Trademark Royalties

Overview

A trademark is an intellectual property right issued by the USPTO, according to whom a trademark “is generally a word, phrase, symbol, or design, or a combination thereof, that identifies and distinguishes the source of the goods of one party from those of others.” A service mark is the same as a trademark, but applies to services rather than goods.

A trademark right gives the right holder the exclusive right to sell or market under that mark within a geographic territory, offering consumers a way to differentiate between products.

The U.S. Patent and Trademark Office provides a concise introductory guide to trademarks and trademark law.

Trademark Licensing

Trademarked brands may be associated with quality and therefore have value (known as goodwill). As such, a trademark or service mark holder may license another producer of goods or provider of services to market under her mark, provided that the licensee meets quality standards associated with the trademark. This provides the licensee with instant name recognition and an established market.

Trademark royalty rates may be assessed in a variety of ways, typically on the basis of the additional profit the licensee will make from increased sales and higher prices achieved by use of the mark.

If a trademark is licensed along with know-how and supervising of the licensee, it may constitute a franchise agreement.