The licensing of a brand has many potential benefits for retailers including the opportunity to generate an additional cash flow and to further promote the brand when entering a new market with costs being paid by the licensee.
Nick Fenner, a brand protection specialist at national law firm TLT explains what can, and does, go wrong when retailers are looking to license a brand and how brand owners should seek to protect themselves.
Trade mark protection
Brand owners preparing to license their brand will often need to expand the scope of their existing trade mark protection to cover new territories or a new range of goods by completing new applications. This process needs to be started early on because if negotiations over a licence break down, it is ownership of the trade mark that will protect the retailer against a proposed licensee who might seek to exploit the opportunities under discussion for their own purpose or they might try to block deals with other licensees. It is important that these costs are factored into the business case for the licence deal.
Once a suitable licensee has been identified and the licensed product range agreed, the brand owner will need to put in place a suitable licence agreement. This agreement will deal with the commercial terms and will also protect the brand against the risk of damage in the event that the licensee or licensed products fail to live up to expectation.
One of the main risks to the reputation of the brand is when discounted branded goods are promoted and sold by licensees in a way that conflicts with the brand owner’s established retail operations and market position. The brand owner’s ability to control discounting and prevent cross border sales, including through online channel are heavily restricted by EC competition law so those types of restriction on licensee should be legally cleared.
Brand owners will need to retain approval over the quality and style of the licensed products ensuring that there is a sample approval process for all new products and changes before they are put on the market.
The agreement with the licensee should also ensure that licensees are adhering to the same high standards of ethical sourcing and working conditions as the brand owner insists upon for its own contract manufactures. Brand owners are unlikely to be able to escape criticism and damage to the brand if they have taken no steps to check the standards at the premises where the goods are actually manufactured. Brand owners should therefore always try and ascertain where goods are manufactured and reserve the right to enter and inspect premises.
For more information please contact Nick Fenner, on 020 3465 4232 / Nick.Fenner@TLT solicitors.com. Visit www.TLTsolicitors.com