Brand

License

The trademark is an essential asset of any distribution network.Being the subject of a registration with the INPI and endowed as such with special protection, the brand is a sign of customer rallying, on the one hand because it makes it possible to distinguish the exclusive products of the distributor, and on the other hand because it is the vector of the brand’s mix-marketing.

This is why, regardless of the size of the network, it is almost always provided that members contractually benefit from the right to use the brand of the head of the network, in particular as a brand.

In terms of distribution, the provision of one or more distinctive signs is even one of the essential and necessary characteristics of contracts.

In practice, this provision is formalized in the commission-affiliate or franchise contract, more rarely in an ad hoc contract specifically relating to the brand.

This provision is analyzed as a trademark license within the meaning of the second paragraph of Article L 714-1 of the Intellectual Property Code.

The trademark license is thus a contract by which the owner of a trademark confers on a third party (the licensee) the right to affix the trademark on its own products and/or to make commercial use of it, in particular as a sign.

The trademark license can be granted for a fee, either against payment of a lump sum, or in return for proportional royalties, generally depending on the licensee’s turnover. The trademark license may also be granted free of charge.

To be valid and of interest to the beneficiary, the trademark license must relate to a sign that is both commercially strong and, above all, legally protected.

For this, the licensed mark must have a distinctive character, that is to say it must not contain any element likely to mislead the public about the characteristics of the goods or services it designates and must not be content to describe these same goods or services. It must of course have been filed and remain protected according to the legislation of the country where it is granted.

In addition, although not subject to any legal formality, the trademark license agreement must be in writing and be precise as to the obligations of each of the parties, in particular for issues of brand management and evidence. In addition, the license must be registered in the INPI Register in order to be enforceable against third parties.

In terms of content, a territorial exclusivity clause at the end of which the trademark owner is prohibited from using and exploiting the latter, in the contractual area is often inserted, although in terms of distribution, exclusivity is often limited to one or more distribution channels. Where the brand is solid and renowned, the existence of contractual exclusivity justifies a high financial consideration to be paid by the licensee.

In general, the licensee may not itself sell branded products or exploit the brand, outside the area reserved for it. Any breach of this obligation would make him an infringer within the meaning of the Intellectual Property Code. In these circumstances, to avoid differences of interpretation, sources of conflict between the parties, it is imperative to ensure that the exclusivity clause is clear and precise, as well as that defining the territory.

The trademark license most often includes an exclusivity of supply at the expense of the licensee. In this case, the licensor must, under Article L 330-3 of the Commercial Code, provide its partner, at least 20 days before the signing of the contract, with a pre-contractual information document allowing it to make an informed commitment.

The trademark license may be only partial, i.e. only cover some of the categories of goods or services referred to in the registration certificate. In the case of a partial license, it is essential to list very precisely in the contract the extent of the rights granted to the licensee.

Brand licensing is a strategic alternative to franchising. It is a universally practiced contract. It does not imply the transmission of know-how, and even if know-how is transmitted, it does not have to be original, secret and identified, limiting the contentious risks of the network head on this usual angle of attack.

You can also check out our video “What’s the Difference Between Franchise and Brand License? “as well as our thematic file” Brand Licensing “on our site.