An agreement of license between a trademark owner and a manufacturer is an official document that states that the manufacturer of a product has the permission to manufacture the product by the company or the individual who has trademarked it. However, the trademark owner gets to choose the licensing terms of this agreement.
Let us understand the purpose of this document with an example: If ABC Industries wants to produce a simple mechanical component, which will be useful for a particular machine, but Mr. M already has the trademark licensing for that particular mechanical component. In this case, ABC industries will have to get into an agreement of license with Mr. M, and draft an agreement stating that ABC Industries only has the rights to produce the said mechanical component, for a said client, and in specific numbers only.
This agreement is a crucial piece of evidence – which is also valid in the court of law – to ensure that the trademarked component is not being copied and produced illegally.
Let us now take a look at the details included in this agreement:
- Names and addresses of both the trademark owner and the manufacturer
- Date of the agreement
- A statement to ascertain the trademark owner and his rights with the product
- Details of permission given by the trademark owner to the manufacturer (how many products, how many consignments, timelines, etc.)
- Details of where the product will be produced and how much will it priced
- A clause stating that product must contain the trademark owner’s name on it
- A clause stating that the trademark owner will have the right to reject the product if it doesn’t meet the quality standard
- A clause stating that though manufactured by another person, the ownership of the product will be with the trademark owner
- Details of the royalty to be paid to the trademark owner
- Contract timelines
- The consequences of breach of contract (if it so happens) and the next course of action
- The manufacturer’s registration details
- The consequences of a dispute
- Contract termination details
The agreement then has to be signed and approved by both the trademark owner and the manufacturer before it becomes legally valid.