United Lawfully

Brand licensing with the use of right agreement and right clauses is sure to bring huge success to the retailer, licensor, and licensee. Read further to know the legal aspects of brand licensing.

Brand licensing is an act of creating a contractual agreement with the owner of the brand or a company with an individual to manufacture goods for a limited period of time. In such concept, an agreement is signed between two parties namely, the licensor and the licensee. The licensor is the one who has an established brand name and the licensee is the one who uses the brand name or the character for his merchandise. For instance, the Vodafone character Zoo-Zoo is now a clothing line an initiative taken by Shoppers Stop.  

A licensor can look for a licensee through various agents and the same goes for the licensee in terms of seeking for a right licensor. A brand which is the sole domain of an entrepreneur is of prime concern and depends on two factors: 

A licensee with a good track record
A trustworthy licensee is the one who has a remarkable track record, good market coverage, and is professional in his dealings. When asked, Utkarsh Singh, Head- Business Development for Rajasthan Royals IPL team, about how they choose a licensee, he states, “We are clear that we would collaborate only with a well known retailer or a brand house with great history, experience and potential matching up to the IPL’s high standard. No matter how much revenue or projections an unknown entity might promise the chances are less for us to get associated with them since our name is attached to the merchandise to be produced.” 

Commercially Viable
A licensor needs to be sure about the commercial viability of the merchandise to be produced. The licensor needs to check out the market visibility and nationwide establishment, a licensee may hold for the merchandise to be sold.  

There are many factors that need to be taken care of before sealing the brand licensing contract. Akhilesh Kumar Rai, IP Head, AZB and Partners says, “There are aspects like market viability, track record, quality management, determining royalty, termination act, use of trademark, litigation acts, whether to sign a joint venture or a simple clear contract and many more since we all should know that licensing for a retailer is a trust that his established name and fame would grow higher and not fall.” Every retailer is a licensor or a licensee and needs to know the imperative factors to pay attention while drafting an agreement. Some of those factors are mentioned below: 

Determining Royalty Fee: Depending on the sales, whether it is per unit or bulk, fee could be anywhere on the scale of 3 -20 per cent of the sales. 

Terms of Agreement: Every contract has a fixed term, It could be from two to five years. A licensor may fix a particular time contract for the licensee to use the licensed logo, brand name or character. 

Registration Act: An agreement between the two parties needs to ensure the use of a Trade Mark (™) sign. Registering the brand with a logo ® is an assurance of the legality of the contract.

Termination of an Agreement: The agreement states that in an event of a discord both the parties involved can mutually terminate the agreement. Also, termination of an agreement needs to be flexible and must be clearly communicated in written form. 

Co-branding/ Co-promotion: Co-branding is good marketing strategies which can be adopted by both the parties involved and help them grow with the brand product that they manufacture. Rai explains the case of Tata Sky where Tata being a household name in India and Sky being a western brand name were co-branded with a DTH service which is now a great success. 

Quality Control: The main consideration of a licensor is the quality of the product with which his/her name is to be associated. The contract should mention a clause which specifies the measures to be taken for quality control.  

Litigation in case of infringement: A licensor is the one who takes action when informed by a licensee about infringement. Rai goes ahead and tells us, “Even a licensee has the liberty to file litigation if the licensor does not take an action when informed about an infringement act by the licensee. However, the Trade Mark ™ Registry of India does not permit a licensee to file a suit unless he has the licensor as the co-defendant.” So the best outcome could be to specify the clause for licensor to take action himself for an infringement activity.  

Lastly, a retailer or an entrepreneur, licensor or licensee, each has a role to play in making a mark for themselves and driving through the express-way of retailing in matters of branding, co-branding or brand licensing. The agreements should be flexible and lucid to attain success in the retail business.

Publish Date
Not Sponsored
Live: People Reading Now