Experts have raised concern over the issuance of trademark licences to third parties, warning that the privilege sometimes comes with challenges capable of ruining any business model.
The warning came from Femi Olubanwo, Olumide Osundolire and Chinasa Uwanna of Banwo and Ighodalo’s Law Firm.
“As much as issuing trademark licences can be advantageous to business, it sometimes comes with some lasting issues that are capable of ruining any business/business model,” the experts said.
The extant law on trademarks in Nigeria is the Nigerian Trademarks Act, Cap T13, Laws of the Federation of Nigeria 2004, Financial Street gathered.
According to the experts, the TMA defines a trademark as “a mark used or proposed to be used in relation to goods to indicate a connection in the course of trade between the goods and some persons having the right, either as proprietor or as a registered user, to use the mark, with or without any indication of the identity of the person.”
Trademark licensing simply means an arrangement where a trademark owner (licensor) grants permission to another (licensee) to use that trademark on mutually agreed terms and conditions, they added.
“By licensing the trademark, the registered proprietor allows others to use the mark without assigning the ownership to them.
“The proprietor can also put other limitations on the use of the mark through the terms that he puts into the licensing agreement. Thus, a mark will be infringed upon if it is used by a person, other than the proprietor or a registered user, in a similar or identical class of goods in such a way as to be likely to deceive or cause confusion or indicate some connection between the proprietor or registered user and the alleged infringing user,” the experts said.
They, however, highlighted that granting of trademark licences to a third party could be advantageous to a business by way of bringing in additional income, leading to business expansion, brand recognition through advertising as well as making it easier for product penetration into new markets.
Some disadvantages of issuing trademark licences, the experts also highlighted, include trademark theft, reputation threat and reliance on the quality of the trademark.
According to them, it is of utmost importance to incorporate clauses on quality checks of goods or services in the licence agreement.
“Although the terms of every license are different and may be freely negotiated between the licensor and licensee, all licenses must at least include certain terms to be valid,” the experts advised.
They further provided insight on some of the licensing agreements to be noted before executing trademark licensing.
These include details of both parties, type of license being offered, any trademarks being included in the agreement, permitted use of the trademark, geographic region where the licensee is to operate, products or services the licensee may offer with the registered trademark.
Others, according to them, involve provision for quality control, dispute resolution clause, duration clause, remuneration /royalty clause and effective dates, the expert stated.
“Trademark licensing can be beneficial because both parties profit. It can also be detrimental if a licence is over-extended or one of the parties acts in bad faith.
“It is noteworthy, however, that the only possible restriction to the registration of a trademark licence agreement in Nigeria is that the registrar can refuse it on the ground that such registration will facilitate trafficking in the market,” the experts added.
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