This column is written by Stuart Gibson, partner at Mills Oakley Lawyers and his topics relate to the legal side of licensing, including Intellectual Property (IP) protection, copyright, trademarks, contractual advice & royalties.
You own and control the rights to Sporting Network Pty Ltd, a fictitious leading sports cable network with a fantastic array of licensed merchandise. You are based in the U.S.
Because of explosive growth in sports globally, fuelled by a competitive market in cable T.V. and on-demand viewing, you have broad opportunities to license merchandise into countries all over the world. You have gone to great lengths to register trademarks in the U.S. and many other significant territories like the EU.
However, in other territories, you don’t have a registered trademark. Instead you have contracted with exclusive licensees in those territories to take out trademarks on your behalf on trust for you. But there is great difficulty in reaching and keeping track of the activities of all the licensees globally, exposing your company and brand to significant risks.
What are the dangers and perils in such licensing arrangements?
The most significant danger is that you do not own the trademark – it is held on trust for you. Consequently, if you don’t have tightly constructed control provisions in your licence agreements, then “your” trademark might become susceptible to ownership by the licensee. That is, if you fail to adequately control the use of the mark by the licensee, it leaves open to the licensee to argue that it has control and ownership of the mark and that the reputation in the mark now resides with it.
There have been many cases where international companies have lost control of their trademarks to their own subsidiaries along these lines.
So what’s the key tip and take-home point?
Be sure that the license agreement you strike as licensor has quality control provisions stipulating how, when and why the mark may be used. Further, it is critical that those provisions are exercised and enforced routinely and effectively in order to avoid losing control of your brand – your most prized asset.