A Court of Appeal judgment handed down this month should be required reading for anyone who licenses their trade mark to a third party. It is a reminder that getting the commercial deal right is not enough. The paperwork has to follow.
What happened
Lifestyle Equities owns the Beverly Hills Polo Club trade mark and licenses it to businesses that sell goods under the brand. Frasers Group, formerly Sports Direct, was found to have infringed those trade marks by selling goods under a rival brand. The infringement was proved. Frasers lost the underlying case.
The problem arose at the damages stage. Lifestyle Equities tried to claim not just its own losses but the losses suffered by its licensees, the businesses actually trading under the brand. The Court of Appeal ruled that it could not. The licences had not been registered at the UK Intellectual Property Office before the dispute began, and the court held it was too late to register them retrospectively once proceedings had started.
A significant portion of the damages were lost. Not because the infringement was not real. But because the licensing paperwork was not in order.
Why this matters for smaller businesses
Large brand owners with sophisticated legal teams can get this wrong. Smaller businesses with licensing arrangements that have grown organically over time, often without formal legal input at every stage, are considerably more exposed.
The scenario is more common than people think. A business registers a trade mark. It allows a distributor, a franchisee or a retail partner to sell goods under that brand. The arrangement works well and grows over time. The licence agreement may exist in some form but it has never been formally registered at the IPO. Nobody thinks about it until something goes wrong.
When something does go wrong and infringement occurs, the business discovers that it cannot recover the full value of the losses suffered across its licensing network. The rights it thought it had are worth considerably less than expected.
What the law requires
Under section 25 of the Trade Marks Act 1994, a licence of a registered trade mark must be registered at the UK Intellectual Property Office to be effective against third parties. An unregistered licence is valid between the two parties who signed it. But it cannot be relied upon in infringement proceedings to recover the licensee’s losses, and it does not bind a third party who acquires the trade mark or an interest in it.
Registration is straightforward and inexpensive. The IPO charges a modest fee and the process can be completed online. There is no good reason not to do it.
What to do now
If your business licenses its trade marks to any third party, whether formally or informally, take three steps.
First, review every licensing arrangement currently in place. This includes formal licence agreements but also any informal arrangements where a third party uses your brand under an understanding rather than a written contract.
Second, check whether each licence has been registered at the UK Intellectual Property Office. If it has not, register it. The IPO’s online portal makes this straightforward. Your trade mark attorney can assist if needed.
Third, if any of your licensing arrangements are informal or undocumented, get them properly recorded in a written agreement before registering. An unwritten arrangement cannot be registered and offers very limited protection.
The broader lesson
Registering a trade mark is the beginning of protecting it, not the end. The commercial arrangements built around it need to be documented and registered with the same care as the underlying right. If they are not, the value of the trade mark in the event of infringement may be significantly less than you expect.
IP insurance covers the legal costs of enforcing trade mark rights against infringers. But as this case demonstrates, no insurance policy can recover losses that are unavailable as a matter of law. The time to get the paperwork right is before a dispute arises.
This article is provided for general information purposes only and does not constitute legal advice. Readers should seek independent legal advice on their specific circumstances before taking any action.
