Trademark licensing can be a useful tool for monetizing a brand and its associated trademarks. This presentation provides a high level overview of what brand owners should keep in mind when licensing their trademarks.

1. Trademark Licensing 101: Fundamentals for
Brand Monetization & Protection
Presented to Licensing Executives Society (LES) Toronto Chapter
October 30, 2014
Lorraine M. Fleck

2. Outline
• It’s all about control.
• License only when required.
• Get it in writing - even when it’s your (business’) relatives.
• Licensing problems can be relative.
• Give notice.
• Set the standard.
• Train your licensees.
• Keep an eye on the situation.
• Sometimes you just have to end things.
• Beware the “accidental franchisor”.

3. It’s all about control
• Single source theory and distinctiveness.
• Distinctiveness is required to acquire, maintain and enforce trademark
rights.
• Distinctiveness means some aspect of the trademark is distinct from
other providers of identical/similar goods and/or services.
• Single source theory is a form of consumer protection.
• Single provider of goods/services; “know your supplier”.
• Canadian Trademarks Act (TMA) codifies common law that a
trademark functions as a source identifier of goods and/or services.
• Distinctiveness essential to such identification.

4. It’s all about control
• Why does this matter?
• Distinctiveness is required to acquire, maintain and enforce trademark rights.
• Trademark rights are “use it or lose it”.
• TMA subs. 50(1):
“For the purposes of this Act, if an entity is licensed by or with the authority of
the owner of a trade-mark to use the trade-mark in a country and the owner
has, under the licence, direct or indirect control of the character or quality of
the wares or services, then the use, advertisement or display of the trade-mark
in that country as or in a trade-mark, trade-name or otherwise by that
entity has, and is deemed always to have had, the same effect as such a
use, advertisement or display of the trade-mark in that country by the owner.”

5. It’s all about control
• Control allows trademark owners to grant permission to
others to use their marks in association with goods and/or
services without losing their rights.
• The mere appearance of control is insufficient.
• Beware of “naked” or “bare” licensing.
• Control crucial for enforcement or defence of trademark
rights.

6. License only when required
• License not required for “conduits”.
• TMA s. 50 does not automatically apply to distributors,
wholesalers, retailers.
• Sometimes a license may be required e.g. when the retailer is more
than a mere conduit. Look at the relationship and how that
relationship may be perceived by a third party.
• E.g. when a license may be required for a distribution/retailer.
• Franchised restaurant, car dealership.
• E.g. when a license is usually not required.
• Retailer, television program.

7. Get it in writing - even when it’s your
(business’) relatives
• TMA s. 50 does not require written license.
• Best practice: have a license agreement to act as a
reference document - paper the deal and set out the
rights and obligations of both parties.
• Even more critical when licensing between related
companies.
• While a court may rule that there was a license relationship, best
to paper the deal and not take chances.
• Which leads to…

8. Licensing problems can be relative
• TMA s. 50 does not specify that the ownership/control of a
licensee by a licensor is sufficient to establish quality control.
• Exception for related companies in respect of pharmaceutical
distribution (TMA s. 51).
• Sometimes quality control can be inferred.
• Best practice: have a written license with robust control
provisions regardless of whether licensee is a “relative”.
• Can be critical in enforcement scenarios.
• May require an agent to exercise required control if licensor is an
intellectual property holding company.

9. Give notice
• TMA does not require notice of a license. Such notice creates a
rebuttable presumption.
• TMA subs. 50(2):
“For the purposes of this Act, to the extent that public notice is given of
the fact that the use of a trade-mark is a licensed use and of the identity
of the owner, it shall be presumed, unless the contrary is proven, that
the use is licensed by the owner of the trade-mark and the character or
quality of the wares or services is under the control of the owner.”
• E.g. of notice: “TRADEMARK is a trademark of OWNER’S NAME, used
under license”.
• Often such notice is required as part of a license agreement.

10. Set the standard
• TMA s. 50 requires trademark owner to have direct/
indirect control of the quality of the goods/services under
license.
• License agreement should specify that the goods/services
must confirm to the owner’s standards or specifications.
• Standards/specifications can be in a separate document.
Allows for flexibility when updating/improving goods/
services.
• May need to supply components for requisite control.

11. Train your licensees
• Key when offering services under license.
• May apply to goods as well (e.g. quick serve restaurants).
• Institute mandatory training e.g. McDonald’s Hamburger
University.
• Those enforcing the standards should partake in such
training.
• Provide regularly updated operations/standards manuals.

12. Keep an eye on the situation
• Inspections and monitoring are key to avoiding “naked” or “bare”
licensing.
• Specify inspection rights in the license agreement to ensure
compliance with trademark owner’s standards.
• Considerations:
• Timing of inspections (how often, how much notice).
• Inspect samples.
• Inspect premises.
• Monitor returns of products, customer feedback to flag possible
quality control issues.

13. Sometimes you just have to end things
• Right to terminate license allows licensor to maintain quality
control.
• Licensor should maintain right to terminate license if:
• Licensee does not adhere to quality control standards.
• Licensee does not allow inspections permitted under the
agreement.
• Licensee under reports royalties due to licensor.
• Specify license term and renewal rights.
• Consider whether automatic renewal appropriate.

14. Beware the “accidental franchisor”
• General definition of a franchise:
• Grant rights to operate a business in association with
franchisor’s trademarks;
• Direct or indirect, initial or ongoing, payment of money by the
franchisee;
• Significant control/assistance by the franchisor in the
franchisee’s operation.
• Board definition can capture many licensed relationships.

15. Beware the “accidental franchisor”
• Why important?
• Provinces with franchise disclosure requirements requires
franchisees to receive a “disclosure document” before paying
royalties/signing agreement.
• Failure to disclose allows franchisee to terminate agreement,
recover royalties and any losses.
• Sums and damage to franchisor’s reputation can be significant.

16. Inspiration Partners™
Lorraine M. Fleck
Partner, Lawyer & Trademark Agent
401 Bay Street
Suite 1220A, Box 88
Toronto, ON
M5H 2Y4
Tel. 416-855-0111 x 221
Fax 647-689-2870
Email lorraine@fleckchumak.com
www.fleckchumak.com
Twitter: @FleckChumak | @lorrainefleck