What are the legal requirements for a trade mark licence under the Trade Marks Act 1994?

Under sections 28 to 31 of the Trade Marks Act 1994, a trade mark licence may be granted in respect of some or all of the goods or services for which the trade mark is registered, and it may be limited as to the territory in which, or the manner in which, the mark may be used. A licence may be exclusive or non-exclusive. Section 28(2) of the Trade Marks Act 1994 provides that a licence must be in writing and signed by or on behalf of the grantor (the trade mark proprietor) to be registerable at the UKIPO. Critically, sections 28 to 31 of the Trade Marks Act 1994 require that a licence must contain adequate quality control provisions: if a licensed trade mark is used in relation to goods or services without control by the proprietor over the quality of those goods or services, the mark may become liable to revocation on the grounds that it has become deceptive or that the proprietor has failed to ensure quality standards. This makes quality control provisions not merely commercially desirable but legally essential.

What is the difference between an exclusive and non-exclusive trade mark licence in England and Wales?

A non-exclusive trade mark licence is the most common arrangement: the proprietor (Licensor) grants the licensee the right to use the trade mark, but retains the right to use the mark itself and to grant identical licences to as many other parties as it wishes. A sole licence means the Licensor grants rights only to the named Licensee and will not grant equivalent licences to any other third party, but the Licensor itself retains the right to use the mark. An exclusive licence is the most restrictive for the Licensor: neither the Licensor nor any other party may use the trade mark in the licensed territory and for the licensed goods or services during the licence term. Under section 31 of the Trade Marks Act 1994, an exclusive licensee has the right to call on the trade mark proprietor to bring infringement proceedings, and if the proprietor fails to do so within two months, the exclusive licensee may bring the proceedings itself. Non-exclusive licensees do not have this right.

Why are quality control provisions essential in a UK trade mark licence?

Quality control provisions are legally essential in any trade mark licence governed by the Trade Marks Act 1994. A trade mark serves as a badge of origin — it tells consumers that goods or services bearing the mark come from a single source (or from sources under common control) and that they can expect a consistent level of quality. If a trade mark is licensed without the proprietor maintaining any control over the quality of the goods or services sold under the mark, the mark risks revocation on the grounds that it has become deceptive (section 46(1)(d) of the Trade Marks Act 1994) or that it has become a bare licence, where the mark no longer functions as a guarantee of quality. The English courts have made clear that a licence agreement must give the proprietor the contractual right to exercise quality control — it is not sufficient simply to say that the proprietor trusts the licensee. A well-drafted trade mark licence will specify the quality standards in detail (or by reference to separate specifications), require the licensee to submit samples for approval, give the licensor inspection rights, and provide for termination if quality standards are not maintained.

Should a trade mark licence be registered at the UKIPO?

Registration of a trade mark licence at the UK Intellectual Property Office (UKIPO) is not mandatory for the licence to be valid between the parties, but it is strongly advisable. Section 25 of the Trade Marks Act 1994 provides for the registration of licences on the register of trade marks. Registration has several practical advantages: it provides constructive notice to third parties of the licensee's rights; it protects the licensee against a subsequent assignee of the trade mark who might otherwise take the mark free of the licence; it establishes a clear public record of the licensed use; and it facilitates enforcement of the trade mark against infringers, since a registered licensee can join infringement proceedings. Failure to register can also affect whether a court will award damages or an account of profits for infringement during the period before registration, under section 25(3) of the Trade Marks Act 1994. The application to register a licence at the UKIPO is made using Form TM50, and the current fee is £50.

How should royalties be structured in a UK trade mark licence agreement?

Royalties in a trade mark licence agreement can be structured in several ways depending on the nature of the licensed goods or services and the commercial arrangement between the parties. The most common structures are: (1) a fixed annual licence fee, payable regardless of sales volume — commonly used for simple licences or where sales volumes are predictable; (2) a percentage royalty on net sales, payable quarterly or annually in arrears — the most common structure in brand licensing, typically ranging from 5% to 15% of net sales depending on the industry and the strength of the brand; (3) a combination of a fixed fee and a percentage royalty, providing the licensor with a guaranteed income floor while also sharing in the upside if sales exceed expectations. In any royalty arrangement, the agreement should clearly define: what constitutes net sales (the basis of calculation, after which deductions are permitted); the reporting obligations of the licensee; the audit rights of the licensor; and the consequences of late payment. A minimum annual royalty guarantee is often included to ensure the licensor receives a minimum return regardless of the licensee's performance.

What happens to a trade mark licence if the trade mark is sold to a new owner?

When a trade mark is assigned to a new proprietor, the position of any existing licensees depends on whether the licence has been registered at the UKIPO and whether the assignee had notice of the licence. Under section 25 of the Trade Marks Act 1994, a registered licence binds successors in title: a new proprietor who acquires the trade mark takes it subject to any licence registered before the date of the assignment. An unregistered licence, however, may not bind a new proprietor who acquired the trade mark without notice of the licence. This is one of the principal reasons why licensees should register their licences at the UKIPO. Even if the licence is not registered, an assignee who acquires the trade mark with actual knowledge of the licence may be bound by it in equity, but this requires proof of actual knowledge. A well-drafted trade mark licence agreement should include a provision requiring the licensor to notify the licensee of any proposed assignment of the trade mark, and to ensure that the agreement of any assignment includes a requirement that the assignee acknowledge and be bound by existing licences.

Trade Mark Licence Agreement (UK) — United States

Grant or obtain permission to use a registered trade mark in England and Wales with a legally compliant Trade Mark Licence Agreement. Whether you are a brand owner licensing your mark to a distributor, manufacturer, or retail partner, or a business seeking to use an established brand, a properly drafted trade mark licence agreement protects the brand's distinctiveness, establishes quality control obligations required by the Trade Marks Act 1994, defines the royalty structure, and sets clear boundaries on how the mark may be used. Our template complies with sections 28 to 31 of the Trade Marks Act 1994 and includes provisions for UKIPO registration.

What Is a Trade Mark Licence Agreement (UK)?

A Trade Mark Licence Agreement is a legally binding contract used in England and Wales under which the registered proprietor of a trade mark (the Licensor) grants another party (the Licensee) the right to use that trade mark in connection with specified goods or services within a defined territory, in exchange for royalties or a licence fee. A trade mark licence does not transfer ownership of the mark — the Licensor retains all rights of ownership, and all goodwill generated by the Licensee's use of the mark belongs to and inures to the benefit of the Licensor.

In England and Wales, trade marks are protected and registered under the Trade Marks Act 1994, which implements the EU Trade Marks Directive (as retained in UK law following Brexit, with modifications). A registered trade mark gives its proprietor the exclusive right to use the mark in relation to the goods and services for which it is registered, and the right to prevent others from using identical or confusingly similar signs. A trade mark licence is the legal mechanism by which the proprietor authorises another party to use the mark without committing the civil wrong (and in some cases criminal offence) of trade mark infringement under section 10 of the Trade Marks Act 1994.

Trade mark licensing is a major driver of commercial value. Well-known brands generate significant revenue through licensing arrangements across a wide range of industries including fashion, food and beverage, entertainment, sport, technology, and franchise businesses. Brand licensing allows trade mark owners to expand into new markets, territories, or product categories without the cost and risk of direct market entry, while simultaneously generating royalty income.

The Trade Marks Act 1994, specifically sections 28 to 31, governs trade mark licences in England and Wales. These provisions set out who may grant a licence, the types of licence that may be granted, the rights of exclusive licensees to bring infringement proceedings, and the critical requirement for quality control provisions. Section 25 of the Trade Marks Act 1994 governs the registration of licences at the UK Intellectual Property Office (UKIPO), which provides public notice of the licence and protects the licensee against the risk of the trade mark being assigned to a new proprietor without notice of the licence.

When Do You Need a Trade Mark Licence Agreement (UK)?

A Trade Mark Licence Agreement is needed whenever a trade mark owner wishes to authorise another party to use their registered trade mark in connection with goods or services, or whenever a business wishes to use another party's established brand. The agreement is essential across a wide range of commercial and creative contexts in England and Wales.

The most common situations requiring a trade mark licence agreement include: a brand owner licensing its trade mark to a manufacturer or distributor who will produce and sell goods bearing the brand; a franchise arrangement, where the franchisor's trade mark forms a central element of the business system being licensed to franchisees; a retail collaboration or co-branding arrangement, where two brands are used together on goods or services; a celebrity or athlete licensing their name or image (which may be protected as a trade mark) to a product manufacturer; a sports club licensing its crest and branding to merchandising companies; a technology company licensing its brand to authorised resellers or service partners; and a business expanding into new territories by licensing its UK trade mark to a local distributor or joint venture partner.

The agreement is equally important for the Licensee, who needs certainty about the scope of the rights it is being granted, the quality standards it must meet, and the protection it has against the Licensor terminating the licence without adequate notice. A Licensee who uses a trade mark without a written licence has no contractual protection against the Licensor withdrawing permission and claiming trade mark infringement.

A written trade mark licence agreement is also essential for maintaining the validity of the trade mark itself. Under the Trade Marks Act 1994, a trade mark that is not being genuinely used in the UK for five or more years may be vulnerable to revocation on grounds of non-use. A licence agreement creates a documented record of genuine use of the mark under the proprietor's control, which can be important evidence in revocation proceedings.

What to Include in Your Trade Mark Licence Agreement (UK)

A well-drafted Trade Mark Licence Agreement for use in England and Wales should contain several critical provisions that reflect both the commercial nature of the arrangement and the specific requirements of the Trade Marks Act 1994.

The description of the Licensed Mark must identify the trade mark with precision. For a registered trade mark, this means specifying the mark as registered at the UKIPO (including whether it is a word mark, a figurative mark, or a combined mark), the UKIPO registration number, and the Nice Classification classes in which it is registered. The agreement should also specify the licensed goods or services — the scope of the licence should match or be narrower than the registered specification, to avoid any argument that the licence covers unregistered uses.

The quality control provisions are the most legally critical element of any UK trade mark licence. Under sections 28 to 31 of the Trade Marks Act 1994, a trade mark licence must give the proprietor adequate rights to control the quality of goods or services supplied under the mark. A bare licence — one without any quality control provisions — risks the trade mark becoming revocable on the grounds that it has become deceptive or that the proprietor has abandoned control. Quality control provisions should specify the standards that apply, require the licensee to submit samples for approval, give the licensor inspection rights, and provide for suspension or termination of the licence if quality standards are not met.

The royalty provisions should specify the royalty structure (fixed fee, percentage of net sales, or a combination), the calculation basis for net sales (and any deductions permitted), the reporting obligations of the licensee, the payment timing, and the licensor's audit rights. A minimum annual royalty guarantee provides the licensor with a floor of income and gives the licensor a right to terminate if the licensee is not performing sufficiently well.

The exclusivity clause must clearly state whether the licence is exclusive, sole, or non-exclusive. An exclusive licensee under English law has the right to bring infringement proceedings under section 31 of the Trade Marks Act 1994 if the proprietor fails to act, which is a significant commercial advantage.

The goodwill provision must confirm that all goodwill generated by the licensee's use of the trade mark inures to the benefit of the licensor. This is fundamental to trade mark law: the mark must remain an indicator of the proprietor's goods or services, and any goodwill built up through the licensee's use must belong to the proprietor, not the licensee. Without this provision, the licensee might attempt to claim that it has acquired rights in the mark by use.

What Is a Trade Mark Licence Agreement (UK)?

When Do You Need a Trade Mark Licence Agreement (UK)?

What to Include in Your Trade Mark Licence Agreement (UK)

Frequently Asked Questions

Related Documents

IP Assignment Agreement (UK)

Software Licence Agreement (UK)

Non-Disclosure Agreement (NDA) (UK)

Franchise Agreement (UK)

Distribution Agreement (UK)