In short
A trade mark licence agreement authorises a third party — a franchisee, distributor, manufacturer or brand partner — to use a registered trade mark under defined conditions. Getting quality control provisions right matters beyond commercial protection: under the Trade Marks Act 1995 (Cth), a poorly controlled licence can expose the mark to removal for non-use or leave the owner unable to rely on the licensee's use to maintain the registration.
Why quality control isn't optional
A trade mark functions as a guarantee of origin and consistent quality to consumers. Where a trade mark owner licenses use of the mark without exercising real quality control over how it's applied, two problems arise: the mark can lose its distinctiveness and the value it represents, and — under the 'authorised user' provisions of the Trade Marks Act 1995 (Cth) — the licensee's use may not count as use by the registered owner for the purpose of defending the registration against a non-use removal application. We build genuine, exercisable quality control rights into every trade mark licence, not just a token clause.
Defining the scope of the licence
The licence needs to specify precisely which trade marks are licensed, for which goods or services (matched to the actual registration classes), and whether the licence is exclusive, sole or non-exclusive. An exclusive licence — where even the owner can't use the mark in the licensed field — is a significant grant and should be reserved for genuinely strategic partnerships, with clear consideration and performance obligations attached.
Territory and exclusivity
For distribution or franchise arrangements, the licence typically defines a territory within which the licensee has exclusive or preferential rights, alongside minimum performance or sales obligations that justify that exclusivity. We draft clear consequences for underperformance — usually a right to convert exclusive rights to non-exclusive, or terminate, rather than leaving the owner locked into an underperforming exclusive arrangement indefinitely.
Approval rights and use guidelines
We attach brand guidelines as a schedule and require the licensee to submit proposed uses — packaging, advertising, signage — for approval before use, with a right for the owner to audit compliance and require corrective action. This is the mechanism that actually satisfies the 'authorised user' quality control requirement, rather than a bare statement in the agreement that the owner 'may' exercise control.
Royalties, reporting and audit
Where the licence is royalty-based, we include reporting obligations tied to sales or usage, audit rights to verify royalty calculations, and interest on late payments. Vague royalty definitions — particularly around what counts as 'net sales' — are a recurring source of disputes we're brought in to resolve after the fact.
Termination and post-termination use
On termination, the licensee must cease all use of the mark, remove it from signage, packaging and marketing materials within a defined period, and return or destroy branded materials. We include a sell-off period for existing stock where appropriate, balanced against the owner's interest in a clean and prompt exit from the licensed relationship.
What the fixed fee covers
- Trade mark licence agreement defining scope, territory and exclusivity
- Quality control and brand guideline approval mechanism
- Royalty, reporting and audit clauses (where applicable)
- Performance obligations tied to exclusivity
- Termination and post-termination use/sell-off provisions
- Review of your trade mark registration to confirm classes align with the licensed use
Mistakes we see
- Licensing use of a mark with no real quality control mechanism, undermining the 'authorised user' defence to non-use removal
- Granting exclusivity with no minimum performance obligations attached
- Vague royalty definitions that don't specify what counts as net sales
- No post-termination sell-off or removal period, leading to disputes over lingering branded stock
- Licensing goods or services outside the mark's registered classes
Who this is for
- Franchisors licensing brand use to franchisees
- Businesses licensing a trade mark to distributors or manufacturers
- Brand owners entering co-branding or brand partnership arrangements
- Businesses expanding into new markets through a licensed local partner
Frequently asked questions
- Can we lose our trade mark registration by licensing it out?
- Not from licensing itself, but a registration can become vulnerable to a non-use removal application if the licensee's use isn't properly authorised — meaning the owner doesn't exercise real quality control over it. A well-drafted licence with genuine approval rights protects against this.
- What's the difference between an exclusive and a sole licence?
- An exclusive licence excludes even the trade mark owner from using the mark in the licensed field; a sole licence allows the owner to continue using the mark alongside the single licensee, but excludes any other third-party licensees. Non-exclusive licences allow multiple licensees. We choose the structure based on your actual commercial intent.
- Do we need to register the licence with IP Australia?
- Registering the licensee as an authorised user isn't mandatory, but recording certain licence interests can provide additional protection and clarity, particularly in a dispute or if the mark is later assigned. We advise on whether it's worthwhile for your specific arrangement.
- What happens if the licensee uses the mark in a way that damages our brand?
- The agreement should give you a right to require immediate corrective action and, for serious or repeated breaches, terminate the licence. Building enforceable approval rights upfront is far more effective than trying to rely on a general 'good faith' obligation after damage has already occurred.
- Can the licensee sublicense the mark to someone else?
- Only if the agreement expressly permits it. We generally prohibit sublicensing without the owner's consent, since it multiplies the quality control and enforcement challenges beyond what the original licence was designed to manage.
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