Trademark Licensing Strategies and Restrictive Practices

Trademark licensing strategies and the restrictive practices are going to be discussed here. Look at this article in order to know the basic information regarding the trademark.

Trademark Licensing strategies:

Enterprises seeking to maximise profits may sometimes engage in practices while exploiting trademarks by way of licensing seeing them as valid practices, but which in fact are dubbed as restrictive practices. The knowledge, of restrictive practices and the efforts to curb them is necessary for the licensors, licensees, the governmental officers, lawyers and all others concerned with trademarks for engaging in successful business negotiations.


In India, in mid and late twentieth century licensing the use of the trademarks was associated with establishing production facilities, which more often were in the nature of import substitution. The pattern of foreign investment in vogue in India was that the foreign enterprise entered into collaboration with an Indian party for Joint Venture (JV) known or referred to in India, as foreign collaboration. Indian party could be a local business house or even an already existing undertaking of a foreign company in India. The foreign enterprise would supply the technology, capital goods and may participate in the financial equity and grant trademark license to the JV unit. The guidelines for industries were published by the government from about the year 1955. There was a guideline as to the use of the trademarks applicable to the establishment of industry.

Restrictive Business Practices Associated with Trademarks:


If the managerial powers of the joint venture vests with the foreign corporation, there is no need for it to insert the restrictive clauses in the agreement which are necessary for assuring itself. If the day to day control and management is not under the control of the trademark owner, then to secure its position the restrictive clauses would be inserted in one of the agreement out of a set of agreements, which are entered into for the completion of the foreign collaboration including the use of trademark. If indian parties seek to license their trademarks abroad, it can be safely presumed that they would normally behave in the same manner, as the MNCs coming from developed countries behave. The responses too would be somewhat near to what were seen in developing countries during the relevant times.

Agreements are secret:


The parties treat these agreements as confidential. The government also does not divulge the data on terms and conditions of collaborations for which there is some justification as the agreements represent business secrets.

Curbing restrictive practices in India:

At approval stage:


The restrictive practices may be curbed firstly at the stage of initial foreign collaboration approval when the government screens the investment cum technology transfer proposal from all angles. All the known restrictive practices may be minimised at that time. Keeping in view the knowledge and experience of the administering authorities. The restrictive practices were sought to be curbed, only after the governments, including that of India, became aware of these practices in mid-sixties and seventies. The U.N sponsored studies in relation to the MNCs and technology transfer have helped the developing countries a lot in understanding the malpractices indulged in by the MNCs, of those related to technology transfer. It appears that the licensing of trademarks has not been studied in this distinct manner extensively.

The knowledge about the ill effects of MNCs started resulting in strenuous regulation to curb the same, but the MNCs belonging to developed countries took a still harder position. They took steps whereby they liquidated the regulation. It is submitted that now after the WTO-Trade Related Investment Measures (TRIMS), the regulation on FDI is minimal.

Curbing at operational level:

The restrictive practices can also be curbed at the actual operational stage under various national laws, prominent of which are the industries development and regulation act IRDA and the competition act, 2002. There are powers vested with the authorities under these laws whereby such practices can be curbed. Before the structural adjustment programme (SAP) of 1991, insistence on the use of the trademark and or insistence on higher foreign equity participation in the marketing operation of the local enterprise were itself considered a restrictive practices.

 Despite the fact that many a time that the technology itself a refused if the product is not marketed under the trademark of the foreign parent, the Government of India kept insisting at not allowing the trademarks as such. The government had, in late seventies, given way by allowing the use of the hybrid composite trademarks consisting of an Indian part and the FTM. The government had found moral justification by treating the hybrid as an Indian mark.

Licensor’s view on restrictive practices:

Licensing agreements are the basic instruments to utilise, exploit and protect the industrial property vested in the trademarks and such agreements function in addition to or in substitution of the laws. Licensing enables the licensee to enjoy the goodwill of the trademark and easy entry and penetration of the market as market power of the owner gets translated into actual sales for the licensee. Some of the clauses in these agreements are considered to be restrictive. The licensees sometimes do agree to these clauses against his free will, simply because he does not have an alternative.

On the other hand, the innovators or the owners of the industrial property feel that they have a right to exploit their property as they desire. The intellectual property vested in them should be free from any constraints and the technology transfer bargain should be allowed to be determined by the market mechanism.

The owners develop the reputation embodied in a trademark and they compare the licensing agreements to rental contracts in relation to immovable property in which the owner retains his property rights. If this basic premise is correct, then other factors follow. In case of rental of a flat or a car, the licensee does not get a claim to the use of that property after the expiration of the lease or contract.

Detailed lease agreements provide for various contingencies including the payment for potential damage for the misuse of property. The explicit discussion on various contingencies in the license agreement reduces the uncertainty proportionately and as the license is at receiving end they want their terms to be imposed on them.

On the other hand, the licensees and developing countries argue that similar to the rent control and restriction laws throughout the world, the welfare measures in the interest of tenants are allowed and can be taken.

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