Adding value to your brand: understanding assignment and licensing

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A strong brandA well-established and protected brand represents much more than just a distinctive sign. It is a precious intangible asset at the heart of your company's value. Beyond its protective role, this brand can become a source of revenue or a strategic lever. How can it do this? Mainly through two contractual mechanisms: the disposalwhich is equivalent to a sale of your brand, and the licencewhich amounts to authorising its use by a third party. Understanding the ins and outs of these two options is essential if you are to make the right decisions and make the most of this asset. This article explains trademark assignment and licensing contracts.

Trademark assignment: transferring ownership

The assignment of a trademark is the act by which you definitively transfer the right to use a trademark to a third party. property of your trademark to another person or company (the assignee), usually for a price. This transfer is only possible and enforceable if the trademark has been correctly filed and registered. It is comparable to the sale of a property or a business: once the deed has been signed and the formalities completed, you are no longer the owner.

Why sell your brand? There can be many reasons for this:

• Redirect the company's strategy and dispose of non-essential assets.
• Obtain substantial cash flow quickly.
• Add value to an asset when the company is sold as a whole.
• No longer having the means or the desire to exploit or defend it.

Key points of the assignment contract : Selling a brand is not a trivial matter, and the contract must be carefully drafted. Several elements are fundamental:

1. Precise identification of the object sold: The trademark(s) concerned must be clearly identified (national or European registration number, classes of goods/services concerned). The assignment may be total (all goods/services, all territories) or partial (certain classes, certain countries only - note that this may require prior division of the title).
2. The price : It must be fixed or determinable (article 1591 of the French Civil Code). It may be a fixed price payable in one or more instalments, or more rarely, in the case of a pure transfer, a variable part indexed to future performance (which is similar to a licence).
3. Guarantees owed by the seller : As with any sale, the seller must provide the buyer with guarantees (articles 1625 et seq. of the French Civil Code). The most important guarantees for a brand are :
   • La guarantee of existence of the right The assignor guarantees that he is the legitimate owner of the trademark and that it is valid (not invalid, not revoked, etc.).
   • La warranty of eviction : This is a twofold guarantee. On the one hand, the assignor undertakes not to disturb the purchaser's enjoyment (for example, by using a very similar trademark immediately after the assignment - this guarantee is a matter of public policy). Secondly, the assignor guarantees the purchaser against disturbances by third parties caused by previous the assignment (for example, an infringement action based on an undetected earlier trademark). This third party liability may be contractually agreed.
   • La guarantee against hidden defects (article 1641 of the French Civil Code): Less common for intangible property, it could come into play if a non-apparent legal defect rendered the trademark unfit for its intended use (for example, a trademark ultimately found to be descriptive for an essential part of its business).
4. Formalism : The transfer of a trademark must must be recorded in writing(article L.714-1 of the CPI). In addition, for the transfer of ownership to be enforceable against third parties (i.e. recognised by everyone, including competitors, tax authorities, etc.), it is essential that it is registered in the National Trademarks Register kept by INPI (or the relevant register for EU or international trademarks - article L.714-7 of the CPI). As long as the registration is not made, in the eyes of third parties, the former owner is still the rightful owner, which can block legal action by the new owner or create complex legal situations.

Disposal is therefore a radical operation, which divests you of your asset, but can result in an immediate increase in value. This valuation is intrinsically linked to the way in which the brand has been used and defended by the seller until now.

Trademark licence: authorising use by a third party

A trademark licence is a very different contract: you retain ownership of the trademark, but you grant someone else (the licensee) the right to use it. right to use itunder defined conditions. It is the equivalent of leasing an intangible asset. It is an extremely flexible tool that is widely used in business.

Why license? There are many advantages:

• Extend your brand's geographical presence without investing directly in new markets.
• Diversify your offering by allowing partners to use your brand for complementary products or services.
• Generate recurring income in the form of royalties.
• Increase awareness and visibility of your brand through exploitation by others.

Types of licences : It is essential to clearly define the scope of the authorisation granted:

• Non-exclusive licence (or simple licence) : You authorise the licensee to use the trademark, but you retain the right to use it yourself AND to grant other licences to other companies for the same use (same products/services, same territory). This is the most flexible form for the owner (licensor).
• Exclusive licence : You grant the licensee the right to exclusive to use the trademark within the defined scope (products/services, territory). You are then prohibited from granting other licences within this scope, and often (unless there is a clause to the contrary), you are even prohibited from using the brand yourself within this framework. This is a strong commitment, often requested by licensees who are making significant investments.
• Single licence (or licence only) : A variant of exclusivity, where you undertake not to grant any other licence, but you retain the right to exploit the brand yourself alongside the licensee.

The basic clauses of a licence agreement : There is a great deal of freedom of contract, but certain points need to be clarified:

1. The scope of the licence : This is the heart of the contract. You need to define precisely which products or services are concerned, in which geographical territory the licence applies, and for what duration (fixed term, with or without tacit renewal, etc.). Imprecision is a source of disputes.
2. Royalties : How does the licensee pay you? The contract must set out the basis of calculation (percentage of sales, fixed amount per unit sold, etc.), the rate, the frequency of payments, and the reporting and control procedures (access to the licensee's accounts). Guaranteed minimum royalties may also be stipulated.
3. The licensee's obligations : They are numerous and crucial to protecting your brand:
   • Respect the quality standards the products/services associated with the brand (this is essential to avoid devaluing your image and losing out through deception).
   • Comply with graphic charter and the conditions of use of the brand.
   • Often, an obligation tooperate a real licence (to avoid an exclusive licensee "freezing" your brand in a territory).
   • Pay royalties.
4. The obligations of the grantor (owner) :
   • Guarantee the licensee peaceful enjoyment the trademark (ensuring that the trademark is valid and that the licensee will not be attacked by third parties for its legitimate use).
   • Often, the obligation to defending the brand against counterfeiting (taking legal action).
5. Quality control : The owner MUST retain the right to monitor and control the quality of the products/services of the licensee bearing his trademark. This is a condition for maintaining the guarantee function of the trademark and preventing it from becoming misleading.
6. The end of the contract : What happens on expiry or in the event of early termination (cessation of use of the trademark, liquidation of stocks, final payment, etc.)?
7. Formalism : Although it is not strictly necessary for a non-exclusive licence to be in writing in order to be valid under French law, it is essential that it be in writing. highly recommended for reasons of proof. For a exclusive licenceregistration in the Trademarks Register is required in order to make it effective. enforceable against third parties (article L.714-7 CPI).

Licensing is a powerful tool for development, but it establishes a long-term relationship that requires trust, contractual clarity and follow-up.

Assignment vs. licence: how do you choose?

The choice between selling your brand (assignment) and authorising its use (licence) depends entirely on your strategic and financial objectives:

• Control : Do you want to retain total control of your brand and its future (prefer a licence or no contract) or are you ready to part with it for good (transfer)?
• Income : Are you looking for an immediate and potentially substantial financial contribution (sale) or regular income over the long term (licence)?
• Risks and management : Would you prefer to transfer the risks associated with the trademark (defence, maintenance) to a buyer (assignment) or retain them while managing a contractual relationship with one or more licensees?
• Strategy: Is the aim to divest (sale) or to develop through partners (licence)?

There is no universal "best" solution. A case-by-case analysis, taking into account the maturity of your business, the strength of your brand and your ambitions, is necessary.

Securing your brand contracts

Whether you are selling or licensing your brand, you are handling a potentially highly valuable asset. The temptation to use model contracts found online is great, but often dangerous. Each situation is unique, and the financial and legal stakes are high.

Precise contractual drafting, tailored to your specific situation and anticipating potential sticking points, is the best guarantee against future disputes. And don't forget the vital importance of registering deeds (assignment, exclusive licence) in the official registers to ensure that they are fully legally effective vis-à-vis everyone.

The assistance of a lawyer with expertise in contract law and intellectual property is highly recommended to negotiate and draft agreements that best protect your interests and maximise the value of your brand.

Are you thinking of selling or licensing your brand? Every clause counts and can have major implications. Ensure legal certainty and optimum value for your asset by contacting us for a consultation. personalised advice and tailor-made drafting of your contracts.

Sources

• Code de la Propriété Intellectuelle (CPI), in particular articles L.714-1, L.714-7.
• Regulation (EU) 2017/1001 on the European Union trade mark, in particular Articles 17, 22, 25.
• Civil Code (general principles of contracts of sale [art. 1582 et seq.] and leasing [art. 1709 et seq.)

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