This article is written by Vasundhra Thakur, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho.
From early morning tea to the late-night snacks, everything around us comes in the distinctive form of marks, such marks carry a significance value, denotes the worth of a brand, therefore, are required to be protected in one way or another, these marks are commonly known as the Trademarks of a significant product or service that can be distinguished goods from other similar goods and services. So, what exactly is a trademark?
A trademark is a visual symbol or name in the form of a word, a label, and/or a picture that represents goods or services of a particular manufacturer/trader as distinguished from similar goods or services manufactured or dealt by other entities. A person acquires certain exclusive rights over the trade name with regards to goods and services with consistent and continuous use. Such a mark is recognized as property protected under the ambit of Trade Mark Act, 1999 along with some common law remedies.
Unlike Patents, Copyrights and Designs the Trade Marks Act puts certain restrictions on the licencing of trademarks to refrain it from misuse while safeguarding the proprietor’s rights over the mark. Since the main function of a trademark is to indicate the origin of products it was deceitful to allow others to use the mark which originates from a different source. However, with industrial development and new economic policies, the licencing of trademarks has become a necessity. While the statute provides for licensing of a registered trademark as “registered user” under conditions to safeguard the proprietor’s right and ownership over the trademark, the licencing of an unregistered mark or a registered mark is not prohibited under the Act, although it has not been recognized by law. Many large companies licence their trademarks to expand trade in different countries, whether registered or unregistered under terms and conditions which are accepted for registration under permitted use.
What is meant by sub-licencing in trademark matters
Sub-licencing of a trademark refers to a licence grant to a third party by a licensee in the form of written agreement to use the trade name, logo or specified rights with the prior consent of the Registered proprietor of the trademark.
Need for sub-licencing of a trademark– The companies grant trademark license to expand their trade and commerce to other countries in the world by providing several rights to use the name of the brand while in the expansion of trade and commerce in the process they need products which could be available within the local jurisdiction to provide a quality product with the original brand name which is cost-effective with no compromise in the quality or contents of the product. With companies headquartered at different states/countries gives such licence to the licensee to provide a further licence/sub-license with restricted rights to come in business with the local traders and vendors. Such use is considered as “permitted use” is allowed by the Trade Mark Act, 1999 under Section 2(1)(r). The permitted use consists of quality control, the distinctiveness of the mark, ownership of the mark, goodwill over the mark. All such rights are reserved by the Registered Proprietor of the Trade Mark.
Relevant legal provisions
The Trade Marks Act, 1999 does not exclusively provide for licencing/sub-licencing of a trademark but it provides for “permitted use” one ‘by registration of the third party as a registered user’ and another ‘without registration as a registered user’ by the third party but subject to certain conditions which are defined under Section 2(1)(r) of the Act as-
Section 2(1)(r) “permitted use”, in relation to a registered trademark, means the use of trademark –
(i) by a registered user of the trademark in relation to goods or services
- with which he is connected in the course of trade; and
- in respect of which in the trademark remains registered for the time being; and
- for which he is registered as a registered user; and
- which complies with any conditions or limitation to which the registration of the registered user is subject; or
(ii) by a person other than the registered proprietor and Registered User in relation to goods or services.
- with which he is connected in the course of trade; and
- in respect of which the trademark remains registered for the time being; and
- by consent of such registered proprietor in a written agreement; and
- which complies with any conditions or limitation to which such user is subject and to which the registration of the trademark is subject;
The provisions as to registered users are contained in Section 48 to 54. http://ipindia.nic.in/writereaddata/Portal/ev/TM-ACT-1999.html#s48
Is it permissible under Indian law
Section 2(1)(r) clearly states that the Trade Marks Act, 1999 provides for the use of registered trademarks by the registered proprietor, registered user and third party (any other person other than registered proprietor and the registered user). A registered proprietor of the mark may grant certain rights to the registered user or users, as the case may be or any third party by the way of a written agreement to grant non-exclusive, limited rights for the use of their trademark by controlling the quality, maintaining the goodwill and safeguarding the exclusive rights to the registered proprietor. As regards to the unregistered trademark, the courts have recognised licensing as legitimate and lawful provided proper control over the use of the mark by the licensee is maintained and care is taken to see that the ownership of a mark vests with the owner and is indicated to the public. This is called common law licensing.
Permitted use and registered use as under Section 48-54
To become a registered user one must fulfil the criteria of section 49 of the Act, where the registered proprietor and registered user shall jointly apply to the registrar of the trademark in the prescribed manner along with the affidavit as prescribed under Section 49(1)(b). The written agreement can comprise with the permission and consent by the registered proprietor to sub-licence the trademark as to fulfil the criteria of section 2(1)(r)(ii)(c). The registered proprietor of the mark may grant certain rights to the registered user or users, as the case may be or any third party by the way of a written agreement to grant non-exclusive, limited rights for the use of their trademark.
While the registered user under Section 2(1)(r)(i) can file for infringement in case of violation of trademark, the user under Section 2(1)(r)(ii) is not permitted to take proceedings against infringers as specified under Section 52 and 53 of the Act.
There are two arguments regarding the sub-licencing of a trademark in Indian Law.
First, it has not been exclusively recognised by the Act hence not capable of sub-licencing that can be inferred from Section 54 of the Act and Section 48 (2).
While another interpretation is that it is allowed to sub-licence to the third party under suitable conditions i.e. (i) with the consent of the Registered Proprietor in a written agreement,
(ii) quality control by the Registered proprietor as also mentioned in Section 2(1)(r)(ii).
In Sorrel Hospitality Pvt. Ltd vs. Nakodar Hotels Pvt. Ltd. a sub-license was executed by the petitioner to the respondent which is limited, non-exclusive, non-transferable and restricted license to use the mark “Best Western”.
It could be inferred from the above case that the current law does not restrict or prohibit sub-licensing of a trademark provided that the licensing agreement:
- does not create confusion to the general public;
- Maintains the distinctiveness of the mark;
- The goods or services continue to be associated with the proprietor of the mark.
Process of sub-licensing of trademarks
The Act does not specify any procedure for sub-licensing of trademarks but it has provided for the permitted use as mentioned above with the prior consent of the Registered Proprietor. Hence, it could be sublicensed as per the common law practice in the following two ways:
- Before signing the licensing agreement
A licensee (Registered User) while entering into the agreement with the Licensor (Registered Proprietor) shall insert in the licensing agreement a clause for sub-licensing of trademark and/or any such rights granted to the licensee.
- After signing the licensing agreement
A Registered User (Licensee) during the term of license and with the written consent of the Licensor can enter into an agreement with the sub-licensee by following the steps mentioned below:
- Consent from the registered proprietor
The Licensee needs to take consent from the Licensor in a written agreement for the grants of specified rights and use of the trademark.
- Trademark sub-license agreement
After obtaining the consent from the Licensor, the sub-licensor (Registered User) should come to terms with the sub-licensee by signing the Trademark sub-licensing Agreement.
- Acceptance by the registrar
The Registrar may give acceptance keeping in mind the terms of agreement for the grant of sub-license to the sub-licensee as a permitted use in a controlled manner where the rights of the Registered Proprietor can be protected and the misuse of the mark must be avoided.
- The Registered Proprietor should inform other registered users of the trademark if any about the sub-licensing.
A Trademark being the indicator of the origin of the product and service must be associated with the proprietor. Sub-licensing is a way to expand trade and business with other proprietors. The licencing agreement should be drafted with such care that it keeps the distinctiveness of the mark while monitoring the quality control of the product and exclusive rights over the trademark by the proprietor. Although, there is no specified definition has been provided in the trademark Act regarding sub-licensing but can be inferred from the provisions of section 2(1)(r). While it is not exclusively provided for sub-licencing, it does not restrict or prohibit sublicense of the mark.
- Indian Kanoon
- The Trademark Act, 1999
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