A Trade mark owner (Licensor) is able to grant permission to a third party (Licensee) to use its Trade Mark on mutually agreed terms and conditions.

This is usually referred to as Trade Mark Licensing.

There are different types of Trade Mark Licensing. The two most common being:

1. Franchising

Franchising is a specialized license where a franchisee is allowed by the franchisor in return for a fee to use a particular business model and is licensed a bundle of IP rights, notably, trade marks and supported by training, technical support and mentoring.

Examples of Franchising includes: Burger King™, KFC™ and Starbucks™.

2. Merchandising

The licensing of trade marks, designs, artworks as well as fictional characters (protected by these rights) and real personalities are broadly referred to as merchandising.

Merchandising, allows third parties to apply the trade marks of the Licensee to consumer items such as clothes, towels, plates and any other item to which the addition of the trade mark would increase its desirability amongst consumers.

Examples of Merchandising include the use of the Trade Mark of sports teams on clothing, thereby increasing the value of the clothing and sales of the items.

In Nigeria, under the Trade Marks Act, a trade mark licence may be registered by filing the prescribed form and the prescribed fees at the Trade Marks registry.  In the Nigeria Trade Marks Act, this is referred to as a Registered user agreement and is detailed in Sections 33 and 34 of the Act.

In the application to register a registered user a statutory declaration must be submitted by the Licensor giving particulars of:

i. The existing or proposed relationship between the licensor and the licensee;

ii. The degree of control by the proprietor over the permitted use which their relationship will confer;

iii. Whether is a term of their relationship that the proposed licensee shall be the sole licensee or any other restrictions;

iv. The good in respect of which registration is proposed

v. Any conditions or restrictions proposed with respect to the characteristics of the goods, the mode or place of permitted use, or to any other matter; and

vi. Whether the permitted use is to be for a period or without limit of period, and, if for a period, the duration thereof.

Under the Nigerian Trade Marks Act, a licensee may institute an infringement action, depending on the terms of its licence. A Registered User of a trademark is empowered to institute an infringement action and to join the registered proprietor as a defendant in the action, where the registered proprietor fails to institute an infringement action after two (2) months of being invited by the Registered User to commence an infringement action.

Where sensitive commercial material forms a part of the license, the Registrar, if requested by the applicant, can take steps to secure the information provided other than that entered in the register is not disclosed to rivals in trade.

Finally, it is worth noting that the usual types of licence available in commercial transactions are recognised and registrable in Nigeria. The only restriction being that the Registrar can refuse an application for registration of a registered user on the basis that the grant of such a registered user would tend to facilitate trafficking in a trade mark.