Licensing Trademarks in Mainland China

07/01/2010

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Unlike assigning a trademark, which requires the approval of the Trademark Office, licensing a trademark in mainland China requires only that the licensor and the licensee enter into a license agreement. However, recording the trademark license with the Trademark Office has certain benefits for both the licensor and the licensee. For example:
l	Lowers the burden in showing a licensing relationship
	To establish the existence of a licensing relationship that has not been recorded with the Trademark Office, one must provide the licensing agreement. This, however, will reveal the terms of the agreement, which the parties may wish to keep undisclosed. Furthermore, when the authenticity of the licensing agreement is in question, the parties must also have the agreement notarized and legalized.
l	Facilitates the remittance of royalty
	Royalty derived from an unrecorded licensing agreement may not be remitted outside of mainland China (including Hong Kong).
l	Grants enforcement rights to licensees
	In the case of trademark infringement by a third party, the licensee may, on the basis of its recorded licensing relationship, bring a suit on its own initiative, or after receiving approval from the licensor.
In the license recordal process, the PRC Trademark Office will examine the licensing agreement in detail, and will require amendments for a variety of deficiencies, such as the lack of a fixed license term or having a license term that would exceed the expiration date of the licensed trademark registration, lack of quality control provisions, failure to describe how the trademark labels will be provided, or lack of provisions that identify the licensee or the place of production on the merchandises. It is therefore advised that parties who wish to enter into licensing agreements seek legal consultation, so to avoid complications during recordation process.