Trade Mark Licence Agreement Template for Canada

Section 50 of the Trade-marks Act requires that the registered owner of a mark exercise control over the character or quality of the goods or services provided under the mark by the licensee. A licence without meaningful quality control provisions is considered a 'naked' or 'bare' licence and can lead to the mark being found invalid through non-use or abandonment.

Yes. An exclusive licence prevents the licensor from licensing the mark to any other party in the defined territory or product category. Exclusive licences give the licensee stronger commercial protection but must be carefully drafted to avoid triggering Competition Act scrutiny for market-allocation arrangements that go beyond protecting the trade mark right.

Registration is not mandatory, but recording a licence with the Canadian Intellectual Property Office (CIPO) provides public notice and can strengthen the licensor's position in disputes about the mark's validity. Recording is also advisable to confirm the licensor's ownership and control for the purposes of Section 50 compliance.

Alberta, Ontario, Manitoba, New Brunswick, and Prince Edward Island have franchise legislation that can apply where a trade mark licence is part of a broader franchise system. The legislation requires pre-sale disclosure, imposes good faith obligations, and may give franchisees the right to rescind the agreement if proper disclosure was not provided. Parties should check whether the arrangement triggers these provincial rules.

The agreement should specify the royalty rate or fee, the royalty base, payment intervals, and the currency. The licensor should retain the right to audit the licensee's books to verify royalty calculations, with the audit right usually exercisable on reasonable notice no more than once per year. Interest on late payments should also be addressed.

Yes, a well-drafted licence should include termination rights triggered by specified material breaches, including acts that damage the reputation or distinctiveness of the mark. The licensor should also have the right to terminate if quality standards are persistently not met. Clear termination provisions protect the mark's validity and give the licensor a practical remedy for brand damage.

If the registered mark is successfully challenged and expunged from the Trade-marks Register, the licence becomes unenforceable because there is no valid right remaining to licence. The licensee may have a claim against the licensor for breach of the warranty of title, depending on what the licence agreement provides. Licensees should conduct due diligence on mark validity before entering a significant licence.

Sub-licensing requires express permission from the registered owner, who must still retain ultimate quality control under Section 50 of the Trade-marks Act. If the head licensee sub-licences without authority or without maintaining quality control obligations flowing back to the owner, the trade mark's validity may be jeopardised. Sub-licence provisions should set out the owner's approval and audit rights at every level.