WHAT IS LICENSING AGREEMENT?

WHAT IS LICENSING AGREEMENT?

A licensing agreement is a full or partial transfer of an intellectual and industrial right for a fee. Licensing agreements, which do not have a legal definition and regulation, fall into the category of unnamed agreement due to these characteristics. Although they are an unnamed agreements, licensing agreements, which have an intensive application area, are considered to be typicalized.

Trademark Licensing Agreements

Trademark and patent agreements, which are established by mutual agreement of wills, give rise to a continuous debt relations to the parties since they are subject to a debt that does not end with usage. As long as the agreement exists, the rights and obligations of the parties will exist.  The main obligation of the licensor is to ensure that the licensee uses the trademark within the scope specified in the agreement. It should be noted that only the authority to use is transferred, there will be no partial or complete transfer of any rights. The return performance may not be performed if it is explicitly stated in the agreement, and licensing agreements without return performance are called free license or free of charge license.

Subject Matter Of Trademark Licensing Agreements

Trademark licensing agreements are agreements under which the trademark owner grants the right to use its trademark to the licensee or company under certain conditions. The agreements set out the specific terms, duration, fees and other related provisions for the use of the trademark. Trademark agreements allow companies that own trademarks to license their trademarks to generate revenue and licensees to market their products or services by leveraging the prestige of the trademark. The agreement must be drafted and enforced in accordance with established conventions, as both parties must act in accordance with the agreement.

Patent Licensing Agreements

Patent licensing agreements are legal agreements that allow individuals or companies to use patented technology that belongs to another party. These agreements are essential for encouraging innovation and commercializing new products and services. Patent licensing agreements serve as a means for patent holders to profit from their inventions, while at the same time allowing others to use their intellectual property in exchange for payment of compensation.

What is Patent?

A patent is a legal document that grants the patent holder exclusive rights over his or her invention for a certain period of time. The patent holder has the authority to decide how to use the patent, including producing, selling or licensing the technology subject to the patent. It is common for patent holders to assign the use of their patent rights to companies or individuals. The main reason for these occurrences is that sometimes patent holders lack the resources or expertise to produce or commercialize their inventions and therefore may license the patent to others through a patent licensing agreement.

Types of Trademark and Patent Licensing Agreements

Although there are many distinctions between trademark and patent agreements, it can be said that the most basic distinctions are simple license and exclusive license.

An exclusive license is a type of license where the exclusive rights of the licensor over the license are not transferred to the licensee. Such licensing agreements allow the licensee to use the trademark or patent for a specific purpose, but the licensee cannot use it for any purpose other than its intended use. For example, a licensing agreement may grant a company the right to use a trademark or patent for a certain category of products, but it does not allow the licensee to use the patent or trademark for other products.

A non-exclusive license (simple license) is a type of license where the licensor transfers some or all of its exclusive rights in the trademark or patent to the licensee. Such licensing agreements allow the licensee to use the license in a wider area and to make other uses of the license. However, the licensee is obliged to pay a certain amount of fee for the use of the license and the term of the license is limited. Both types of licenses must contain certain conditions to protect the licensor’s rights. These conditions may include the duration of the license, the license fee, the use of the mark, and the terms of expiry of the license.

Trademark and Patent Agreements According to the Type of Licensee

Trademark and patent agreements are categorized into two types according to the nature of the parties. A individual license is a type of licensing agreement is closely attached to the individual and cannot be transferred to another person. In the business license, the licensee continues to own the license even if the business is transferred.

Contractual License (Discretionary Trademark and Patent Agreements)

Within the scope of the principle of freedom of contract, the licensor, trademark or patent owner has the right to allow others to use the product subject to the license to which it has the exclusive right. Discretionary trademark and patent agreements, on the other hand, are a type of license in which the exclusive right holder permits the use of its rights through a contract. Such agreements are concluded by the licensee at its free will and are valid only under certain conditions and limitations.

Mandatory Trademark and Patent Agreement

A mandatory license, which is one of the exceptions to the principle of freedom of contract, obliges a party to enter into a contract with legal authority. As seen in the TRIPS articles, it is stated that the mandatory licensing agreement is an appropriate prevention against abuse of intellectual property rights by right holders. In Turkish Law, since the mandatory license is subject to some legislative regulations, its establishment and implementation depends on the legislative provision.

Trademark and Patent Agreements by Field of Use

In a license to use, the licensee only has the right to use the product. They will be unable to sell or produce. In a production license, the licensee is granted only the right to produce, but not the right to use or put up for sale. The licensor will not be able to use these produced materials without purchasing them. A sales license is a license granted by a producer or owner to another person or entity to sell a product it has produced. This license is granted under conditions and for a fee set by the producer or owner and is usually valid for a certain period of time. Sales licenses are usually in the form of a written agreement and cover matters such as the use, sale, marketing and distribution of the product.

Production License

A production license is a type of license that grants the licensee only the right to produce the product subject to the license. However, the rights to use and sell the manufactured goods will not be within the scope of the rights granted by this license. This will also apply to service marks, where the licensee offers a good to consumers as part of a service. The licensor is obliged to purchase the products manufactured by the licensee.

Sale License

A sale license is a license that allows the licensee to sell goods provided by the licensor or a designated third party under the licensor’s trademark. The sales license is frequently embodied in the special types of exports and imports. If the licensee purchases the license and sells the goods under its ownership, there will be no need to establish a licensing agreement. This is because the sale of the products will exhaust the right to a trade license.

Geographically Restricted Trademark and Patent Agreement

A license may be granted for a specific geographical area. Therefore, the licensee will only have the right to use the trademark or patent in the geographical area specified in the agreement. If the trademark or patent is used outside the specified geographical area, the absolute rights of the licensor may be enforced against the licensee. The key issue here is to clearly state in the agreement that the use of the license is limited to certain geographical areas, otherwise the trademark or patent license will be valid in the whole country.

Sub License

A sublicense is when the actual licensee authorizes another person to use the trademark or patent in accordance with the licensing agreement. However, the licensee must specify its authority to grant a sublicense in the agreement or it must be understood from the content of the agreement that it has the authority to grant a sublicense. The scope of the sublicense depends on the scope of the main license and the sublicensor is the licensee. The sublicense agreement is subject to the terms of the main licensing agreement, and the sublicense agreement will also terminate if the main licensing agreement terminates.

How Licensing Agreements  are Concluded?

Pursuant to the general provisions of the Code of Obligations, in order for a licensing agreement to be concluded, an offer must be made and a declaration of acceptance must be communicated to the other party in accordance with this offer. The mutual agreement of the parties on the main terms of the agreement is also an obligation for the conclusion of the agreement.

Elements of Trademark and Patent Agreements

The essential elements of a licensing agreement are the subject matter of the license, the license fee and the licensor’s provision of the right subject to the license. In trademark and patent agreements, the scope of use subject to the license must be specified. The licensor must undertake the use of the right subject to the license and the license fee must be determined. It is also possible that the license fee may be something other than money, but it is important that mutual payment shall occur.

Form of Trademark and Patent Agreement

Since the transactions of legally registered trademarks are subject to written form, trademark and patent agreements must also be made in writing in accordance with this validity requirement, otherwise they are deemed invalid. However, in the absence of a written agreement, if the parties have substantially fulfilled their obligations, the agreement will be deemed valid and neither party will be able to plead the invalidity of the agreement.

Registration of Trademark and Patent Agreement

The registration of trademark and patent agreements in the registry is a non-compulsory transaction with a declaratory effect. However, the important point here is that the invalidity of the agreement cannot become valid with registration. Since registration is mandatory for common trademarks, the license must be registered in the trademark registry in order to grant a license. In order to register the license, a petition containing the registration number and trademark name, a notarized licensing agreement and written proof of payment of the fee are required.

Efficacy of the Registration of Trademark and Patent Agreements

Trademark and patent agreements cannot be asserted against bona fide third parties if they are not registered. However, if the license is registered, it may be asserted against the individuals who subsequently assign the license right. The rights arising from the trademark and patent agreement cannot be asserted against bona fide third parties who have taken over the license right before the registration of the license in the registry. The registration of the license may be requested by both the licensee and the grantor.

Provisions of the Agreement – Obligations of the Parties

A trademark and patent agreement is a contract in which the licensor makes its rights available to the licensee and in return, the licensee agrees to perform the performance owed by the licensor in exchange for the use of the rights. The rights and obligations between the parties may be determined as the parties wish due to their rights arising from the principle of freedom of contract, provided that they are not contrary to the provisions of the relevant law. However, as in every legal transaction, there are also obligations arising from the principle of honesty. The content of the contract must be prepared in accordance with the law and the ethical rules.

Obligations of the Licensor

A trademark and patent agreement is based on the licensor’s obligation to allow the licensee to benefit from the trademark and patent right. This obligation is not limited to permitting the use of the trademark and patent; the licensor must not prevent the licensee from using the license to the extent specified in the agreement, must not cause difficulties, must tolerate the use and must help the licensee to get rid of third parties claiming rights.

Obligation to Enable the Licensee to Benefit from the Trademark or Patent Right

The primary obligation of the licensor in a trademark and patent agreement is to undertake the obligation to enable the licensee to use the trademark or patent. Thus, the licensee does not face the right of prohibition arising from the trademark or patent right. The licensor’s obligation is limited to the terms and duration specified in the agreement. The licensor’s obligation is not limited to allowing the licensee to use the trademark or patent, but also includes the obligations not to hinder the use, not to cause difficulties, and to save the licensee from the claims of third parties. In the context of this obligation, the warranty provisions of the contract of sale may be applied to the licensing agreement by analogy.

Licensor’s Obligation to Guarantee

The main obligation of the licensor is to ensure that the licensee benefits from the trademark or patent right. For this purpose, the trademark subject to the agreement must be valid and in existence. Even if the contract between the parties does not contain a guarantee obligation regarding the existence of the trademark right, the licensor’s guarantee in this regard should be accepted.

Along with the obligations to protect and support the trademark and patent, the licensor should try to protect the market position of the licensee who acts in accordance with the agreement. However, the licensee has no obligation to protect the trademark or patent through advertising, unless expressly provided in the contract. In a simple licensee, the licensee has the right to sue for the acts of third parties that constitute infringement of the trademark or patent. This obligation applies even if it is not specified in the agreement.

Obligations of T the Licensee

When executing a licensing agreement, the license fee must be paid as a fulfillment of the obligation. However, in free licensing agreements, it may be agreed not to pay a fee for the use of the license. However, unless it is clearly understood from the wording of the agreement, it will be necessary to determine the license fee. As long as it is mutually agreed, licensees may fulfill their obligations with any goods other than money.

In licensing agreements, in addition to the primary obligations of the licensee, there may be ancillary obligations such as confidentiality, ensuring quality standards, advertising and accountability.

 CONCLUSION

Trademark licensing agreements and patent licensing agreements are an important instruments to ensure a beneficial cooperation between the parties. Trademark licensing agreements grant the licensor the right to use the trademark, while helping the licensee to increase the value of the trademark. Patent licensing agreements, on the other hand, give the patent holder the opportunity to generate income from their inventions, while helping to develop technological innovations and grow businesses.

When an agreement is prepared, it is important to specify the rights, obligations and responsibilities of the parties. For this reason, legal support during the preparation and implementation of the agreements is necessary for the validity and enforceability of the agreements by the parties.

Licensing agreements are a vital tool for the development of commercial activities and contribute greatly to the commercial activities of businesses. However, proper drafting of the agreements, protection of the mutual interests of the parties and proper follow-up and management during the implementation of the agreement are also essential.