Trademark Licence Agreement (India)

An India Trademark Licence Agreement is a contract under which the owner of a registered trademark (the licensor) grants another party (the licensee) the right to use the trademark on specified goods or services, subject to conditions and quality controls. Governed by the Trade Marks Act 1999 and the Indian Contract Act 1872, it is the foundational document for any arrangement where a brand owner permits another business to use their mark in India.

The agreement may grant: an exclusive licence — only the licensee (and not even the licensor) may use the mark in the licensed territory and for the licensed goods/services; a sole licence — only the licensee and licensor may use the mark (but not other licensees); or a non-exclusive licence — the licensor may grant the same or similar licences to multiple licensees. For commercially significant licences — franchise arrangements, distribution agreements, manufacturing licences, and co-branding deals — registration of the licensee as a 'registered user' under Section 49 of the Trade Marks Act 1999 with the Registrar of Trade Marks is strongly advisable.

The Trade Marks Act 1999 gives quality control obligations particular importance. Section 50 of the Act allows cancellation of a registered user's status if the use of the mark is contrary to or inconsistent with the terms of the licence. More significantly, if a trademark is used by a licensee without adequate quality controls by the licensor, the mark may be attacked as deceptive or as having lost its distinctiveness as a badge of origin — grounds for cancellation of the registration under Section 57. A trademark licence without meaningful quality control provisions may therefore undermine the value of the very mark it purports to licence.

Royalty income from trademark licensing in India attracts multiple tax obligations. The licensor (if an Indian resident) must declare royalty income under the Income Tax Act 1961 as income from business/profession or other sources. The licensee (payer) must deduct TDS under Section 194J at 10% for royalties paid to a resident licensor, and must deduct TDS under Section 195 for royalties paid to a non-resident licensor (subject to the applicable Double Taxation Avoidance Agreement rate). GST at 18% under the Goods and Services Tax Act 2017 applies to trademark licensing services, and the licensor must issue a GST-compliant tax invoice if GST-registered.

For cross-border trademark licences — where the licensor is a foreign company and the licensee is an Indian entity — the Reserve Bank of India (RBI) and FEMA 1999 govern royalty remittances. Royalty payments to foreign trademark owners must be at arm's-length rates and are subject to automatic RBI approval up to prescribed limits under the Foreign Exchange Management (Current Account Transactions) Rules 2000.

The Registrar of Trade Marks under the Trade Marks Registry (under the Office of the Controller General of Patents, Designs and Trade Marks) oversees trademark registration and registered user applications. The Intellectual Property Appellate Board (IPAB) — now replaced by the High Courts — hears appeals from Trade Marks Registry decisions. Forms-legal.com provides this template as a starting point for India-compliant trademark licence agreement documentation.

Use this agreement when allowing another business to use your trademark on their products or services — for example, in a franchise arrangement, a distribution agreement, a co-branding deal, a manufacturing licence, or a regional sub-licence. The licensee also needs this agreement to confirm their right to use the mark and protect themselves from infringement allegations.

Prepare the agreement before the licensee commences any use of the mark. Unauthorised use of a registered trademark — even with the verbal consent of the owner — does not constitute a valid licence under the Trade Marks Act 1999. Only a written licence gives the licensee a defence against infringement claims, and only a registered user can bring infringement proceedings in their own name under Section 53 of the Act.

For franchise arrangements in India — where the franchisor licences both the trademark and the business system to the franchisee — this agreement should be read alongside a separate franchise agreement covering the business format, territory, training, operations manual, and ongoing fee structure. India does not have a dedicated franchise law; franchise relationships are governed by the Indian Contract Act 1872, the Trade Marks Act 1999, the Competition Act 2002, and the Consumer Protection Act 2019.

For manufacturing licences — where a manufacturer is authorised to produce goods bearing the licensor's mark — the agreement should include a complete quality control schedule specifying raw material standards, production process requirements, product testing protocols, and packaging specifications. The Bureau of Indian Standards (BIS) ISI mark and FSSAI licences (for food products) impose additional labelling and quality requirements on manufacturers that must be reflected in the licence conditions.

For cross-border licences from a foreign trademark owner to an Indian licensee, the royalty payments must comply with FEMA 1999 and are subject to transfer pricing review under the Income Tax Act 1961. Under Indian law, the Trade Marks Act 1999 governs trademark licences, and arbitration under the Arbitration and Conciliation Act 1996 is the standard dispute resolution mechanism for commercial IP disputes.

A thorough India trademark licence agreement under the Trade Marks Act 1999 should include the following elements.

Parties and trademark details: full legal names, addresses, and GSTINs of the licensor and licensee; the trademark registration number(s) at the Trade Marks Registry; the trademark class(es) under the Nice Classification; and a description of the mark (word mark, device mark, or combined mark).

Type of licence: whether the licence is exclusive (no other licensee or the licensor may use the mark in the territory for the licensed goods/services), sole (only the licensor and this licensee may use the mark), or non-exclusive.

Territory: the geographic area in which the licensee is authorised to use the mark — pan-India, specific states, or a named city. For distribution licences, the territory should match the distributor's sales area.

Permitted goods or services: a precise description of the goods or services on which the licensee may use the mark, matching the specification in the trademark registration. Use of the mark on goods or services outside the registered specification may not benefit from the registered trademark rights.

Quality control: the licensor's right to inspect the licensee's premises, review product samples, and approve packaging and marketing materials before use. A minimum quality standard schedule should be appended. Failure to maintain quality control is a ground for cancellation of the registered user status under Section 50 of the Trade Marks Act 1999.

Royalty: the royalty rate (percentage of net sales, or a fixed amount per unit), royalty calculation basis, audit rights, payment frequency, and currency. For foreign licensors, FEMA 1999 compliance and transfer pricing arm's-length rate.

TDS and GST: the licensee's obligation to deduct TDS under Section 194J at 10% on royalty payments to a resident licensor, or under Section 195 for non-resident licensors; and the licensor's obligation to charge GST at 18% on trademark licensing services if GST-registered.

Registered user provision: the parties' agreement to file a joint application with the Registrar of Trade Marks to record the licensee as a registered user under Section 49 of the Trade Marks Act 1999 within a specified period of execution.

Sub-licensing: whether the licensee may grant sub-licences and, if so, the conditions and requirement for the licensor's written consent.

Infringement notification: each party's obligation to promptly notify the other of any infringement of the trademark by third parties, and the mechanism for deciding who conducts infringement proceedings.

Term, renewal, and termination: the initial term, renewal provisions, and termination rights — for breach of quality standards, non-payment of royalties, insolvency, or non-use of the mark for a continuous period of five years (which is a ground for removal from the register under Section 47 of the Trade Marks Act 1999).

Post-termination: the licensee's obligations after termination — immediate cessation of use, destruction of branded materials, and de-registration as a registered user. Forms-legal.com provides this template as a starting point for India-compliant trademark licence agreement documentation.