Below is an excerpt from John McKeown’s February 2016 Monthly IP Bulletin.
Happy end of January!
I would like to continue the discussion concerning developing effective brand management policies.
Frequently licencing is an important component of brand management. For example, in some cases it may be preferable to extend a brand by entering into licence agreements. The licensee can be responsible for production, distribution, sales and marketing, while the brand owner must ensure that the product, design, distribution and marketing appropriately communicates the brand image to potential customers.
Licencing Programs
The Trade-marks Act allows for the licencing of trademarks so long as the owner has, under the licence, direct or indirect control of the character or quality of the goods or services. If this requirement is not complied with the distinctiveness and validity of the brand name may be diminished.
Typically a licence should preclude the licensee from using any other marks apart from the licensed mark in association with the licensed goods or services. Alternatively if co-branding is to occur the licence should set out specific guidelines relating to spatial separation, the presentation of the marks and trademark notices.
Any brand owner who engages in licensing must control the character or quality of the licensed goods or services. The licence must set out the standards relating to the character or quality of the goods or services that are being licensed.
The owner must also be in a position to show that such control was exercised. Control is typically exercised by requiring, at a minimum that:
a) the licensed goods or services conform to standards and/or specifications relating to the character or quality of the goods or services prescribed by the brand owner;
b) the licensee be subject to a right on the part of the brand owner to inspect the production or method of delivery of the licenced goods or services;
c) all advertisements or other public presentations containing the licensed marks be subject to a requirement to obtain a written pre-approval from the brand owner.
Retained records consisting of approved product samples as well as approved product packaging and advertising and reports relating to inspection and control will allow the brand owner to show that it has in fact exercised control. If a brand owner grants many trademark licences it should have a licencing/quality control department to monitor and audit the character or quality of the licensed goods or services and retain the appropriate information.
A trademark notice, in form prescribed by the trademark owner, should be included in all public presentations of the licensed mark. The brand owner should prescribe such notices and be in a position to show they were used.
If there are a number of licences outstanding a system should be in place to track the status of each licence including applicable obligations and restrictions. Such information can be invaluable in prosecuting and defending litigation.
It is useful to arrange for regular meetings with licensees to help control the licensees activities and prevent default. This can also assist in monitoring the marketplace.
Canadian Intellectual Property Law & Strategy 2015 Edition
The 2015 edition of the above-noted text has now been published by LexisNexis. This book was written to explain to practitioners outside Canada how the Canadian legal system works for trademarks, copyright and industrial designs. If you are interested, a link to the LexisNexis store is available here.