Key points
- Choosing between an exclusive and a non-exclusive trademark licence is a strategic decision that determines the royalty, the obligations and the licensee’s protection.
- Both forms are based on Article L714-1 of the French Intellectual Property Code (Code de la propriété intellectuelle); a written agreement is strongly recommended, even though the law only requires one, on pain of nullity, for an assignment or the creation of rights in rem.
- An exclusive licence reserves use of the trademark to a single licensee within a defined scope, justifying a higher royalty and minimum exploitation obligations.
- A non-exclusive licence allows several licensees in parallel, with a lower royalty, at the cost of less individual protection.
- In both cases, the agreement must provide for quality standards and a right of control to prevent damage to the trademark.
- Internationally, the licensing strategy must be consistent with the filing strategy and with governing law and tax issues.
Choosing between an exclusive and a non-exclusive trademark licence is not a drafting detail: it is a major strategic decision. It determines the value of the royalty, the intensity of the obligations, the licensor’s ability to run a network and the licensee’s degree of protection. Understanding what each option covers is essential, whether you grant or take a licence.
The common legal framework
Both forms rest on the same basis. Article L714-1 of the Intellectual Property Code provides that 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 (our unofficial translation; only the French text is authoritative). In both cases, the trademark remains the property of the licensor. The same article only requires a written document, on pain of nullity, for an assignment or the creation of rights in rem; a licence is not subject to this requirement, but a written agreement remains essential in practice to set its scope and prove it. The difference lies in the extent of the right granted.
The exclusive licence
An exclusive licence reserves use of the trademark, within a defined scope (territory, goods, services), to a single licensee. The licensor then undertakes not to grant other licences within that scope. Depending on the wording, the exclusivity may even bind the licensor itself, which undertakes not to use the trademark directly. This scarcity comes at a price: it justifies a higher royalty and, often, minimum exploitation obligations on the licensee, to prevent the trademark from being under-used.
The non-exclusive licence
A non-exclusive licence allows the licensor to grant several licences in parallel, to different licensees, within the same scope. It suits strategies of broad distribution, merchandising or rapid roll-out. In return for a generally lower royalty, the licensee accepts sharing the market with others. This formula maximises the trademark’s presence, at the cost of less individual protection for each licensee.
The strategic impact of the choice
The choice shapes the whole economics of the agreement. Exclusivity rewards the licensee’s investment and protects its position, but exposes the licensor to dependence on a single partner: if that partner does not exploit the trademark, the trademark stagnates. Non-exclusivity boosts distribution and spreads the risk, but may dilute the image and create competition between licensees. The right choice depends on the nature of the trademark, the target market and the long-term strategy.
Royalties and exploitation obligations
Whatever the regime, the royalty is freely set, often as a percentage of turnover, sometimes with a guaranteed minimum. In an exclusive licence, this guaranteed minimum and exploitation obligations (sales and marketing targets) are particularly important: they protect the licensor against inaction by the exclusive licensee. In a non-exclusive licence, the issue shifts to consistency between licensees and preserving the shared image.
Controlling the trademark, in both cases
Exclusive or not, a licence without control exposes the trademark to damage, or even revocation. The agreement must provide for objective quality and image standards, a right of control and graduated sanctions. Protecting the trademark is a requirement common to both forms of licence, because the value of the licensor’s asset is at stake.
Exclusivity and international expansion
The choice between exclusivity and non-exclusivity takes on an extra dimension internationally. As a trademark is only protected where it is registered, the licensing strategy must be consistent with the filing strategy (national trademark, EU trade mark, international system). Granting an exclusive licence for a territory presupposes having protected the trademark there; otherwise the licensee builds on sand. Consistency between licences granted in different countries is also crucial: diverging pricing or quality policies weaken the trademark worldwide.
On top of this come the questions of governing law, jurisdiction and the tax treatment of cross-border royalties, which must be settled from the negotiation stage. An international licence poorly aligned with these parameters exposes the parties to complex and costly disputes.
Planning the exit
Whether exclusive or not, a licence must organise its own end. The agreement must provide for the grounds for termination (non-payment, harm to the image, failure to meet guaranteed minimums), cessation of use of the trademark, sell-off of stock, what happens to marketing materials and a final royalty audit. In an exclusive licence, the exit is all the more sensitive as the licensee has often invested heavily: an unbalanced exit clause is a major source of litigation. Planning the end from the signing stage protects both parties.
Points to watch
- Specify whether the exclusivity binds the licensor itself.
- Define the scope precisely (territory, goods, services).
- Provide for a guaranteed minimum and exploitation obligations, especially for an exclusive licence.
- Set rules on quality and image, whatever the regime.
- Record the licence in writing, to set its scope and prove it.
Frequently asked questions
Does an exclusive licence prevent the licensor from using its own trademark?
It depends on the wording: the exclusivity may bind third parties only, or the licensor itself as well. This point must be stated unambiguously.
Which formula allows the highest royalty?
Generally exclusivity, because it reserves the market to the licensee. But it requires exploitation obligations to prevent the trademark from being under-used.
Can a non-exclusive licence be turned into an exclusive one?
Yes, by amendment, provided the other current licences are respected and the economics of the agreement are rebuilt accordingly.
Must the licence be registered to be enforceable?
Recording the licence in the National Trade Mark Register (Registre national des marques) makes it enforceable against third parties (Article L714-7 of the Intellectual Property Code) and strengthens the licensee’s position, in particular if the trademark is assigned or in a dispute. It is not a condition of validity between the parties, but it is strongly recommended, especially for an exclusive licence on which the licensee bases long-term investments.
Official sources
- Article L714-1 of the French Intellectual Property Code, trademark licence: Légifrance (in French)
Every situation is different and we make no promise of outcome. To choose and draft an exclusive or non-exclusive trademark licence, our intellectual property lawyers assist you.
