Drafting a trademark license agreement: what belongs in it

Drafting a trademark license agreement involves first defining the trademark and its scope, followed by the commercial and quality agreements. You determine which registered trademark is involved, for which goods or services and the territory the license applies, whether it is exclusive, what the remuneration is, and which quality requirements the licensee must comply with. Because a trademark revolves around origin and reputation, the quality clause is not a minor detail but a core provision. Below is a list of exactly what should be included.

The short answer

1. Mark and scope: state the registration number, the classes and the goods or services.
2. Territory and exclusivity: Benelux or EU, exclusive, sole or non-exclusive.
3. Remuneration: fixed amount, royalty, or percentage of turnover, with reporting.
4. Quality and supervision: requirements, prior approval and right of inspection.
5. Register, duration and termination: registration of the license and consequences upon termination.

Drafting a trademark license agreement: start with the trademark

Before making any agreements, it must be clear which trademark you are licensing. State the registration number at the BOIP or EUIPO, the type of trademark (word mark, figurative mark, or combined), and the classes for which it is registered. A license may cover the entire trademark or only a part of the goods and services. Be precise here, as the scope determines what the licensee may and may not do.

Also verify whether you are the holder yourself and whether the trademark is not encumbered by a prior exclusive license or pledge. Licensing a trademark that you have already exclusively granted to another party constitutes a breach of contract.

Scope, area and exclusivity

These three determine the scope of the right:

• Scope: for which products or services does the license apply? Limit this to the classes in which the trademark is actually registered.
• Territory: only the Netherlands, the Benelux, or the entire EU. Outside the registration territory, there is no trademark protection for licensing.
• Exclusivity: exclusive, sole, or non-exclusive. In the case of exclusivity, even the holder may no longer use the mark for those goods in that territory.

Compensation and royalty reporting

The remuneration can be a one-off or periodic fixed amount, or a royalty that fluctuates with sales. If you opt for a royalty, define the basis: per product sold, per turnover, or per net turnover, and at what percentage. Regulate when the licensee reports and pays, and what data the report contains.

Include an audit clause allowing you to have the statement verified. In practice, you cannot enforce a royalty without the right of inspection. Agree on who bears the costs of an audit if a deviation exceeding a certain percentage is found.

Quality, supervision and presentation

This is the most important substantive provision in a trademark license. Specify the quality requirements that the products or services must meet, how the trademark may be depicted (color, proportion, placement), and in which channels the trademark may appear. Include a right of prior approval for new products, packaging, and advertising, and a right of inspection to verify compliance.

Link a sanction to this: in the event of persistent quality violations, you may terminate the license and invoke your trademark rights pursuant to Article 2.32 of the BVIE. This way, you maintain control over the goodwill.

Registration, obligation to use and enforcement

Regulate whether and by whom the license is registered in the trademark register. Registration is necessary to assert the license against third parties and to enable the licensee to take action against infringement themselves in certain cases. Additionally, stipulate that the licensee actually uses the trademark and can demonstrate such use, so that the trademark continues to comply with the obligation to use.

Agree on who will combat infringement by third parties, who will bear the costs, and how any damages will be divided. Usually, the trademark holder takes the lead, with a notification obligation for the licensee.

Duration, termination and consequences

• Duration: fixed-term or ongoing, with a notice period.
• Dissolution: in the event of breach of quality, non-payment, or bankruptcy.
• Consequences: cessation of all use, depletion and sale of stock within a period, removal of the license from the register.
• Continuing effect: confidentiality and a ban on continuing to use confusingly similar signs.

Practical example

A designer has registered a clothing brand as an EU trademark in Class 25. A producer wishes to manufacture and sell a collection under that brand in the EU. The designer grants an exclusive license for three years, against a ten percent royalty on net sales, with quarterly reporting and an audit right. The contract specifies fabric quality requirements, prior approval of each design, and fixed logo usage. The license is registered with the EUIPO. If the producer supplies clothing that does not meet the requirements, the designer may terminate the license and assert his trademark rights.

Honest recommendation

You don't always need a lawyer. For a simple, non-exclusive license involving a small interest and a fixed fee, a short, clear agreement is perfectly adequate, as long as the scope, territory, remuneration, and quality are clearly defined. For a trial period or limited collaboration, an extensive contract is often overkill.

Do engage a lawyer for exclusivity, royalties, multiple countries, or a trademark with real market value. In such cases, the quality clause, audit regulations, registration, and enforcement require close attention. A targeted review of your concept costs little and prevents you from losing goodwill or control later on.

For arrangements, see the trademark license agreement, read the basics in what is a trademark license agreement and the costs in having a trademark license agreement drafted.

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