Introduction
A better alternate to enter the UAE market is through licensing of trademarks. The law provides that in order to record a trademark license, the trademark should be registered in the United Arab Emirates. The duration of appointment cannot exceed the validity period of the trademark registration, however, can be renewed once the trademark registration is renewed. Similarly, the scope of license should be restricted to the goods or services protected under the trademark registration.
Once the license agreement is executed, it should be recorded with the UAE Trademark Office or else it does not provide any rights to the licensor or licensee against third parties. In the event the license agreement is executed inside the UAE, it is required to be notarized; on the other hand, agreements executed outside the UAE, require notarization as well as legalization from the UAE consulate in the country where the agreement is signed.
As compared to agency agreements, it is relatively easier to termination or deny renewal of a trademark license agreement. In order to do so, it is essential that the License Agreement clearly provides the authority of termination and non-renewal to the Licensor. In case such powers are not delegated to the Licensor in the agreement, either the Licensee's consent shall be required at the time of termination or non-renewal or the Licensor will have to obtain a favourable decision from the Court of competent jurisdiction in the UAE.
Different ways of Licensing Trademarks
- Franchising Agreement: Franchising and trademarks are closely connected. Franchising a company entails granting franchisees a license and authorization to use the franchisor's trademarks. Franchising is an agreement in which the franchisor, usually a brand owner, grants permission to exploit the brand to the franchisees. The key to franchising is the licensing of intellectual property rights, particularly trademarks. It may be an advantageous method to launch one's own company while operating under the umbrella of a well-known brand.
- Franchising Agreement: A merchandise licensing agreement outlines the conditions under which the owner of intellectual property, such as a trademark, service mark, or copyright, gives a party known as the licensee the right to distribute, advertise, and sell the property in film television programs, video games, etc.
- Brand Extension: Brand extension is a marketing approach that entails introducing a new product under an existing brand name already well-known in a different product area.
- Co-branding: Two or more well-known trademarks, not necessarily of equal standing, may combine in one product to give it a new attraction for the same audience or enter a new market. When both brands work together, they will profit more than if they market themselves separately.
Statutory Requirements
The UAE Trademark Law (Federal Law No. 37 of 1992) states that the Licensor cannot impose unnecessary and unreasonable conditions in the licensing agreement. However, it is permitted to include the following conditions:
- Limitation of jurisdiction, that is, a license agreement can either be for the whole of the UAE or restricted to some areas and emirates.
- It can either be exclusive or non-exclusive.
- Sub-licensing can be restricted.
- Limitation on the duration of license can be imposed.
- Quality control provisions can be included.
- Provisions to protect the goodwill related to a trademark, that is, not to take any action or inaction which results in brand dilution can be agreed between the parties.
Articles 30 to 34 of this law deal with the licensing of trademarks clearly stating that the proprietor may "by a written and notarized contract", license one or more persons to use such mark for all or some of the products or services for which the trademark is registered. The Law accordingly confirms that a trademark owner is at liberty to choose to grant an exclusive or non-exclusive license in the UAE. An exclusive license means only the particular licensee can use the trademark, while no further licenses to other parties would be possible in respect of the same territory and goods or services. A non-exclusive license refers to a license by which the licensor may allow more than one party to use the same trademark in the same territory and in respect of the same goods or services. Importantly, the Law also confirms that it is possible for the owner of a trademark to license different licensees to use the same trademark in respect of different goods or services.
An unrecorded licence does not have an effect against third parties and therefore, there is a tricky statutory limitation to enforce such rights against third parties.
Under UAE Trade Mark Law, quality control is one of the most possible and accepted clauses to be included in a licence agreement. However, it is not a mandatory requirement for both the licensee or licensor.
Naked licence is not one of the available causes of action in the UAE to invalidate or cancel a trade mark. Hence, a licence with no quality control provisions does not undermine the trade mark owner's rights on their marks in the UAE.
Conclusion
The licensing agreement is an effective method by which the brands can enhance their presence in the market. By giving consent to other parties to use their registered trademarks, the brand owners get the opportunity to enhance the value of the trademark and boost the reach of the brand. However, several legal considerations govern the process of licensing agreements. The brand owners and the licensees must know about the legal aspects of the trademark licensing before signing an agreement. The owner of the registered trademark and the licensee should have clarity about the scope and limitations of their rights over the registered trademarks. Further, the record of the trademark license in the trademark register is beneficial for the trademark licensee as well. A trademark owner has the right to apply for cancelling the registration of his trademark form the Register.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
