Trademark licensing allows a trademark owner to authorize a third party to use the mark in exchange for royalty payments. There are different types of licensing including classical licensing, merchandising, and franchising. The Trademarks Act was amended in 1999 to allow third party use of a trademark with the registered owner's consent through a written agreement without requiring the third party to be registered as a user. However, licensing agreements must still include a quality control clause to ensure consistent quality of goods and services bearing the trademark in order to maintain the connection between the mark and its owner.

2.  Trademark licensing is when one as a trademark owner authorize a 3rd party to use the
mark in course of trade in consideration of royalty over the sales of products or services
licensed under the trademark.
The licensing of a mark is to allow others to use the mark without assigning the
ownership and the same may be done for all or some of the goods and services covered.
The Trademarks Act does not mention the term 'License', the concept under the Act is
mentioned as that of a 'Registered User'.
MEANING:
TYPES OF TRADEMARK LICENSING:
Classical trademark licensing - Done under which the licensee can
manufacture products using the trademark licensed.
Merchandising – The activity of promoting the sale of goods, especially by their
presentation in retail outlets.
Franchising - A privilege or right officially granted to offer specific products or
services under explicit guidelines at a certain location for a declared period of time.

3. Trademark Licensing & Franchising: Trends in Transfer of Rights
The revolution in the new Trademarks Act, 1999, as compared to the old Trademarks
Act, 1958, regarding the expression “permitted use” includes the use of a trademark
(registered) not only by a third person as a ‘registered user’ but also use of the
Trademark (registered) by the third person with the consent of the registered
proprietor in a written agreement without registering that person as a ‘registered
user’.
Principles/Theories of Trademark Licensing:
1) Principle of Source Indication
2) Principle of Quality Control
3) Principle of ‘Connection in the Course of trade’
In Gujarat Bottling Co. v. Coca-Cola Co. (1996) PTC 89, it was held that so far
as a connection in the course of trade with the Trade Mark continues to exist
between the goods and the proprietor of the mark, licensing of Trade Marks,
registered or unregistered may be permitted.

5. Key clauses in a licensing agreement:
1. The grant clause that includes the nature of property,
the trademarks licensed, geographical territory, term of
the agreement etc. should be clearly laid down;
2. Consideration in form of royalty and the percentage to be
paid should be put down;
3. The quality control clause that includes established
standards of use of trademark must be mentioned;
4. Grounds on which the licensor can terminate the
agreement should be broadly included.

7. Quality Control: McCarthy in his book ‘Trademark and Unfair Competition’ has
observed that:
“the consumer assumes that products sold under the same trademark will be of
equal quantity regardless of the actual physical source or producer of the goods.
This means, as per the expectations of the potential consumer, the legal form of
ownership and control of a Trade Mark should not affect the final produced goods
or service. Hence, whatever be the form of quality control exercised by the
registered proprietor over the use of the Mark by the registered user, the provision
of the quality control and the expectations to provide the same, must be written in
an agreement (which is between the licensor and the licensee) as one of the
stipulated conditions.”
Is bare licensing in consonance with provisions of the 1999 Trademarks
Act?
Section 49 of the Trademarks Act prescribes a mandatory clause in the licensing
agreement regarding degree of quality control. In case of UTO Nederland BV v.
Tilaknagar Industries Ltd [Bom HC 2011], the Bombay High Court inclined to
suggest that the licence could have been rendered invalid, had the performance and
terms of the agreement suggested existence of facts which implied no quality
control.
However, section 2(1)(zb) which allows use of the mark by the registered proprietor
or the user, implies that the legislature did not intend a trademark to signify only
one source. This can be another argument in favor of bare licensing.

8. Procedure for registering as a registered user:
 Not Mandatory to get licensing agreement registered with Indian Trademark Office.
 No established procedure for registering a license, as in case of assignment of
trademark,
 The procedure to become a registered user is laid down under sections 48-54 of the
Act. Jointly make a request along with the licensor within 6 months of entering into
the licensing agreement.
 While both registered and unregistered users are permitted users, only a registered
user can initiate infringement proceedings against third parties after giving due notice
or he may join the licensor/proprietor in trademark infringement.
Cancellation of registration as registered user:
Section 50 of the Act stipulates procedure for cancellation of registration as
registered user.
Either party may apply for cancellation in writing on various grounds like:
 Misuse of the mark licensed to the registered user, or
 Misrepresentation, or
 Non-disclosure of certain material facts by the proprietor, or
 If the mark is no longer registered.

9. A quick reading of section 49(1)(b)(i) makes it evident that the
contract should have an express term regarding degree of
control exercised by the licensor over the licensee.
Moreover, section 50 also makes it incumbent on the
proprietor to ensure quality control. And under the same
section the licence is liable to be revoked if any member of the
public makes an application to the registrar stating non
existence of quality control, and the finding is confirmed by the
registrar.
Thus, as per the Indian framework on trademark, the concept
of licensing is still deeply rooted in a strong protection of the
mark by ensuring quality control.