A Canadian Trademark Licence Agreement is a legally binding contract that grants a licensee the right to use a trade-mark owned by the licensor in connection with specified goods or services within Canada. This document is governed by the Trade-marks Act (R.S.C. 1985, c. T-13), which is the federal statute providing the framework for trade-mark registration, protection, and enforcement throughout all Canadian provinces and territories. The agreement establishes the terms, conditions, and limitations under which the licensee may use the trade-mark, including the geographic territory, duration of the licence, quality control standards, and financial arrangements between the parties.

Under Canadian intellectual property law, trade-marks are registered and administered by the Canadian Intellectual Property Office (CIPO), a branch of Innovation, Science and Economic Development Canada. When a trade-mark owner wishes to allow another party to use their registered mark, section 50 of the Trade-marks Act imposes a critical requirement: the owner must maintain direct or indirect control over the character or quality of the goods or services associated with the licensed mark. This quality control requirement distinguishes Canadian trade-mark licensing from simple commercial agreements and ensures that consumers are not misled about the nature or origin of the goods and services they purchase.

The Trademark Licence Agreement serves multiple legal functions in the Canadian context. It documents the grant of rights from the licensor to the licensee, satisfying the requirements of section 50 of the Trade-marks Act. It establishes quality control mechanisms that preserve the validity and enforceability of the trade-mark. It defines the financial terms, including licensing fees, royalties, and payment schedules denominated in Canadian dollars. It also addresses termination provisions, confidentiality obligations, and dispute resolution procedures in accordance with the applicable provincial law and the federal Competition Act (R.S.C. 1985, c. C-34). The agreement may be recorded with CIPO to provide public notice of the licensing arrangement, although such recording is not mandatory under the Act.

A properly drafted Trademark Licence Agreement protects both parties by clearly defining their respective rights and obligations. The licensor retains ownership of the trade-mark and the ability to control how it is used, while the licensee gains lawful authority to use the mark for commercial purposes within the agreed-upon scope. Without this agreement, any use of the trade-mark by the licensee would constitute infringement under sections 19 and 20 of the Trade-marks Act, potentially exposing the licensee to injunctions, damages, and accounting of profits before the Federal Court of Canada.

A Canadian Trademark Licence Agreement is needed whenever a trade-mark owner wishes to grant another party permission to use their registered or common law trade-mark in Canada. The most common scenario involves a corporation that has developed a strong brand identity and wants to expand its market presence by allowing franchisees, distributors, or manufacturing partners to use the trade-mark in association with their own goods or services. Under section 50 of the Trade-marks Act (R.S.C. 1985, c. T-13), this licensing arrangement must include quality control provisions to maintain the validity of the mark.

Franchise arrangements across Canada frequently require Trademark Licence Agreements. Provincial franchise legislation, such as Ontario's Arthur Wishart Act (Franchise Disclosure), 2000 (S.O. 2000, c. 3), Alberta's Franchises Act (R.S.A. 2000, c. F-23), British Columbia's Franchises Act (S.B.C. 2015, c. 35), and similar statutes in other provinces, often mandates specific disclosures regarding trade-mark licences as part of franchise disclosure documents. The trade-mark licence is typically the central intellectual property component of a franchise relationship.

Manufacturing and distribution agreements are another common context requiring a Trademark Licence Agreement. When a Canadian company authorizes a third party to manufacture goods bearing its trade-mark, or to distribute and sell branded products within specific Canadian provinces or internationally, the licence agreement establishes the scope of permitted use and the quality standards the licensee must maintain. This is particularly important for goods subject to Canadian consumer protection regulations under the Consumer Packaging and Labelling Act (R.S.C. 1985, c. C-38) and the Competition Act.

Merchandising and co-branding arrangements also necessitate a formal Trademark Licence Agreement. Sports teams, entertainment companies, and brand owners frequently licence their marks for use on merchandise, promotional materials, and co-branded products. These arrangements require careful delineation of the permitted uses, approved product categories, and quality standards to protect the value and distinctiveness of the licensed mark under the Trade-marks Act.

Cross-border licensing scenarios arise when international companies wish to enter the Canadian market through local licensees. The Trade-marks Act has provisions addressing the use of marks by registered users and the recognition of foreign registrations. The licence agreement must address the specific requirements of Canadian law, including bilingual labelling requirements under the Official Languages Act (R.S.C. 1985, c. 31 (4th Supp.)) for federal government contractors and the Consumer Packaging and Labelling Act for retail goods.

A valid Canadian Trademark Licence Agreement must include several essential components to comply with the Trade-marks Act (R.S.C. 1985, c. T-13) and applicable provincial law. The identification of parties section records the full legal names, addresses (including province and postal code), and entity types (individual, corporation, or partnership) of both the licensor and the licensee. For corporations, the jurisdiction of incorporation under the Canada Business Corporations Act (R.S.C. 1985, c. C-44) or the applicable provincial corporations act should be specified.

The trade-mark description section provides a comprehensive identification of the licensed mark, including the trade-mark name as registered with CIPO, the registration number (typically in the format TMAxxxxxxx), the registration date, and the goods and services for which the mark is registered according to the Nice Classification system. If the mark includes figurative elements, colours, or specific design features, these must be described in sufficient detail to identify the mark precisely.

The quality control provisions are the most critical element of a Canadian Trademark Licence Agreement. Section 50 of the Trade-marks Act requires the licensor to maintain direct or indirect control over the character or quality of the goods and services associated with the licensed mark. The agreement should specify the quality standards the licensee must meet, the inspection and audit rights retained by the licensor, approval processes for new products or materials bearing the mark, and consequences for non-compliance. Without adequate quality control provisions, the Federal Court may deem the licensee's use as not constituting the owner's use, potentially leading to the trade-mark's vulnerability to expungement proceedings under section 45.

The financial terms section establishes the licensing fees or royalties payable in Canadian dollars, including the payment method (lump sum, royalty percentage, or combination), payment schedule, late payment penalties, and tax obligations under the Income Tax Act (R.S.C. 1985, c. 1 (5th Supp.)) including withholding tax requirements for cross-border payments. The territory clause defines whether the licence applies to all of Canada, specific provinces, or international markets.

The term and termination section specifies the duration of the licence, renewal provisions, and the grounds for termination, including breach, insolvency under the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3), and voluntary termination with notice. The governing law clause identifies the applicable provincial law for interpretation and enforcement, while the dispute resolution clause designates the appropriate court or arbitration mechanism. A confidentiality clause protects proprietary information exchanged between the parties, and a force majeure clause addresses circumstances beyond the parties' control.