Trademark Licensing in India – Process, Royalty, Agreement & Legal Strategy (2026)

It is a legal arrangement where the owner (Licensor) grants usage rights to another party (Licensee) without transferring ownership, typically in exchange for royalties.

A "Registered User" is a licensee whose rights are officially recorded in the Trademark Register through Form TM-U, providing statutory recognition to the licensing arrangement.

This occurs when a licensor grants a license without exercising quality control. This is risky and can lead to the trademark being cancelled or deemed abandoned.

Royalties can be a fixed fee per unit, a percentage of net sales (typically 2%–10%), a lump sum upfront fee, or a hybrid model.

In India, a "Registered User" (recorded with the registry) has the right to institute infringement proceedings in their own name, subject to the agreement.

Licensing focuses on the usage of the mark, while Franchising involves the transfer of the entire business model, SOPs, training, and operational systems.

While licensing is valid via contract, filing Form TM-U for "Registered User" status is highly recommended for statutory protection and enforcement benefits.

Yes, royalties are taxable as business income. Additionally, GST is typically applicable on the licensing service provided by the licensor.

Yes, most agreements include termination clauses for breach of quality standards, non-payment of royalties, or expiry of the term.

It is a strategic arrangement where two companies grant each other usage rights to their respective trademarks, often used in co-branding or technology alliances.

While licensing can be established through conduct or oral understanding, it is not legally advisable. A written agreement is mandatory to register the licensee as a "Registered User" with the Trademark Registry.

Trademark licensing agreements must be executed on valid stamp paper. The value of the stamp duty depends on the state where the agreement is executed and the royalty consideration involved.

Yes, but the licensee cannot be recorded as a "Registered User" with the Registry. The arrangement would be governed by common law principles of "Passing Off" rather than statutory trademark rights.

This is a specialized form of licensing where characters from films, cartoons, or sports are licensed for use on consumer products like toys, clothing, and stationery.

Generally, no. Licensing an asset belonging to multiple owners requires the explicit consent of all co-owners, unless a prior agreement grants independent licensing power.

By using precise "Territory" clauses and "Non-Compete" provisions to ensure that different licensees do not encroach on each other's geographic or commercial domains.

Most agreements include immediate termination rights for brand misuse. Additionally, the licensor can sue for breach of contract and seek damages for brand dilution.

If quality control is strictly maintained, licensing increases brand visibility. If not, it can lead to "Genericide" or loss of the mark's ability to identify a single source.

A license that has no expiry date. While commercially common in software, trademark licenses are typically for a fixed term to allow the licensor to review quality periodically.

Yes. However, you must comply with FEMA (Foreign Exchange Management Act) regulations regarding the outward or inward remittance of royalties.

Under Section 194J of the Income Tax Act, royalties paid for the use of a trademark are typically subject to a 10% TDS (Tax Deducted at Source).

Generally, no. A licensing agreement strictly prohibits any modification of the trademark. The licensee must use the mark exactly as registered or as provided in the brand manual.

Modern agreements include a "Termination on Insolvency" clause, which allows the licensor to terminate the agreement immediately if the licensee becomes bankrupt, to protect the brand assets.

Yes. While it cannot be a "Registered User" filing, the licensee can be recorded as an "Authorized User." Once the mark is registered, the status can be upgraded to Registered User via Form TM-U.

It is a specialized license where two independent brands collaborate to create a new product (e.g., a "Limited Edition" sneaker), using both trademarks under a shared-risk agreement.

The Registered User status is typically tied to the duration of the agreement. If the agreement is renewed, a fresh notification or application must be sent to the Registry to update the records.

Yes, but only if the trademark is officially registered and the licensing agreement specifically authorizes the licensee to use the registration symbol.

Naked licensing is granting a trademark license without any quality control provisions. It is "fatal" because it can lead to a court declaring the trademark abandoned or invalid.

No. Legally, even a parent-subsidiary relationship requires a formal licensing agreement to establish "Active Control" and prevent brand dilution or legal challenges.

Rule 71 details the specific particulars required in the affidavit that must accompany a Registered User application, including the degree of control the licensor will exercise.