Brand licensing is a critical strategy for brand expansion and market penetration, yet the legal complexities behind it are significant and crucial. From pre-licensing preparations to post-licensing management, each step is filled with challenges and opportunities.  This article delves into the legal issues to focus on during the brand licensing process, analyzing the key points, potential risks, and considerations at each stage in China.

Pre-Licensing: Careful Planning to Lay a Legal Foundation

1.    Qualification Review and Contract Construction

Before engaging in brand licensing, the first task is to review the qualifications of both the licensor and the licensee. The licensor must be the legal owner of the registered trademark, while the licensee should have the capacity to operate the related goods or services. This step is fundamental to ensuring the legality of the brand licensing. Following this, constructing a detailed and legally binding licensing agreement is crucial. The contract should clearly define the type of license (e.g., exclusive license, sole license, or non-exclusive license), the scope of the license (including territory, licensed goods/services, duration, and method), the rights and obligations of both parties, and key terms such as breach of contract. Every detail of the contract must comply with the requirements of the Trademark Law and relevant legal regulations to ensure its legality and validity.

2.    Risk Assessment and Control Strategies

Prior to licensing, conducting a thorough assessment of the licensee's business situation, brand management capabilities, and market reputation is essential. This step helps identify potential risk points and formulate corresponding control strategies. For example, if the licensee has a poor business record or lacks brand management capabilities, the licensor should carefully consider whether to proceed with the licensing or include contractual provisions to restrict the licensee's behavior. Additionally, the licensor should explicitly prohibit the licensee from registering or using trademarks similar to the licensed trademark to prevent brand dilution or confusion. This clause should be clearly stipulated in the contract and form the basis of the cooperation.

During Licensing: Strict Execution to Ensure Rights Are Realized

1.    Contract Recordal and Publication Procedures

According to the China Trademark Law, trademark license should be filed and recorded with the National Intellectual Property Administration; without recordal, the trademark license provides no defence against a third party using the mark in good faith. This step is crucial for ensuring that the contract is enforceable against third parties in good faith. Therefore, the licensor should promptly handle contract filing procedures and monitor the progress and outcome of the filing.

2.    Quality Control and Brand Maintenance Mechanisms

During the licensing period, the licensor should establish strict quality control mechanisms to ensure that the goods or services bearing the trademark by the licensee meet the brand’s image and standards. This step is vital for maintaining brand value and market reputation. Simultaneously, the licensor should closely monitor market dynamics, promptly detect and stop any infringement actions. By establishing brand maintenance mechanisms, the licensor can ensure that brand rights are protected and take legal action if necessary to safeguard its interests.

3.    Sub-Licensing Management and Hierarchical Control

If the contract authorizes the licensee to sub-license, the licensor should strictly review the sub-licensee's qualifications and the contract terms. This step is crucial to ensure that the brand value is not compromised.

Post-Licensing: Ongoing Supervision to Ensure Long-Term Brand Success

1.    Contract Performance and Termination Management

When the licensing agreement expires or is terminated early, both parties should follow the agreed-upon procedures, such as executing a termination agreement and canceling the filing. This step is key to ensuring a smooth transition of the licensing relationship.

2.    Brand Promotion and Marketing Strategies

After licensing, both parties should work together to enhance brand awareness and reputation. Through advertising and marketing activities, the brand’s value can continue to grow. This step is crucial for maintaining competitiveness and attractiveness in the market.

3.    Legal Dispute Response and Resolution Mechanisms

In the face of potential trademark infringement disputes, both parties should establish a rapid response mechanism, promptly collect evidence, and take legal measures to protect their rights. This step is critical to ensuring that the brand can quickly respond to challenges and protect its interests.

The Kangxin IP Platform has a professional legal advisory team that provides comprehensive legal support to clients. In the event of legal disputes, the platform can assist clients in quickly gathering evidence, formulating response strategies, and offering professional legal advice and representation services, ensuring that the client's rights are effectively protected.

Risks and Considerations: Case Warnings and Response Strategies

Case 1: A Well-Known Sports Brand’s Trademark Licensing Dispute

In 2022, a well-known sports brand faced a trademark licensing dispute due to its failure to thoroughly review the licensee’s qualifications, resulting in the licensee selling poor-quality sports shoes, severely damaging the brand’s image. This case warns us that before licensing, it is crucial to comprehensively review the licensee’s qualifications and ensure they have the capacity to operate the related goods or services.

Case 2: A Fashion Brand’s Sub-Licensing Dispute

In 2023, a fashion brand encountered a sub-licensing dispute because of its failure to strictly manage sub-licensing relationships, leading to the sub-licensee arbitrarily altering the trademark design, triggering an infringement dispute. This case highlights the importance of hierarchical control in sub-licensing management. The licensor should strictly review the sub-licensee's qualifications and contract terms, ensuring that each level of licensing complies with legal regulations and brand strategy requirements.

In the complex process of brand licensing, the Kangxin IP Platform (eservice.kangxin.com), with its professional services and advanced technological means, provides strong support for both licensing parties. They can more efficiently and conveniently complete various tasks related to brand licensing, reducing legal risks and enhancing brand value. In this era of information explosion and fierce competition, choosing the right path is choosing a road to successful brand licensing.