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Trademarks and Licenses

By: Jaime Israel Dávila Gómez, attorney

One of the most important rights derived from having a trademark is to be able to exploit it economically through licensing. A license involves authorization of brand owner, for a third party to use it in the marketing of products or the provision of services for which it was registered.

There are different types of licenses, but they all have two elements: authorization on one side and an economic consideration on the other. Also, by law, whoever receives a license must ensure that the quality of services or products with which the “borrowed” brand will be identified, is the same as that offered by the holder thereof.

In relation to the consideration, it may be a fixed authorization to use a brand quantity, it may consist of royalty payments (proportional to that obtained by reason of the use of the mark or fixed and it may also involve both of the above).

Regarding who is authorized to use a trademark license may be exclusive or non-exclusive, meaning that in the first case only the third party is going to license and in the second case the holder may grant more licenses to other people. The exclusivity of a license may directly affect the purchase consideration and other terms of a license.

licensing-franchising-7-728Finally, in matters of license types, there are traditional licenses that are as already explained and there are also franchises, which are a type of license, which also grants the authorization for use of a trademark, the holder thereof transmits knowledge about the business or company using the mark, specifically operational, administrative and financial matters, also known as the “know how”.

Licenses must clearly establish at least those involved in it, the mark on which authorization is given, the economic consideration that must pay the licensee, the duration of the license, the territory in which the brand will be used, defense aspects of the brand and economical penalties for anyone who fails to comply with its terms.

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