Being a trademark licensee means that your business is using the trademarks of another business in order to create products that the licensor (the trademark owner) cannot or will not create. This creates a bigger pie for both the licensor and licensee and then the licensee can pay the licensor a royalty to use the trademarks.

What Is Trademark Licensing?

Trademark licensing is the process by which a registered trademark owner, called a licensor or proprietor, allows another party, called a licensee, to make and distribute specific products or services under the licensor’s trademark agreement. Trademark licensing is a type of merchandise agreement.

The licensor receives a certain amount of money or royalties, a percentage of all sales, in exchange for sharing the trademark. This compensation is also called consideration. Fashion and consumer products concerned with sports and entertainment are often sold under a trademark licensing agreement.

The licensee usually creates a trademark licensing agreement, but a licensor can also create this document. Both parties usually agree upon the terms before creating a trademark licensing agreement.