But It’s Mine - He Gave it to Me!

Misunderstandings About Licensing Intellectual Property

Entering into a partnership or other form of a business relationship can be very exciting and the potential for success can loom large. It is often a situation where one party (the “licensor”) sees the benefit of enlisting another party (the “licensee”) to sell its products and increase its revenue by way of receiving royalties from the sales made by the licensee.  Similarly, the licensee is excited about being granted an exclusive license to distribute the products of the licensor and taking advantage of the goodwill created by any branding / trademarks owned by the licensor in connection with its products.

Unfortunately, the grant of a license is often misunderstood by both parties when it comes to the ownership of the intellectual property. Many times a licensee will ask their legal counsel to assist them with the registration of a trademark that contains the trademark (registered or unregistered) of the licensor, because they believe that, as they have been given a license to such trademark, they can proceed to have a similar trademark registered in their name.  Similarly, a licensor may even be agreeable to the registration because it believes that their trademark is simply being expanded to accommodate the use by the licensee.

However, while a licensee has the right to use the licensor’s trademark it does not have the right to own the trademark, or one confusingly similar to that of the licensor. If the parties determine to register a trademark that contains a confusingly similar element to that of the trademark owned by the licensor, the trademark registration would need to be in the name of the licensor, as owner, even if the licensor has never used the trademark itself.  The date of first use would be based on the date that the licensee began using such trademark and the new trademark application would be associated with any similar registered trademark of the licensor on the Trademarks Office Register.

If the licensor were to allow the licensee to register a trademark similar to the one owned by the licensor, then the licensor is, in essence, reducing its ability to defend its exclusive claim to the use of such trademark and is providing others with an ability to argue that they too can register confusingly similar trademarks or alternatively, that the trademark has become so commonly used that it is no longer distinctive and therefore the owner no longer has exclusive rights to its use in connection with the goods or services with which it is associated.

When providing or being issued a license for the use of a trademark, it is important that both parties recognize the importance of the licensor maintaining the ownership of the trademark and that nothing is done which could weaken the licensor’s ownership and claim to such trademark.