Selling licensed products – the do’s and don’ts

August 17th, 2019 by Arlette Mendenhall

Consumers love having something made sporting their favorite team name or movie character. But crafter beware – unless you have obtained a license from the holder of that design, using it without that permission is ILLEGAL!

What is a trademark

A trademark can be applied to almost anything. A distinctive design, word, or logo that can be identified with a product or service used in commerce. A business owner establishes trademark rights from the very first use of the trademark and is not required to enlist any type of government regulation. Rights continue as long as the original owner continues to use the said trademark. These rights, however, are generally limited to the geographic location where the items are sold. The traditional trademark symbol may also be used but is not required.

Expanded rights

The owner may register their trademark with the state and or federal government. By doing this it allows the owner to use their trademark exclusively anywhere in the United States and the right to use the trademark symbol.

What does this mean to you

Unless you have obtained a license from the trademark owner and met their requirements in obtaining the said license, the owner has the exclusive rights to use the trademark and you do not.

The owner of the trademark has greater remedies when someone infringes on the trademark. AKA uses it without permission. The owner has the right to sue for trademark infringement in FEDERAL COURT, obtain the infringer’s profits from the sale of the trademarked item and triple the costs involved due to the lawsuit.  In other words, it could cost you A LOT of money.

But I really want to use this trademark

Every trademark owner has the right to allow other businesses to sell their product. It is solely at their discretion as to who they will allow to do this. Each owner sets their own requirements that must be met by the potential seller and if met you should be able to negotiate a nonexclusive licensing agreement with the trademark owner.

Keeping it Legal

Be prepared as this won’t be cheap either. You will need to contact an attorney to handle the negotiations for you and to review the agreement.

A portion of the price you charge for your merchandise will also be paid to the trademark owner as a licensing fee.

You may also be required to submit periodic audited financial and sales information to the owner as a part of the agreement requirements.

Is it really worth all the work

Do some research, maybe your product will sell on its own without the use of a trademarked design or element. Consider all the costs involved and ask yourself if it will be profitable enough to warrant the additional expense and accountability.

Where to go from here

If after all considerations you still are interested in using a trademarked design or elements, your next step will be contacting the trademark owner. You will need to search the records of the US Patent and Trademark Office for the owners of federally registered trademarks using their Trademark Electronic Search System or TESS on its website. State trademarks will vary by state with some providing the information online while others you may need to contact by mail or phone and is generally handled thru the Secretary of States office.

Playing with the Big Boys!

Sports teams are always a high demand item. If you are looking to sell this type of product, contact the licensing department of the major sports leagues or your favorite team.  Information can be found on their respective websites, and ask to speak to a representative about becoming a licensed product vendor.

Minimum purchases

Be prepared. Most professional and collegiate leagues have minimum purchase requirements to carry their products. Some may require a minimum royalty guarantee of $100,000 annually based on actual sales of the product. For general information, the Collegiate Licensing Company can give you information on various teams.

They may also request to see your business plan. Make sure you have done a market study of what teams are most popular in your area.

After you have negotiated a deal, you may be placed on a probation period to see how well your business performs. You may be limited to one line of merchandise until you can demonstrate your success. You can ask for additional merchandise as you grow your market.

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