Monetising your brand is smart — but losing control over it is not.
By Prashant Kumar
Why trademark licensing needs strategy, not trust
Trademark licensing lets you expand your brand reach, earn royalties, and partner with new markets — without giving up ownership. But in India, many businesses enter informal or poorly drafted licensing deals that end up diluting brand distinctiveness or even transferring control unintentionally.
This article explains how to structure a trademark licence under Indian law so that you can monetise your mark without weakening your rights or losing control.
What is a trademark licence in India?
A trademark licence allows the owner (licensor) to let another party (licensee) use the mark under agreed terms — while retaining ownership. It’s a contractual permission, not a transfer of rights, and should always include conditions for quality, scope, and duration.
Under the Trade Marks Act, 1999, licensing is a legally recognised method of brand expansion. The licence may be exclusive, non-exclusive, or limited to specific goods, territories, or time periods. Crucially, the licensor continues to own the trademark; the licensee only gains conditional rights of use.
Why control matters in trademark licensing
Licensing is profitable — but risky when control is absent.
If the licensee uses the mark carelessly, alters packaging, or compromises product quality, your trademark’s reputation can suffer. Worse, the Registrar or courts may consider that you’ve abandoned control, weakening your enforcement rights.
In India, maintaining control means:
- Setting quality standards the licensee must meet.
- Reviewing and approving marketing materials.
- Prohibiting sub-licensing without written consent.
- Including audit and inspection rights in the licence.
Key elements of a strong trademark licence agreement
A trademark licence should clearly define who can use the mark, for what purpose, where, for how long, and under what quality conditions. Include inspection rights, termination triggers, and explicit acknowledgment that ownership stays with the licensor.
Here’s what a good agreement includes:
- Parties and ownership clause — Confirm the licensor owns the registered mark and grants only a limited, revocable right to use.
- Scope of licence — Define products, territory, and exclusivity. Avoid vague terms like “all future brands” or “global rights”.
- Quality control clause — The most critical element. Give yourself the right to review products, packaging, and advertising.
- Royalty and payment terms — Specify royalty rate, reporting frequency, and penalties for under-reporting.
- Inspection and audit rights — Reserve periodic inspection rights to ensure compliance.
- Use of symbols and representation — Require consistent use of ® or ™ and exact representation of the mark.
- Termination clause — Allow termination for misuse, quality breach, or non-payment.
- Post-termination obligations — Licensee must stop using the mark immediately and destroy branded material.
- Jurisdiction and dispute resolution — Preferably under the Arbitration and Conciliation Act, 1996, with seat in India.
How to register a “Registered User” with the Trade Marks Registry
In India, a licence can remain private — or be registered officially with the Registry under Section 49 of the Trade Marks Act.
Registering a user under Section 49 gives legal recognition to the licensee’s use and ensures it counts as use by the owner, preventing cancellation for non-use. It also strengthens your control and record with the Trade Marks Registry.
Procedure:
- File Form TM-U with prescribed fee.
- Attach the licence agreement and owner’s affidavit of control.
- Registry examines and enters the name of the registered user.
Registering a user is optional but highly advisable — especially for long-term or nationwide licensing arrangements.
How not to lose control — practical strategies
- Never allow perpetual licences without renewal rights.
- Prohibit assignment or sub-licensing by the licensee.
- Maintain an internal brand manual outlining approved designs and usage rules.
- Include termination-on-default clauses — misuse should trigger automatic revocation.
- Require periodic reporting and sample submissions.
- Use territorial exclusivity cautiously — overbroad licences limit your flexibility.
- Monitor compliance — send periodic notices reminding the licensee of quality and brand representation.
These measures ensure that you monetise your trademark while keeping full ownership and legal control intact.
Why poorly drafted licences can destroy your brand
Licensing done wrong can have devastating effects:
- The brand becomes associated with poor-quality goods.
- The mark loses distinctiveness and becomes generic.
- Courts may deny injunctions because you “acquiesced” to misuse.
- Competitors may cite inconsistent usage as evidence of abandonment.
Remember: Trademark licensing is both a commercial and legal act. You can’t outsource brand control without risking brand integrity.
Related reading on Pratham Legal Blog
- How to Use Your Trademark Properly After Registration (and Avoid Losing It)
- How to Register a Trademark in India (2025 Update)
- Brand Protection Strategies for Indian Startups
FAQs on Trademark Licensing in India
1. What’s the difference between a licence and an assignment?
A licence gives permission to use your mark under certain conditions; ownership remains with you. An assignmenttransfers ownership permanently. Licences are reversible; assignments are not.
2. Do I need to register the licence with the Trade Marks Registry?
Not mandatory, but highly recommended. Registering a user (via Form TM-U) legally records your control and counts the licensee’s use as your own, protecting you from cancellation for non-use.
3. Can I license an unregistered trademark?
Yes, but enforcement is weaker. You can grant a contractual licence over an unregistered mark, but if disputes arise, your remedies will be limited to passing off, not infringement.
4. What happens if the licensee misuses the mark?
The licensor can terminate the agreement, issue legal notices, and claim damages for infringement or breach of contract. Always include clear termination and indemnity clauses for misuse.
5. How can I ensure quality control in a trademark licence?
Include clauses requiring the licensee to:
- Maintain defined quality standards.
- Submit product samples for approval.
- Allow periodic inspections.
- Use the mark exactly as approved.
Non-compliance should trigger immediate revocation.
6. Can I give multiple licences for the same mark?
Yes. You can issue non-exclusive licences to multiple partners or regions. Just ensure each is bound by identical standards and none have rights that conflict or overlap territorially.
7. How long can a trademark licence last?
Licences typically last 2–5 years, aligned with business cycles. Avoid perpetual licences — they create legal ambiguity and reduce your ability to control or withdraw rights.
8. Is a trademark licence taxable in India?
Yes. Royalties from trademark licensing are taxable as business income under the Income Tax Act, 1961. GST may also apply under “intellectual property services”.
9. Can a foreign company license its trademark to an Indian entity?
Yes. Cross-border trademark licensing is permitted, subject to FEMA (Current Account Transactions) Rules, 2000 and RBI guidelines for royalty remittance. Agreements should specify governing law and jurisdiction.
10. What if I want to terminate a licence early?
Your agreement should include clear termination for cause provisions (breach, misuse, non-payment) and an exit process requiring immediate cessation of use. Without this, termination becomes legally messy.
Key takeaway
Licensing your trademark is a smart business move — but only if you remain in control. A strong agreement, registered user filing, and ongoing monitoring ensure your brand earns income without compromising integrity or ownership. Treat every licence as a controlled partnership, not a handover.
About the Author
Prashant Kumar is a Company Secretary, Published Author, and Partner at Pratham Legal, a full-service Indian law firm advising on corporate, regulatory, and intellectual property matters.
He has filed and managed thousands of trademark applications, structured IP ownership for startups, and handled licensing, assignment, and due diligence matters for funded companies.
For expert guidance on trademark filing, ownership structuring, or IP strategy, contact:
📞 +91-9821008011
📧 prashant@prathamlegal.com
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