Licensing of Trade Marks in India

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June 07, 2018

The term “Licensing of trademark” has not been defined or rendered specific mention in the Trademark Act, 1999. However, the law pertaining to the Licensing of Trademarks is enshrined under Section 48 of Trademark Act, 1999  which provides for “Registered Users”.

The statutory provision under Section 48 of Act stipulates that a person other than the registered proprietor of trademark may be registered as a registered user. Thus, the use of a registered trademark can be permitted to a registered user in accordance with the provisions of the Act and for that purpose the registered proprietor has to enter into an agreement with the proposed registered user.

Section 49 of the Trademark Act enumerates the process for registration as a registered user. The essentials for licensing of trademark or registration as registered user are:

The registered proprietor and the registered user shall jointly apply in writing i.e. Trademark License Agreement, to the Registrar of Trademark in the following manner:-

  1. The agreement shall be in writing with respect to permitted use of the trademark;
  2. An affidavit by the registered proprietor of the trademark authenticating the particulars of the agreement, like extent of degree of control by the proprietor over permitted use of the mark, stating the goods and services in respect of which registration is proposed, stating condition or restriction on use of the mark and the period for which the trademark has been licensed.

Here it would be relevant to mention that under the Indian Law both registered and unregistered can be transferred. The transfer of a Trade Mark can either be by means of a license or an assignment[1]. A license to a registered Trade Mark in India can be of two kinds:

a) A simple license agreement which is in the nature of a permissive use;

b) A Registered User, wherein the license agreement is registered with the Registrar of Trade Marks and certain rights accrue to the licensee as per statute.

Difference between Licensing and Assignment of Trademark

An assignment of trademark is a complete transfer of the right and title in a mark. Assignments can also be of various kinds. For eg., Assignment could be product specific, territory specific, but they will vest complete and absolute ownership in the assignee.

Assignment of a registered trade mark can be with or without the goodwill of the business concerned. Such an assignment can be in respect of all the goods or services or part of the goods or services for which the mark is registered. However, an unregistered trademark is assignable with the goodwill of a business and if the same is assigned without the goodwill of the business, the nature of the transfer would have to be determined on the facts of a particular case.

The fundamental test to determine as to whether a particular mark has been licensed or assigned is to see if the licensor/assignor has retained any rights in the mark. If rights are retained with the owner, usually it is a license and if no rights are retained by the owner, then it would usually be an assignment. A license is, therefore, nothing but a permissive use of the mark, which permission, is revocable. A `right to use’ is usually a license and not an assignment, except in certain circumstances.

The High Court of Delhi in a recent case[2] framed questions that would aid in determining whether an arrangement is a license or an assignment include:

  • Whether the user acknowledges the licensor’s right and title over the mark?
  • Whether it is a mere right to use the mark or it was a transfer/assignment of a permanent nature?
  • Whether the manner of use is specified and restricted and the effect thereof on the rights of the user?
  • Whether the payment made by the User is one-time, fixed running royalty or a percentage of sales, with or without investment made by the Licensor on marketing and advertising?
  • Whether the licensor has right of supervision and control over the use of the mark?
  • Whether sole and exclusive right was conferred on the user and the effect thereof?
  • Whether the user can further transfer his rights to third party, with and without consent of the licensor and the effect thereof?
  • Whether the licensor had the right to terminate the license and if so, under what circumstances?
  • Whether upon termination by the licensor, the user has to stop use of the mark?
  • Whether or not the right to sue is given and conferred on the user?
  • Whether there is a transfer of goodwill of the business and/or goodwill in the mark?
  • Whether there are multiple users of the same mark?

Who can file suit for Trademark Infringement

Only registered proprietor of the trademark is competent to launch proceedings to prevent its infringement. If the user is not registered, he cannot maintain a suit under the Act. In the case of Himalaya Drug Co. Pvt. Ltd., Bangalore v. Arya Aushadhi Pharmaceutical Works, Indore[3], the Court ruled that if a company fails to prove that it is a registered user then the suit is liable to be dismissed.

[1] M/S Hilton Roulunds Ltd. vs Commissioner Of Income Tax, Delhi High Court ITA 325/2005

[2] ibid

[3] AIR 1999 MP 110

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