Trade Name License Contract Mexico

A Trade Name License Contract Mexico (Contrato de Licencia de Uso de Nombre Comercial) is a commercial intellectual property agreement governed by Articles 213 through 223 of the Ley Federal de Protección a la Propiedad Industrial (LFPPI), published in the Diario Oficial de la Federación on 1 July 2020, under which the owner (licenciante) of a trade name (nombre comercial) — the name under which a person, company, or establishment is known in commerce — grants a licensee (licenciatario) the right to use that trade name in connection with a specific commercial activity and within a defined geographic territory within Mexico, in exchange for royalties or other agreed consideration.

The LFPPI Articles 213 through 223 regulate trade names (nombres comerciales) as a distinct form of industrial property separate from registered trademarks (marcas registradas). Article 213 LFPPI defines a nombre comercial as the denomination or sign used to distinguish a commercial establishment (establecimiento industrial, comercial o de servicios) from other establishments in the same line of activity. Unlike registered trademarks, which require formal registration with IMPI for protection, a trade name acquires legal protection through first use (primer uso) in commerce in the specific geographic area where the establishment operates under Article 213 LFPPI — no registration is required for the basic right to exist. However, LFPPI Article 215 provides that a trade name owner may register the name with IMPI to obtain a declared (publicada) right that creates a presumption of prior use and protection against conflicting later registrations nationwide.

The distinction between a nombre comercial and a marca registrada is fundamental in Mexican intellectual property law: a trademark (marca) identifies goods or services; a trade name (nombre comercial) identifies the commercial establishment or enterprise itself. For example, 'Grupo Bimbo' is the nombre comercial of the enterprise, while 'Bimbo,' 'Marinela,' and 'Barcel' are registered marcas identifying the company's product lines. The licence of a trade name authorises the licensee to operate a business under the licensor's established identity — its name, reputation, and commercial goodwill (fondo de comercio) — in the licensed territory.

Trade name licences are especially important in the context of business acquisitions, spin-offs, and corporate restructurings where a divested business unit needs to continue operating under the parent company's name for a transitional period. They are also critical in joint ventures (empresas en participación) where one party contributes the trade name and commercial reputation as part of their capital contribution (aportación en especie) under CCF Article 2689. Article 214 LFPPI provides that trade name rights are territorially limited to the area where the name has been used — a trade name protection in Ciudad de México may not extend to Guadalajara or Monterrey unless the name is nationally known (nombre comercial de reconocimiento general) or has been registered with IMPI.

The SAT requires that royalties paid for trade name licences be supported by CFDI (Comprobante Fiscal Digital por Internet) and that the payments reflect market-rate pricing (precios de mercado) under LISR transfer pricing rules when the licensor and licensee are related parties (partes relacionadas). IMPI publishes a Guía de Procedimientos for recording trade name licences in its public registry, and recording of the licence is recommended — though not legally required between the parties — for third-party enforceability and trademark integrity purposes.

A Trade Name License Contract Mexico is needed whenever a business owner or company authorises a third party to conduct commercial activities under its established trade name — the business name by which it is known to customers, suppliers, and the public — in a defined territory or activity sector.

The contract is essential when a business sells a franchise or licensee arrangement where the franchisee or licensee will operate a local outlet under the franchisor's trade name. While franchise agreements under Código de Comercio Articles 142-A through 142-J include both trademark and trade name licences, many business licensing arrangements that fall short of a full franchise — business opportunity licences, dealer agreements, authorised distributor networks — also require formal trade name authorisation under LFPPI Article 213.

The licence is needed when a parent company (empresa controladora) reorganises its business and a subsidiary or spin-off company requires authorisation to continue using the parent's trade name — common in corporate restructurings, partial sales of business units, and holding company arrangements where multiple legal entities operate under a single brand identity. Without a formal trade name licence, the subsidiary's use of the parent's name could be considered an infringement (uso no autorizado) under LFPPI Article 223 if the entities are separately owned.

The agreement is required when a company expands into a new geographic territory in Mexico through a local partner (socio regional) who will operate under the company's established trade name in the new region. LFPPI Article 214's territorial limitation on unregistered trade name protection means that a trade name well-established in the Bajío region may not have legal protection in the Yucatán Peninsula — a licence from the registered or nationally known trade name owner formally authorises the regional partner's use.

The contract is also critical in business sale transactions (compraventas de negocio en marcha) where the buyer acquires the going concern but the trade name is retained by the seller — a transitional trade name licence allows the buyer to continue using the established name while building a new brand identity, under LFPPI Article 215 and applicable transitional use agreements.

Under LFPPI Articles 213–223, CCom Article 273, and SAT CFDI regulations, every trade name licence must define the authorised trade name precisely (including any graphic form registered with IMPI), the permitted commercial activity and geographic territory, the quality control obligations of the licensee, the royalty payment structure, and the conditions for termination and post-termination use cessation.

A valid Trade Name License Contract Mexico under LFPPI Articles 213–223 must include the following essential elements:

Trade Name Description and Registration Status (Descripción del Nombre Comercial): The exact trade name being licensed — in its word form and, if applicable, its graphical presentation (logotipo del nombre comercial). If the trade name is registered with IMPI, include the publication number (número de publicación) and registration certificate reference. If the name is protected through use only (uso no registrado), the licensor should provide documentation of first use — including dated advertising, business registration records, invoices, and publications — to establish the priority and geographic scope of protection under LFPPI Article 213.

Licensed Commercial Activity (Actividad Comercial Autorizada): A precise description of the commercial activity or industry sector (giro comercial) in which the licensee may use the trade name. Under LFPPI Article 213, trade name protection is limited to the specific line of commercial activity — a trade name well-known in the restaurant sector does not automatically protect against use of the same name in an unrelated sector. The licence must specify whether the licensee may use the trade name on signage (rotulación), advertising, stationery, websites, social media, email, product packaging, vehicles, and uniforms.

Geographic Territory (Territorio Autorizado): The specific geographic area — municipality (municipio), state (estado), region (zona geográfica), or all of Mexico — where the licensee may use the trade name. LFPPI Article 214 limits unregistered trade name protection to the area of actual use, so the contract's territory clause should align with either the licensor's proven area of use or the scope of any IMPI registration. Licensees must ensure they do not use the trade name in territories where a conflicting trade name or trademark already exists.

Exclusivity (Exclusividad del Territorio): Whether the licence grants exclusive rights to use the trade name in the licensed territory — preventing the licensor from operating the same commercial activity under the same name in the same area — or non-exclusive rights. Exclusive trade name licences typically command premium royalties and require minimum performance obligations (mínimos de operación) from the licensee.

Quality Standards and Appearance Standards (Estándares de Calidad e Imagen): Specific quality standards for the goods or services provided under the licensed trade name, consistent with LFPPI Article 135 quality control obligations applicable by analogy to trade name licences. For commercial establishments (tiendas, restaurantes, establecimientos de servicios), the licence should specify: physical appearance standards (estándares de imagen del establecimiento); customer service protocols; employee training requirements; and health and safety compliance obligations applicable to the business under relevant municipal and federal regulations.

Royalties and Consideration (Regalías y Contraprestación): The compensation payable to the licensor for the trade name right — which may be structured as a percentage of gross revenues (porcentaje sobre ventas brutas), a fixed annual fee (pago fijo anual), a combination of a base fee plus a percentage, or an initial entry fee (cuota de entrada) for long-term exclusive licences. Royalty rates for trade name licences in Mexico typically range from 1% to 5% of revenues for non-exclusive licences and 3% to 8% for exclusive territory licences, depending on the strength and recognition of the trade name.

IMPI Recording (Inscripción ante IMPI): The obligation and timeline for recording the licence with IMPI under LFPPI Article 136 (applied by analogy to trade names). Recording protects the licensee's rights against third parties, including subsequent purchasers of the trade name and conflicting later registrants. The party responsible for filing and maintaining the IMPI record should be specified, along with the cost allocation for filing fees (derechos fiscales).

Termination and Post-Termination Obligations (Terminación y Obligaciones Posteriores): Clear termination grounds, notice periods, and post-termination obligations for the licensee — including immediate cessation of all use of the trade name in signage, advertising, websites, social media accounts, and customer communications; return of all branded materials; and cooperation in cancelling the IMPI licence record. Forms-legal.com provides this Trade Name License Contract Mexico as a reference for business owners and their legal advisers.