What is a Trademark License and What is it Used For?

Due to the diverse economic and business needs within the commercial and industrial sectors, brand protection has been steadily increasing over time.

This, stemming from the fact that brands have positioned themselves and become known in different markets according to the products or services they represent, and their owners can grant the use of them to a third party through a license.

In Guatemala, the trademark license was first regulated by the Central American Convention for the Protection of Industrial Property (Approved by Decree 26-73 of the Congress of the Republic).

Subsequently, the Industrial Property Law (Decree 57-2000) came into effect on November 1, 2000, with this regulation being the applicable one in our country's industrial property matters.

DEFINITION

A trademark license agreement is a legal bond whereby the owner or applicant of the trademark, voluntarily and without losing their rights to it, grants another person the right to carry out, according to the conditions stipulated in said agreement and without being the owner thereof, forms of exploitation of the trademark that, in the absence of such consent, could be prohibited.

The parties participating in the contract

• Licensor

The trademark owner or the applicant, as the case may be, or a person who holds a right to the trademark, authorized to grant licenses.

• Licensee

It is the person who acquires the right to use a trademark granted in their favor through the contract, without being the owner of the registration and within the conditions and limitations established in said contract.

MAIN FUNCTION

The priority function of the license agreement is that the rights acquired by the licensee will have a commercial purpose, such rights will allow the licensee to market goods and services identified with the trademark subject of the license.

Also, it should be noted that, due to the functions of trademark licenses, they will normally be intended for business purposes with the aim of profit for the holders.

Document Formalities

Our legislation, specifically the Industrial Property Law, regulates the formalities that the document must have where the use license agreement is celebrated, being the following:

• Written document (private or public deed)
• If granted in a language other than Spanish, the document must be duly legalized and have a sworn translation. (applies to private document)

REGISTRY ASPECTS

While it is true that said regulation does not require the registration of the trademark license agreement in the Intellectual Property Registry of Guatemala, it is highly recommended that said agreement be registered, since having the support of the registration will allow it to take effect against third parties according to the conditions established therein and will also serve as a backup for both parties.

To be able to register a trademark license agreement in the Intellectual Property Registry of Guatemala, it must contain the following requirements:

• The name, business name, or designation of the owner and the licensee, and their domicile;
• The brand or brands subject to the license and indication of their registrations;
• The license term, if any;
• Indication of whether the license is exclusive or non-exclusive and agreed terms, covenants, or restrictions on the use of the trademark; and

1. Summary of quality control provisions.

RECOMMENDATIONS

• It is important to take into consideration that the document, whether private or a public deed, expresses the rights granted to the licensee, for example: to produce, use, market, sell, or a combination of the above; and whether these are for valuable consideration or gratuitous.
• The category of the license must be specified: whether or not it covers all of the products or services for which the trademark is registered.
• Quality control is of utmost importance because the brand is what represents the products or services covered by the brand. That being said, it is advisable to establish in the contract the licensee's obligation to comply with the licensor's quality standards.
• Without a doubt, one of the aspects that must be taken with utmost importance is the remuneration agreed upon in the contract. Therefore, the payment periods or methods for such remuneration must be regulated, as well as the consequences when it has not been paid within the agreed period.
• And finally, the trademark license agreement must strictly stipulate a term. This term will govern until the licensee has all the rights granted in the agreement.