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Trademark License Agreement: Everything You Need to Know

You sip your favorite Nestle-brand Starbucks coffee, ready to tackle the day at your manufacturing plant. A thought suddenly comes: If Starbucks can let Nestle sell their products in stores, why can’t you let another company do the same? You can with a trademark license agreement.

Starbucks in 2018 entered into a trademark licensing agreement where Nestle allowed Nestle to distribute, sell, and market Starbucks products outside of their coffee shops worldwide. This nearly $7.2 billion deal expanded both companies’ businesses.

A trademark license agreement grants an unaffiliated party access to the use of registered or unregistered trademarks. Let’s explore how these agreements work and why you may want to enter into one.

What Are Trademarks?

Trademarks are symbols or words representing products or companies. They may be established through use or legally registered. Here are a few well-known trademarks and their companies:

  • Nike’s swoosh
  • Apple’s bitten apple
  • Facebook’s “F”

These marks help differentiate companies from their competitors. Your trademark also protects your right to use your slogan, logo, or name exclusively. You may sue someone who tries to misuse or copy your trademark.

Trademark License Agreement Benefits

A trademark licensing agreement permits another party (the licensee) to use your trademark. They’ll pay you (the licensor) for this privilege. These payments are called royalties.

Licensing agreements can positively affect companies’ finances by generating revenue. It’s perfect for producing a steady income stream.

Another reason to create a license agreement is that it may help expand your company’s customer base and market reach. That’s because your licensee can use your trademark on the different products they manufacture in various regions.

You won’t have to pay to maintain and enforce your trademark in these other regions. This will be your licensee’s job per your licensing agreement’s terms.

Trademark licensing agreements can benefit licensees, too. Licensees can save money and time on legal fees, branding, and marketing. Entering agreements with reputable licensors can also boost their sales and customer loyalty.

Remember that your licensee may use your trademark on agreed-on services or products but won’t own your trademark. You’ll remain the owner. Let’s examine what to include in a trademark agreement.

What to Include in Your Agreement

What information should your manufacturing license agreement contain? Here are key details to add to your document.

Licensee and Licensor Identification

Clearly identify the licensee and licensor in your licensing agreement. Licensees may be businesses or individuals. Some agreements feature sublicensees.

Suppose you give Business A the right to use your trademark. Business A then permits Business B to use it. Business B would be your sublicensee.

Trademark Details

Clarify whether your trademark is registered or unregistered (more on this later). Let’s say your trademark isn’t registered, but you plan to complete the trademark application soon. State this in your agreement.

Another important detail to include is how your licensee can use your trademark. Some licensees might use the trademark on their product packaging. Others may use it in their commercials or on their menus or signs.

Scope of Use

Outline your contract terms and the territories where your licensee may use your trademark. Clarify the sectors, too. This will help ensure your trademark isn’t used in a manner that will reflect poorly on your brand.

Perhaps your licensee manufactures alcoholic and non-alcoholic beverages. Your licensing agreement may permit them to include your trademark on their non-alcoholic drinks but not their alcoholic ones.

Maintaining Quality of Control

How can you ensure your licensee uses your trademark properly? State in your agreement that you will audit your licensee’s use of your trademark to protect it. This is called quality control.

Audits are important because your trademark represents your company. It’s part of your identity. Regular audits will help ensure your trademark maintains its goodwill (value not associated with your company’s financial or physical assets) long-term.

Royalty Breakdown

Mention how much your licensee must compensate you to use your trademark. Some licensors charge 20% of the profits their licensees earn from using their trademarks. Others require advance payments or minimum guaranteed amounts.

Resolving Disputes

What happens if you and your licensee experience a dispute? Include a clause in your trademark agreement explaining what both parties’ liabilities and rights are.

Let’s say your licensee defaults on your agreement’s obligations. Explain that this breach of contract will lead you to terminate the agreement.

What to Do When Creating an Agreement

Research potential licensees before entering agreements with them. This will help you choose third parties that will help your company grow.

Gather information about prospective licensees’ business reputations and positions. Other details to collect include their product scopes and portfolios. Explore a prospect’s scale of distribution and production, too (more on vetting potential licensees later).

Have you found the perfect licensee? Create an agreement that meets both parties’ needs. You both should review this agreement to ensure all essential deal points are included.

It’s better to include too many details than not enough in a licensing agreement. Don’t assume that specific terms or expectations have been agreed upon if they’re not expressly stated in your document.

Sign two agreement copies. Save one for yourself, and give the other to your licensee.

Consider also having your document notarized. Notarization will help limit legal challenges to your document’s signatures.

Hire an attorney to create your licensing agreement if you don’t feel comfortable handling this. A lawyer can create a contract that will satisfy your needs and comply with applicable laws.

Record your licensing agreement with the United States Trademark and Patent Office. Do this after negotiating and signing the contract with your licensee.

This isn’t legally required, but it lets others know you’ve given the licensee permission to use your mark. This might protect you against claims that you’ve abandoned the mark and don’t have the right to use it anymore. 

Important Consideration

Have you considered selling your trademark instead of entering a licensing agreement? Selling your mark outright will give you guaranteed payment. You’ll receive the amount that you and your buyer have negotiated.

The drawback of selling a trademark is you’ll receive payment for the mark only one time. You also can’t control what the buyer does with your creation.

Creating a licensing agreement will give you passive income as mentioned earlier. Another benefit of this approach is that you’ll retain control of how your trademark is used.

What Not to Do When Creating an Agreement

Licensors’ agreements should dictate what their licensees do with their trademarks. Avoid being overly controlling in your licensing agreement, though.

Excessive control might cause a court to view your arrangement as a franchising one, not a licensing one. Controlling your licensee’s business too much may force you to comply with federal and state franchise laws instead of contract law.

Franchise arrangements involve transferring not just trademarks but entire business systems. These systems include products. They also include the following:

  • Services
  • Training
  • Standards
  • Methods

Trademark licensing arrangements involve transferring only trademarks. Licensees have more flexibility and freedom when using trademarks.

You’ll have less stringent laws to comply with if you choose a licensing arrangement. That’s because contract law respects parties’ autonomy, intervening only to invalidate or enforce a contract. This may happen if fraud, a breach, or a mistake happens.

Franchise law is stricter since it’s designed to protect franchisees from exploitation or abuse. It aims to ensure just disclosure and dealings between parties.

Speak with an attorney regarding these two arrangements. They’ll help you determine the best option for your business’s needs and goals.

Key Tip for Licensees

Are you a potential licensee seeking an agreement with a licensor? Prospective licensees shouldn’t enter into agreements before doing their due diligence. Look for information about your target licensor via the following:

  • The United States trademark and patent office
  • “Doing business as” filings
  • Online business directories
  • State and local government agencies

Your findings may reveal critical details about the breadth and value of your target licensor’s mark. This may help you choose a mark that will most benefit your company.

License Agreement Rights

Not all trademark agreements give licensees the same rights. Your licensee’s rights will depend on how they intend to use your trademark.

Trademark agreements generally grant three kinds of rights. Let’s review them.


You may give your licensee the exclusive right to use your trademark. Nobody else can use this mark during your licensing period, not even you. Some licensors limit exclusive rights to particular areas or geographical regions.

A major benefit of this arrangement is that it eliminates competition for your licensee. This may increase their market share and profitability. It may incentivize your licensee to aggressively promote your trademark, benefiting your bottom line.


A non-exclusive right will let multiple licensees use your trademark simultaneously. Licensors can use their trademarks, too.

This option may help you expand your company’s reach. The increased market exposure might lead to fresh revenue streams.

Use this option to test various licensee partnerships without tying yourself to a single business. It’s perfect for exploring multiple market segments or rapidly expanding your brand.


Just one licensee may be allowed to use your trademark with this arrangement. You may also use the trademark but can’t sell it to someone else. Sole rights may help prevent or minimize trademark misuse or infringement (breaking the law).

Choosing a Licensee

Your trademark reflects your service and product quality, so only reliable licensees should be allowed to use it. A bad licensee may tarnish your business’s reputation. That’s why vetting prospective licensees is so crucial.

Look for a licensee who hasn’t been sued recently or earned negative reviews on sites like Google Reviews. The best licensees also have a strong market presence. Search for ones with positive press coverage, which may help boost your brand’s image.

Dependable licensees will respect your licensing agreement’s conditions and terms, complying with them consistently. They’ll also pay their agreed fees or royalties on time.

Licensees should be willing to cooperate with you to protect and enforce your trademark rights. This will help prevent misuse by another party.

Choose a licensee who’s willing to seek your approval to modify or expand your trademark scope. You don’t want your trademark used in a manner that will dilute or damage your brand. 

Registering Your Trademark

You may enter into trademark licensing agreements even if you haven’t registered your mark. This applies to marks in the process of being registered.

Is your trademark unregistered? Give your licensees details about why you own the mark. Claiming your trademark ownership is possible by providing the following information:

  • Date when you first used the trademark
  • Description of services and goods used with the mark
  • Trademark description

Registering your mark is ideal for claiming your trademark ownership and ensuring trademark protection. That’s because unregistered trademarks don’t receive the protections given to registered marks. Unregistered marks are also enforceable only in certain geographic regions.

Let’s say someone uses your trademark illegally. Sueing them for infringement may be more difficult than it would be with a registered mark.

How Do You Know You Own Your Unregistered Mark?

Suppose you’ve created a logo that you consider to be your trademark. You may not have the legal right to use this mark.

Another company might have been using this mark long before you did. This means they have the right to use it. Thoroughly search the trademark and patent office and the internet to see if your trademark is already being used before trying to use it.

How We Can Help Your Business

A trademark license agreement gives another party the right to use your business’s trademark on their products or services. This arrangement may benefit you and the other party.

The party using your mark (the licensee) may boost their sales if customers recognize your brand’s (the licensor) name on their products. You might increase your revenue if the licensee exposes your trademark to new markets.

Shield Works Precision Manufacturing can help you further boost your revenue with our assembly, warehousing, and China manufacturing services. We also advise on intellectual property rights. Partner with us today!

What to Know About Trademark Renewal in China

Doing business overseas is a massive accomplishment for businesses of all kinds. If you decide to go global and you want to enter markets such as China, you will want to make sure you have the proper paperwork in place for your trademark.

Even more so, you want to make sure that you keep up with your trademark renewal to ensure that you can continue to run your business under your preferred trademark name. If you currently do business in China or are in the process of doing so, you will want to learn more about keeping up with your trademark. Continue reading below to learn more about the trademark process and the trademark renewal process in China. 

What Is the Trademark Law in China?

China only recognizes trademarks registered within its jurisdiction, and they are a “first-to-file country,” which means that the trademarks are typically given to the first business to file the trademark application. If you have an idea that you wish to trademark, it is recommended that you start the trademark process as soon as possible. 

If you fail to trademark your business name, it leaves room for bad faith registration. It isn’t uncommon for businesses or individuals to knowingly file someone else’s trademark.

When to File Your Trademark Application

It is best to file your trademark application with the Chinese government within six months of submitting your trademark application in your home country. When you do it within six months, you can use your original priority date on your Chinese trademark. 

Chinese Trademark Proceedings

The Chinese trademark registration process takes three to six months to complete. Depending on the volume of trademarks in the queue, it can take several months before your trademark application gets assigned to an examiner. 

The Chinese Trademark Office, also known as the CTMO, tries to process their applications within six to nine months from start to finish, but don’t expect your application to be approved within that time frame. You should expect to receive approval within twelve to eighteen months. 

What Happens if Someone Files My Trademark?

As mentioned earlier, it isn’t uncommon for someone to file a trademark in bad faith. If you feel that someone else filed your trademark in bad faith, you can file an Opposition.

The opposition process takes some time to complete, averaging from twelve to eighteen months. Most clients don’t have their opposition request reviewed until about eleven months after they send in the original request. 

You can change your trademark to avoid infringement if you don’t want to go through the opposition process. Even if the original trademark were yours, it would be best to change your trademark since someone already claimed it. 

You may be able to get away with minor changes in the trademark to receive an approval, but this depends on a case-by-case basis. The Chinese trademark office may deny your request if you need to make large scale changes. If you are unsure what to do, you may want to contact a trademark attorney for more information. 

Filing a Trademark Renewal

You will need to meet renewal deadlines to ensure that your trademark does not expire. Once you have your trademark, you must renew it at least once every ten years. It typically takes about one month for you to receive your approval for the renewal.

Of course, as with any process, there are some potential delays. To ensure you receive your approval before your deadline, send your application for trademark renewal at least six to seven months before your tenth year. 

Why Should You Register Your Trademark?

It is imperative that you register your trademark in China, even if you are a well-known company. As you now know, several different entities profit off making counterfeit items. For example, a well-known shoe company, New Balance, had to fight for its trademark rights in China for ten years before it won its trademark. 

If you don’t register your name and someone else takes it, you must go through several legal proceedings to get your trademark back. This can cost you and your business thousands of dollars. To avoid this, it is best to register your name as soon as you can. 

Chinese Definition of a Trademark

A trademark sign helps consumers distinguish the services or goods of different producers. This mark can either be a specific color combination, words, or numerals. 

Additional marks used for trademarks:

  • Devices
  • Three-dimensional signs

The mark can also be a combination of all the above listed factors. In order to register your trademark in China, you must follow certain aspects. 

The Mark Cannot Be Functional

China does not accept trademark applications that refer to the model of the service or the good itself. For example, if your business sells apples, you can’t just register an image of an apple or the word “Apple.” Any general imagery is free to use by any company, so registering an apple by itself hinders other companies.

The trademark must not sabotage competitors by using similar words or symbols related to other companies. For example, if you also sell technology devices but wish to label your company as Apple or something close to that name, you could face infringement from Apple. 

The Trademark Must Be Legal

Your trademark cannot be similar to the name of an international organization or state’s flag. Your brand also cannot discriminate against anyone or any nationality. The Chinese trademark office will deny your request if your trademark indulges in exaggerated or fraudulent advertising. 

The Trademark Must Be Available for Registration

Before submitting your application for your Chinese trademark, head over to the Chinese trademark office’s website. They have a database full of all the current trademarks registered in the country.

Make sure you look up your trademark name to ensure that it is available for you to register. The database contains preliminary approvals, trademark renewals, final approvals, and modifications of all trademarks. 

The Trademark Must Be Distinctive

Similar to the trademark being a legal rule, your trademark must be distinctive. This means that you should be able to clearly distinguish your trademark from that of other services and goods. 

Where to File a Trademark in China

If you wish to file your trademark in China, you will have to do so through the Trademark Office, China National Intellectual Property Administration. You can apply directly through this organization or through the World Intellectual Property Organization. It is essential that you reach out to a registered agent if you don’t have a place of business or residency in China. 

Choose Your Product and Service Subclass

When filing your trademark, you have to file your application per class of goods or services. You will also need to submit a precise list of services or goods for which the protection needs. For example, footwear and boots fall under specific subclasses in China, so your trademark could be registered by different companies if the subclass is deemed different from yours. 

When you file your trademark, it is imperative that you ensure your trademark covers all relevant services and products. Make sure it covers relevant goods and services in all applicable subclasses, or else you risk the chance of someone legally filing your trademark under a different subclass. 

Register the Trademark in Chinese Characters

It is crucial to note that you must file your trademark in Chinese characters as well. If you don’t, you risk the chance of another company coming in and taking your brand in their native language. 

If other firms use your trademark in their locally spoken language, there is a chance you could lose customers. It could also cause you to diminish your brand value. An example of this is with Mercedes-Benz.

When they entered the Chinese market, they had difficulty translating their name, as it directly translated to “rush to die.” Make sure you work with a reputable agent to ensure that your name gets correctly translated and not misconstrued by your potential new clients. 

Benefits of Filing With the Chinese Trademark Office

As mentioned earlier, if you don’t have residency in China or a place of business in the country, you must file your trademark through a registered agent. When you file with a reputable registered agent, they can help you find the correct class and subclass to file under.

If you file through the World Intellectual Property Organization, the examiner will decide the subclass on your behalf. Although this sounds helpful, there is a chance they could miss a subclass. 

How To Choose Your Chinese Trademark Name

To avoid infringement or any miscommunication, you must register the direct translation of or the Chinese version of your trademark. There are a few different strategies you can use to ensure that you choose the correct Chinese trademark name. 

Phonetic Translation

Phonetic translations involve creating a Chinese character name that sounds like the original trademark. For example, Audi is known as Ao Di, and McDonald’s is known as Mai Dang Lao.

This strategy works best if the brand already has an established reputation amongst consumers in China. This can be a tricky strategy because of the several different dialects in China. Your trademark may directly translate as you want in one dialect, but it could mean something undesirable in another. 

Literal Translation

Literal translations tend to work if your trademark has a distinctive meaning. For example, Apple trademarked its name as “Ping Guo,” which is a literal translation for apple. Another great example is the Palmolive brand.

They trademarked their name as Zong Lan, which is a direct translation of “palm” and “olive.” If your company chooses to go this route, be sure to invest time in building the association with your trademark name and the Chinese character trademark.

Combining Literal and Phonetic

Combining literal and phonetic translations is the most effective strategy if you are able to combine the two. This strategy takes the sound of your trademark name and combines it with a positive defining trait of your brand. You can also use a positive Chinese cultural reference. 

For example, Coca-Cola goes by “Ke Kou Ke Le,” which translates to “taste and be happy.” This perfectly combines literal and phonetic translation.

To ensure that you have the right combination of the two, make sure you work with a registered agent to help you. Again, you don’t want to create a trademark name that could mean well in one dialect but could mean something not pleasant in another. 

Why Is Trademark Renewal Important?

As mentioned earlier, you want to make sure you renew your trademark once every ten years. As a general rule of thumb, you should send in your renewal application at least six to seven months before your ten-year expiration date. It is crucial that you renew your trademark because if you don’t, you risk leaving a window open for another entity to come to take your trademark. 

China Trademarks and Manufacturers

The trademark renewal process is just as important as the trademark application process because they both ensure that you retain the rights to your trademark. It is imperative that you make sure to renew your trademark once every ten years, or else you risk losing the trademark you worked so hard on.

If you wish to break into the Chinese market and you need a reputable manufacturer to help you, contact us. Our team is here to answer any questions or concerns you may have.