When you allow another person or business to use your registered trademark — your brand name, logo or slogan — in exchange for royalties or as part of a franchise arrangement, that is trademark licensing. The person who owns the trademark is the licensor. The person permitted to use it is the licensee or, in Indian law, a registered user.
Every franchise agreement is, at its core, a trademark licence. Whether you are a food chain, coaching institute, retail brand or service business, when you expand through franchisees, they are using your trademark to run their operations. If that use is not properly documented and registered, serious problems follow.
Why Trademark Licensing Matters in India
Under the Trade Marks Act 1999, only the registered proprietor of a trademark has the exclusive right to use it. If a third party — including your own franchisee — uses your mark without a valid registered user arrangement, two things happen: their use does not count as use by the proprietor (creating vulnerability in non-use cancellation proceedings), and you may lose the legal ability to control quality — which can invalidate the entire licence.
Without a formal agreement, disputes become extremely difficult to resolve. Franchisees have walked away with the brand's goodwill and even filed trademark applications in their own name in cases where the licensor was careless with documentation.
Types of Trademark Licences
| Type | Meaning | Common Use |
|---|---|---|
| Exclusive Licence | Only the licensee (and not even the owner) can use the mark in the agreed territory | Master franchise arrangements |
| Non-Exclusive Licence | The owner can grant the same rights to multiple licensees simultaneously | Multi-franchisee models |
| Sole Licence | Only the owner and one licensee can use the mark — no additional licensees | Single-territory franchise deals |
| Sub-Licence | The licensee licenses the mark to a third party (only if the main agreement permits it) | Master franchisee sub-franchising |
Legal Requirements for a Valid Trademark Licence
Section 48 of the Trade Marks Act 1999 governs registered users. A valid trademark licence in India must satisfy the following:
- Written agreement — The licence must be in writing. Oral licences are not enforceable.
- Quality control clause — The owner must retain control over the nature and quality of goods or services. Without this, the licence is a "naked licence" and can render the mark unenforceable.
- Form TM-U application — Both the proprietor and the proposed registered user must jointly apply to the Trade Marks Registry using Form TM-U.
- Payment of fees — The prescribed government fee must accompany the TM-U application.
What the Licence Agreement Must Contain
- Identification of the mark — Registration number, class and description of goods/services
- Territory — Specific states, districts or pin codes where the licensee can operate
- Duration — Start date, end date and renewal provisions
- Quality control obligations — Inspections, standards, approvals required before use
- Royalty and payment terms — Percentage of revenue, flat fee, or combination
- Termination clauses — Grounds for termination and notice period
- Post-termination obligations — Return of signage, cessation of use of the mark
- Dispute resolution — Arbitration or court jurisdiction (specify city)
Filing Form TM-U: Step by Step
- Prepare the signed trademark licence agreement.
- Fill Form TM-U with details of the proprietor, registered user, the trademark, territory and duration of the licence.
- Attach a certified copy of the licence agreement.
- Both the proprietor and the proposed registered user must sign the application.
- Pay the prescribed fee (currently ₹5,000 per mark per class for e-filing).
- Submit to the Trade Marks Registry online via the IP India portal or physically.
- The Registry will examine and, if satisfied, record the registered user in the register.
💡 Important: Filing Form TM-U is strongly recommended. Without it, the licensee's use does not count as use by the proprietor, which leaves the mark exposed to non-use cancellation proceedings after five years.
Common Mistakes to Avoid
- No quality control clause — Courts can invalidate a trademark if the licensor exercised no control over quality.
- No TM-U filing — Relying on the agreement alone without registry recording leaves the mark exposed.
- Vague territory — "North India" is not a valid territory. Use specific states, districts or pin codes.
- No post-termination clause — Without this, franchisees have continued using marks even after the franchise ended.
International Trademark Licensing Considerations
If you are licensing your Indian trademark to a foreign entity, royalty payments out of India require RBI approval under FEMA guidelines. For businesses expanding internationally, it is often better to register the trademark in the target country first (via the Madrid Protocol) before granting licences there, as an unregistered trademark in a foreign country offers limited protection to the licensee.
Key Takeaways
- Every franchise is a trademark licence — get it in writing and register it via Form TM-U.
- Quality control by the licensor is a legal requirement, not optional.
- Clearly define territory, duration and post-termination obligations.
- Review and update licence arrangements whenever the trademark is renewed.
- For guidance on drafting a trademark licence agreement, contact our IP team →
Need a Trademark Licence Agreement?
Adv. Nikhil Soni drafts franchise and licensing agreements and handles TM-U filings with the Trade Marks Registry across all classes.