products covered by the licensed trademark;
(2) Change in the licensing period;
(3) Transfer of the exclusive right of the licensed trademark;
(4) Other situations requiring re-application.
When the licensor or the licensee changes his or her name, however, the law does not require re-application, but only requires the applicant to notify the organization that handled the original trademark recordation.
Moreover, during the recordation process, the applicant must take note of the following issues:
(1) When a licensing contract contains several licensed trademarks or licensees, the applicant shall send an application for each trademark or licensee. But, it is only necessary to send a single copy of the licensing contract;
(2) Whether or not the original trademark license has been recorded, once the trademark is relicensed, the applicant shall present a duplicate of the original licensing contract and the written license or notarized copies.
(3) When trademark transfer is not approved by the Trademark Office, the assignee cannot apply for the license recordation in his or her own name.
II. What is the benefits trademark license recordation?
According to the Interpretations on Several Issues Concerning the Trial of Civil Disputes Concerning Trademarks, recordation is not a necessary precondition for an effective trademark license. In practice, however, the trademark licensor can obtain several benefits from recordation:
(1) The certainty of the licensing method and scope could prevent unnecessary disputes and losses
The current primary methods of trademark licensing are the normal license, the exclusive license, and the sole license. The primary difference between these licenses is in the exclusivity of the trademark use. The exclusiveness of the exclusive license is the strongest and allows exclusion of everyone during the license period and region, including the rights holder. For this reason, to avoid influence on the future exercise of the right, the licensor shall clearly agree with the licensee on the type of license, as well as the issues like the licensing period, territory, and relicensing.
(2) Evidence to combat the claim of “three years of consecutive non-use”
Where the licensor does not use the trademark but only licenses a third party for use, the rights holder may be confronted with the claim of trademark cancelation based on three years of consecutive non-use. In this situation, the trademark license record could be strong evidence to combat against the opponent’s cancelation claims. Otherwise, because it is difficult or impossible tp prove use or licensing of the trademark, the trademark holder will ultimately suffer trademark revocation. Even if the trademark is not canceled, the rights holder may be forced to spend a great deal of energy or resources.
(3) To oppose third parties
The purpose of the record is “publicity,” and if no record is made, there is no way to combat good faith third parties. In practice, the circumstances might look like this: A licenses B to use the trademark within a certain scope but does not record such a license afterwards. After that, A licensed C an exclusive or sole right to use the trademark. Because B’s right has not been registered, it cannot combat C, and C enjoys extremely strong exclusivity. This could lead to B having no means to exercise its right, and A would also be pursued by B for breach. But, when A registers its license to B, the license to C as explained above could not happen, and the disputes could be totally prevented.
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