Trademark License Agreement Template

In plain language: Identifies the licensor and licensee as legal entities, states their relationship, and records the commercial background that motivates the agreement.

Common mistake: Using a trade name instead of the registered legal entity name for either party. If the licensor's corporate name differs from the trademark owner of record at the trademark office, the license may not be enforceable against the mark.

In plain language: States the exact rights being granted — whether exclusive or non-exclusive, the permitted field of use, territory, and any restrictions on how the mark may be used.

Common mistake: Omitting the field of use. A license with no field-of-use restriction is effectively unlimited — the licensee could use the mark in unintended industries, damaging the brand and creating conflicts with other licensees.

In plain language: Lists each trademark covered by the agreement — including registration numbers, filing jurisdictions, and whether unregistered common-law marks are included.

Common mistake: Referencing a mark by name only without the registration number. If the licensor owns several variants, the licensee may claim broader rights than intended — particularly if a newer or broader registration exists.

In plain language: Defines the geographic scope of the license and confirms whether the licensor is prohibited from granting competing rights to others in the same territory.

Common mistake: Granting a worldwide exclusive license without carving out territories where the licensor already has existing licensees. Overlapping territorial grants expose the licensor to simultaneous breach claims from multiple licensees.

In plain language: Sets the royalty rate or fee structure, calculation basis (net sales, gross revenue, or per-unit), payment frequency, reporting obligations, and audit rights.

Common mistake: Defining 'net sales' without specifying which deductions are permitted (returns, discounts, shipping, taxes). Licensees interpret 'net' broadly; licensors interpret it narrowly — the gap can represent significant royalty revenue.

In plain language: Requires the licensee to maintain brand standards set by the licensor, submit samples for approval before launch, and allow the licensor to inspect products or services bearing the mark.

Common mistake: Including no quality control clause at all. A trademark license without quality controls is a 'naked license' — courts have held that naked licenses cause the trademark owner to lose trademark rights entirely through abandonment.

In plain language: Confirms that all goodwill generated through the licensee's use of the mark inures exclusively to the licensor, and that the licensee acquires no trademark rights through the licensed use.

Common mistake: Omitting this clause because it seems obvious. Without it, a licensee who has used the mark for several years may argue they have acquired a common-law interest in the mark — particularly in jurisdictions that recognize use-based trademark rights.

In plain language: Specifies whether the licensee may grant sublicenses to third parties or assign the agreement, and if so, under what conditions and with whose consent.

Common mistake: Silently permitting sublicensing by not addressing it. Without an express prohibition, some courts have found that sublicensing is implicitly permitted under a broad license grant — allowing an unauthorized third party to use the mark.

In plain language: States the initial term, any automatic renewal mechanism, and the specific events that allow either party to terminate — including breach, insolvency, or failure to meet minimum royalties.

Common mistake: No minimum royalty or performance threshold tied to termination. If the licensee generates zero sales for two years but technically complies with reporting obligations, the licensor is locked into an exclusive grant with no revenue and no exit.

In plain language: The licensor warrants it owns the mark and has authority to grant the license; the licensee warrants it will not infringe third-party rights. Both parties agree to indemnify the other for breaches of their respective warranties.

Common mistake: Licensor warranting the mark is free from all third-party claims. Trademark ownership is frequently disputed — a blanket warranty of clear title exposes the licensor to indemnification liability if a prior-rights claimant emerges.

A trademark license agreement is a legally binding contract in which a trademark owner (the licensor) grants another party (the licensee) the right to use the licensor's registered or common-law trademark under defined conditions. It specifies the permitted territory, field of use, term, royalty structure, quality control requirements, and termination triggers. Without it, any commercial use of the mark by a third party is unauthorized and constitutes infringement.

A trademark license grants temporary, conditional permission to use the mark while the licensor retains ownership. A trademark assignment permanently transfers ownership of the mark to the assignee, who becomes the new registered owner. Licensors who want to generate royalty revenue while maintaining control of their brand use a license; parties who want a clean, permanent transfer of the mark use an assignment.

In the US and Canada, trademark license agreements are not required to be registered, but recording them with the trademark office is advisable for licenses of significant commercial value. In the EU and UK, recording the licensee's rights with the relevant trademark office provides constructive notice to third parties and strengthens the licensee's position in infringement proceedings. Some countries — including China and several Middle Eastern jurisdictions — require recordal of licenses as a condition of enforceability.

A trademark license with no quality control provisions is typically treated as a naked license, which is legally invalid in the US and most common-law countries. Courts have held that naked licenses result in abandonment of the trademark, meaning the licensor can lose all rights to the mark entirely. Every trademark license agreement should include at minimum a quality standards schedule and a right for the licensor to inspect products or services bearing the mark.

Industry royalty rates typically range from 2% to 15% of net sales, depending on brand strength, exclusivity, territory, and field of use. Consumer goods and fashion brands commonly license at 5–12%; industrial and B2B marks tend to fall in the 2–5% range. Character and entertainment licenses can reach 15–20% for well-known properties. A flat per-unit fee or annual minimum is often paired with the percentage royalty to guarantee a floor of income regardless of sales performance.

Only if the trademark license agreement expressly permits sublicensing. Without an explicit grant, the licensee has no right to sublicense the mark, and any such sublicense would be void. If sublicensing is permitted, the agreement should require the licensee to flow down the same quality control obligations and obtain the licensor's written consent before granting each sublicense.

An exclusive license prohibits the licensor from granting any other party the right to use the same mark in the same territory and field of use during the term. Use an exclusive license when the licensee is making a significant investment in the brand — such as building a distribution network or manufacturing infrastructure — and needs assurance that the licensor will not undercut them with a competing licensee. Include a minimum sales threshold or minimum royalty floor to protect the licensor if the licensee underperforms.

In the US, Section 365(n) of the Bankruptcy Code allows a trademark licensee to retain its license rights if the bankrupt licensor rejects the agreement, provided the licensee continues meeting its obligations. However, the Sunbeam Products decision (7th Circuit) created uncertainty for licensors. In Canada and the UK, similar protections exist but vary by jurisdiction. Both parties should include a termination-upon-insolvency clause and consider whether the license constitutes an executory contract under applicable bankruptcy law.

For straightforward domestic non-exclusive licenses with a single licensee and a simple royalty structure, a high-quality template is generally sufficient as a starting point. Legal review is strongly recommended when the license is exclusive, covers multiple jurisdictions, involves significant royalty value, or is part of a franchise or co-branding arrangement. A 1–3 hour attorney review typically costs $400–$1,200 and is a sound investment relative to the risk of trademark abandonment or a royalty dispute.