Key points
- No statute sets a royalty rate for a trademark licence: the price is a matter of freedom of contract (Article 1102 of the French Civil Code).
- Licences are provided for by Article L.714-1 of the French Intellectual Property Code (Code de la propriété intellectuelle), which governs the right but says nothing about the price.
- The royalty base must be defined unambiguously: a percentage of turnover under the trademark, an amount per unit, a periodic flat fee or a combination.
- The rate varies with the scope of the licence, exclusivity, territory, duration, the reputation of the trademark and the quality control imposed.
- Several mechanisms protect the licensor’s remuneration: a guaranteed minimum, volume-based tiers and an audit clause covering the licensee’s statements.
- Any range presented as a market standard should be treated with caution, as the right balance is found case by case.
Licensing a trademark means answering one central question: how much will the licensee pay in return for the right to exploit it? The answer disappoints those hoping for a scale. No statute sets a royalty rate, and any range presented as a market standard should be treated with caution. A trademark licence is a matter of freedom of contract: the price is built, not read off a table. Setting a royalty means combining a royalty base, a rate and sometimes a guaranteed minimum, and calibrating the whole according to exclusivity, the scope granted and the reputation of the sign. The issue is not only financial: a poorly structured remuneration weakens the relationship and the control exercised over the trademark. This article sets out the parameters of a serious negotiation, without claiming to give a figure that applies to your situation.
Each transaction is specific and depends on the terms of the licence agreement as well as on the economic value of the trademark concerned. The analysis below offers a framework for reflection, not advice tailored to a specific case.
The trademark licence royalty: a freely negotiated price
Trademark licences are expressly provided for by law. Article L.714-1 of the Intellectual Property Code allows an exclusive or non-exclusive licence to be granted for all or part of the territory and of the protected goods or services. The text governs the transfer of the right, but it says nothing about the price.
The remuneration is therefore a matter of the freedom of contract established by Article 1102 of the French Civil Code: the parties freely determine the content of their agreement. Once signed, the contract has the force of law between them (Article 1103). There is no statutory rate, no official scale and no mandatory percentage. The royalty is the result of a negotiation, framed by the value that each party places on the trademark.
What royalty base should be used?
Before discussing a rate, you need to define what it applies to. Several bases coexist in practice: a percentage of the turnover generated under the trademark, an amount per unit sold, a periodic flat-fee royalty, or a combination of these mechanisms. The choice of base largely determines the real value of the royalty.
Each base calls for careful drafting. Turnover “under the trademark” must be defined unambiguously: products concerned, returns, discounts, intra-group sales. An apparently modest rate on a broad base can exceed a high rate on a narrow base. Consistency between the base, the rate and the reporting arrangements determines whether the arrangement is sound.
What factors influence the royalty rate?
Scope of the licence and exclusivity
An exclusive licence deprives the licensor of any other exploitation within the licensed scope; it is negotiated differently from a non-exclusive licence. The territorial scope, the list of goods and services covered and the duration have a direct bearing on value. The broader and more protective the licence is for the licensee, the higher the consideration expected by the owner. Article L.714-1 specifically allows this scope to be adjusted.
Reputation of the trademark and quality control
The value of a trademark lies in its reputation, its age and the customers it attracts. An established trademark justifies a different royalty from a recent sign. To this value is added the cost of the obligations imposed on the licensee: compliance with standards, quality control, advertising contributions. These obligations protect the trademark, but they are also part of the economic balance of the contract.
Guaranteed minimum, tiers and audit clause
Beyond the rate, several mechanisms protect the remuneration. The guaranteed minimum gives the licensor a floor income, regardless of the licensee’s performance. Tiers can vary the rate according to the volumes reached. An audit clause makes it possible to check the turnover statements used as the basis for the calculation.
Whether each of these tools is appropriate depends on the situation. A demanding guaranteed minimum reassures the owner but may discourage a licensee in a market that has yet to be built. The right balance is found case by case, according to the maturity of the trademark, the commercial risk and the intended duration.
Points to watch
- There is no statutory scale: be wary of rates presented as market standards, which can rarely be verified.
- The base matters as much as the rate: define precisely the turnover used, the exclusions and intra-group sales.
- A royalty is not the same as the price of an assignment: under a licence, the owner keeps ownership of the sign.
- Quality control and reporting are inseparable from the remuneration: without monitoring, the base becomes impossible to control.
- Recording the licence in the trademark register kept by the INPI (French National Institute of Industrial Property) is what makes it enforceable against third parties.
When should you consult a lawyer?
A lawyer can help you structure the royalty, combine the base, rate and guaranteed minimum, and make the control, reporting and audit clauses legally sound. Careful drafting of the licence agreement protects the value of the trademark over time. For the negotiation and drafting of a trademark licence, the support of an intellectual property and trademark lawyer in Paris (in French) helps you anticipate points of friction and align the economics of the contract with your objectives.
Each matter deserves its own analysis: the solution depends on the facts, the value of the trademark and the drafting of the contract.
What the law says
Trademark licences fall under Article L. 714-1 of the Intellectual Property Code: the rights attached to a trademark may be the subject, “for all or part of the territory and of the protected goods or services, of the grant of an exclusive or non-exclusive operating licence”. The law imposes no royalty scale: the rate is set freely, generally as a percentage of turnover or of licensed sales, possibly combined with a guaranteed minimum.
The drafting must pin down the royalty base (which products, which territory), the rate, the minimums, the reporting and audit arrangements, and what happens to royalties on termination. A poorly defined rate exposes the licensor and licensee to disputes.
Official sources
- Article L714-1 of the French Intellectual Property Code, trademark licence: Légifrance (in French)
Every situation is different. To negotiate, perform or terminate a trademark licence, our intellectual property lawyers are here to assist you.
For assistance: trademark licence agreement lawyer.
