Summary
- Each company in a corporate group is a separate legal entity, meaning a company that wishes to use a trade mark owned by another group company requires a formal written licence signed by or on behalf of the trade mark owner to avoid potential infringement claims.
- Holding intellectual property in a parent or holding company, with operating companies licensed to use it, can protect valuable trade marks from creditor claims against operating companies and provides a clear ownership structure for investors and buyers conducting due diligence.
- A well-drafted intercompany trade mark licence agreement should specify which trade marks are licensed, permitted business activities, duration and termination provisions, rules for consistent use, confirmation of ownership, and confidentiality obligations.
- This article is a guide to intercompany trade mark licensing for corporate groups in Australia, explaining why a formal written licence is required when group companies share brand names and logos and how to structure the arrangement effectively.
- LegalVision is a commercial law firm that specialises in advising clients on intellectual property law and corporate group structures.
Tips for Businesses
Establish a formal written intercompany trade mark licence agreement rather than relying on informal consent, as undocumented arrangements create uncertainty and may not satisfy investor or buyer due diligence requirements. Consider holding all group intellectual property in a holding company from the outset to protect it from claims against operating companies. Seek legal and tax advice before establishing or restructuring your corporate group to ensure the arrangement is both fit for purpose and tax efficient.
On this page
- Considering IP Protection in Group Companies
- Is a Licence Required to Use Trade Marks Within a Group?
- How Can an Intercompany Licence Agreement Protect Your Business?
- Key Contract Drafting Considerations For Your Group Trade Mark Licence
- Seeking Bespoke Legal Advice on Your Brand Strategy and Sharing
- Key Takeaways
- Frequently Asked Questions
Within a corporate group, companies often want to share brand names and logos, but because each company is a separate legal entity, doing so without a proper legal framework can create significant risks. A clear intercompany trade mark licence agreement is the most effective way to manage this arrangement. This article considers how to set up this arrangement and why having a clear intercompany trade mark licence agreement is important.
LegalVision’s Trade Mark Essentials Guide provides valuable information for any business looking to register or enforce a trade mark.
Considering IP Protection in Group Companies
Each company in a group is its own legal entity. Groups can set up specific structures from the start to help manage intellectual property risks. For example, shareholders might own a parent or holding company, which in turn owns the operating companies. The operating companies usually handle trading, while the holding company owns key assets such as the group’s intellectual property.
This setup can help protect valuable intellectual property, like trade marks, by keeping them within the holding company. If an operating company faces financial problems or creditor claims, the holding company’s assets are usually kept separate and protected.
It is sensible to seek legal and tax advice before setting up a company group structure like this. This is important to ensure that the structure is fit for purpose and tax efficient.
Is a Licence Required to Use Trade Marks Within a Group?
It can be common for a company to want to use a trade mark, such as a logo owned by another company in the group, for branding purposes or other reasons. A key question is whether a company needs a formal written licence to use a trade mark registered to another company in the group.
Under law, a licence of a registered trade mark must be in writing and signed by, or on behalf of, the trade mark owner to be legally effective. Trademark infringement happens when someone uses a mark without the owner’s consent.
If a group company can show it has permission to use the mark, that consent might prevent an infringement claim, even if the agreement was informal. However, relying on informal consent can create uncertainty. A written agreement is important as it serves as key evidence if the arrangement is ever questioned and can clarify:
- how the mark can be used
- in what form the mark can be used;
- Where the mark can be used; and
- how long the mark can be used.
In practice, a third-party buyer or investor looking at the licensee company will usually expect to see a properly documented licence during due diligence. If the licensee company is unsure about how it can use the mark and uses it incorrectly or inconsistently, this can weaken the trade mark’s protection.
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How Can an Intercompany Licence Agreement Protect Your Business?
In simple terms, an intercompany intellectual property licence lets companies in the same group, like a holding company and an operating company, use intellectual property. It is a legal agreement that allows one company to use another’s intellectual property. This approach lets the group use valuable intellectual property assets.
By setting clear rules for use, the licence helps protect the value and integrity of the intellectual property. It does this by:
- allowing the use of intellectual property;
- reducing the risk of disputes; and
- clearly defining ownership and permitted uses.
This document is especially useful for letting group companies use trade marks, such as logos and brand names.
Key Contract Drafting Considerations For Your Group Trade Mark Licence
Your licence should cover several important points, including:
- which trade marks are licensed;
- the permitted business activities;
- the duration of the licence and termination provisions;
- rules to protect the trade mark and ensure consistent use;
- confirmation of ownership; and
- addressing sensitive issues such as confidentiality obligations
Seeking Bespoke Legal Advice on Your Brand Strategy and Sharing
Sharing a brand within a group might seem simple, but problems can come up if it is managed informally.
A documented and carefully written intercompany trade mark licence agreement can give you a clear legal framework. It can enable group companies to use intellectual property while protecting ownership and preventing risk. Seeking advice can help protect your intellectual property’s value and enable confident use of logos and brand names across your group.
Key Takeaways
It is important to consider how intellectual property, like trade marks, is held within a corporate group. If one company owns a trade mark and another wants to use it in its branding or trading name, a written and signed licence should be put in place to help protect the businesses from risk. Clear and well-drafted intercompany licences protect ownership, define how trade marks can be used, and help preserve brand value across the group.
LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced intellectual property lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
You may be able to do this. If your name is unique and distinctive and not already registered or too similar to an existing mark, you may be able to apply to register it as a trade mark.
If one company owns the trade mark and another seeks to use it, a written licence is important. It protects brand ownership, clarifies how the mark can be used and reduces overall risk.
The licence should specify which trade marks are licensed, permitted business activities, duration and termination provisions, rules for consistent use, confirmation of ownership, and any confidentiality obligations between the parties.
Investors need assurance that intellectual property arrangements are properly documented. Inconsistent or undocumented use can weaken trade mark protection and raise concerns about ownership and permitted use during any acquisition or investment process.
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