Background

We learnt in our previous article on trademarks that after a person registers his/her trademark, he/she becomes the owner of the trademark to the exclusion of all others. We also noted that under Ghanaian law, where a person desires to use the trademark of another person, that person will be required to obtain consent from the owner of the trademark. Such consent may be obtained through a trademark license agreement. A trademark license agreement is basically an agreement which allows a party (licensee) to use the registered trademark of another person (licensor) under certain terms. The licensee may either be a company or an individual.

For instance, Taylor Company Ltd is desirous of using ABC trademark owned by Mr. Addai for its business operations. Mr. Addai, being the registered owner of ABC trademark, is able to grant Taylor Company Ltd the permission to use the ABC trademark under a trademark license agreement.

Important clauses that should be in the trademark license agreement between Mr. Addai and Taylor Company Ltd include but are not limited to:

The Grant Clause

This clause typically grants the licensee the right to use the licensor’s trademark. It must state in clear unambiguous terms the scope of the rights granted to the licensee under the agreement. The rights granted for the use of the trademark by the licensee may be exclusive or of the non-exclusive in nature. The rights may even specify the goods and services on which the licensee can use the relevant trademark among others[i].

The Royalty's Clause

The royalty's clause will state the methods of calculation of the relevant royalties which is to be paid by the licensor to the licensee. It should also state all the terms related to the payment i.e.,the manner inclusive of the timeline for all payments of royalties, including the documentation mentioning the calculation of royalties.[ii]

Quality Control Clause

This is a very important clause under a trademark license agreement. Under Ghanaian law, the trademark license agreement must provide for effective control by the licensor of the quality of the goods or services of the licensee in connection with the trademark being used[iii]. Basically, the agreement must provide for the provision where the licensor shall exercise the quality control practice over the goods or services which the licensee will be using the trademark for. A trademark license agreement is not valid if the agreement does not provide for quality control or the quality control is not effectively carried out[iv].

Advantages and disadvantages of a trademark license agreement

The advantages of licensing one’s trademark is that you retain the potential to future income, both in your own use and development of the mark and in the royalties received from granting a license to use the trademark to a licensee. However, major disadvantages of granting a license to a licensee for the use of a registered trademark is that the licensor may lose control of his/her trademark and the trademark may be open for intellectual property theft.