Trademark Licensing & Franchising: Trends in Transfer of Rights

Abstract

A revolution has ushered in the field of trademarks with the change in the treatment to licensing under the new Trademarks Act, 1999. The replacement of the old Trademarks Act 1958, which referred only to ‘permitted use’ and ‘registered user’ with the new Act has enlarged the scope of the term ‘permitted use’. The effect, which has sought to be achieved with this change is, that now trademarks could be licensed to third parties without the need to register the licensee as the ‘registered user’. The requirement that a license be recorded with a Government Agency, i.e. the Trademark Office has been done away with and the failure to registration does not render a license invalid. Over the past fifty years, the law governing trademark licensing has changed drastically in response to the pressures of new commercial methods of distributing goods and services. With the gradual change in approach towards licensing, it slowly began to be accepted and now is in fact encouraged as a commercial phenomenon in the law. One cannot deny that licensing in trademarks has become a regular commercial practice. But at the same time the law has provided for fulfillment of certain conditions, viz. ‘quality control’ or ‘connection in course of trade’, which need to be complied with as the trademark holder decides to enter into a license arrangement. And it is suggested that a trademark owner should avoid an exclusive license because it may be read as an assignment. Also, even though the system of keeping records of registered users of the trademark is no more prevalent, registration continues to carry additional advantages for a trademark owner under the current scheme of the Act also. Section 53 of the Indian Trademark Act, 1999 creates an incentive for registration by depriving the unregistered licensees of the right created by virtue of Section 52