Drafting a trade mark licence agreement under the Trade Marks Act 1995 (Cth)
A trade mark licence allows a third party to use a registered trade mark without the use constituting infringement. Under the Trade Marks Act 1995, a licence must be authorised by the registered owner, and the owner should maintain quality control to avoid the mark becoming vulnerable to removal for non-use or loss of distinctiveness.
This is an 8-step workflow for preparing a trade mark licence that protects the owner's rights, complies with the Trade Marks Act 1995 (Cth), and establishes clear quality control and usage standards.
Before you start
- Confirmed trade mark registration number(s) and classes
- Current trade mark search confirming the registration is in force
- The scope of licensed use agreed in principle (territory, products/services, exclusivity)
- Quality control standards or brand guidelines from the licensor
The workflow
Verify the trade mark registration
Search the Australian Trade Marks Register (ATMOSS) to confirm the mark is registered, in force, and not subject to removal proceedings. Note the registered classes, owner, and any existing licences or security interests.
Define the licence scope
Set out the licensed marks, the goods and/or services covered (by reference to the registered classes), the territory, the term, and whether the licence is exclusive, sole, or non-exclusive. An exclusive licence has statutory significance under s 26 of the Act.
Establish quality control provisions
Include obligations for the licensee to maintain the licensor's quality standards, submit samples or reports, and comply with brand guidelines. Quality control is critical — without it, the owner risks the mark being treated as not used by the owner under s 8.
Set financial terms
Draft the royalty structure: fixed fee, percentage of revenue, minimum guarantees, or a combination. Address payment timing, GST, withholding tax (for cross-border licences), and audit rights to verify royalty calculations.
Address sub-licensing and assignment
Specify whether the licensee may sub-license or assign the licence. If sub-licensing is permitted, require the licensor's prior written consent and flow-down of quality control obligations to any sub-licensee.
Include protection and enforcement obligations
Allocate responsibility for monitoring and enforcing the mark against third-party infringement. Require the licensee to notify the licensor of any infringement and cooperate in enforcement proceedings. An exclusive licensee has standing to sue under s 26.
Draft termination and post-termination provisions
Set out termination triggers (breach, insolvency, change of control) and post-termination obligations: cessation of use, return of materials bearing the mark, wind-down period for existing stock, and survival of confidentiality and indemnity clauses.
Record the licence on the Register
Record the licence (or authorised user) on the Trade Marks Register with IP Australia. While recording is not mandatory, it provides public notice and may be relevant to the licensee's standing in infringement proceedings.
What you will have at the end
An executed trade mark licence agreement with quality control, financial terms, and enforcement provisions, recorded on the Trade Marks Register.
Common issues
- Omitting quality control provisions, undermining the owner's position on authorised use
- Not recording the licence, leaving the licensee's standing uncertain in enforcement proceedings
- Failing to distinguish between exclusive, sole, and non-exclusive licence types
- Overlooking the interaction between the licence and any existing security interest over the mark
- Not addressing what happens to existing stock bearing the mark on termination
Run this workflow on a real matter
Quillio verifies trade mark registrations, drafts licence terms aligned with the Trade Marks Act, and flags quality control gaps. See /practice-areas/commercial-lawyers or start a free trial.
This workflow is a general guide. Trade mark licensing intersects with competition law, tax, and (for cross-border licences) foreign registration requirements — always consider the broader context.
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