Trademark Licensing in Saudi Arabia: What It Is and Key Licence Agreement Clauses
Licensing your trademark lets you earn income from it while keeping ownership, provided the licence agreement is carefully drafted and the licence is recorded with the competent authority.
A trademark licence is an agreement under which the owner of a registered trademark permits another person (the licensee) to use it on specified goods or services, for an agreed term and scope, either for payment or free of charge, while ownership remains with the owner. For the licence to be enforceable against third parties, it must be recorded with the Saudi Authority for Intellectual Property (SAIP).
What Is the Difference Between Licensing and Assigning a Trademark?
- Under a licence, the mark remains the property of its owner, and the licensee obtains a temporary, conditional right of use.
- Under an assignment, the mark passes permanently to the new owner with all its rights.
This is why licensing suits owners who want to expand or generate income without giving up their mark, for example by expanding into other cities through a local partner, allowing a manufacturer to produce goods bearing the mark, or collaborating with another brand on a joint product for a fixed period. In all of these cases, the owner remains responsible for renewing the mark and keeping its registration in force.
What Is the Difference Between a Trademark Licence and a Franchise?
A trademark licence focuses on the right to use the mark. A franchise, by contrast, is a broader model that usually involves transferring the business system, know-how, support and training in addition to the mark, and in Saudi Arabia it is subject to the Franchise Law and its specific requirements. If your arrangement goes beyond simply using the mark, you may be dealing with a franchise that must comply with that law.
What Types of Trademark Licence Are There?
- Exclusive licence: the licensee alone may use the mark within the agreed scope — the owner grants no other licences and does not use the mark itself in that scope, unless the agreement provides otherwise.
- Non-exclusive licence: the owner may grant multiple licences to more than one party.
- Sole licence: granted to a single licensee only, while the owner keeps its own right to use the mark.
The right type depends on your business strategy and the degree of control you want over your mark.
What Are the Key Clauses in a Trademark Licence Agreement?
- Definition of the mark: the registration number, an image of the mark, the classes, and the specific goods or services covered by the licence.
- Type of licence: exclusive, non-exclusive or sole.
- Territory: a city, a region or the whole Kingdom.
- Term and renewal: the licence term should not exceed the mark's current term of protection, and the renewal mechanism should be specified.
- Consideration: a fixed amount or a percentage of sales (royalty), and the method of calculation, payment and audit.
- Quality standards and control: the owner's right to inspect products or services and approve marketing materials, to protect the mark's reputation.
- Sub-licensing: whether or not the licensee may grant licences to others.
- Protection of the mark: who takes action against infringers and who bears the costs.
- Termination: grounds for early termination, such as breaches of quality standards or late payment, and what the licensee must do after termination.
- Dispute resolution: the competent court, or arbitration under the Arbitration Law.
Does a Trademark Licence Have to Be Recorded With SAIP?
Yes. The licence is recorded in SAIP's trademark register through its online platform, and it only takes effect against third parties from the date of recordal. This usually requires submitting the licence agreement or a summary of it, the parties' documents, a power of attorney when filing through an agent, and payment of the fee set by SAIP. You can use our trademark licensing service to complete this.
What Are the Benefits of Licensing for the Owner and the Licensee?
For the owner, licensing makes it possible to enter new markets without direct investment in branches or factories, generates recurring income from an existing asset, and extends the mark's reach. The licensee benefits from the reputation of an established brand and a ready customer base instead of building a new brand from scratch. These benefits, however, depend on a clear contractual relationship: a poorly structured licence can turn the mark into a source of disputes rather than income, and its reputation may suffer from a substandard product that the owner is unable to stop.
What Are Common Mistakes in Licence Agreements?
- Describing the goods and services too broadly, allowing unintended expansion.
- Omitting quality control clauses, exposing the mark's reputation to harm.
- Failing to specify what happens to stock and marketing materials when the licence ends.
- Not recording the licence with SAIP.
- Using a ready-made template that does not suit the nature of the business or Saudi law.
Frequently Asked Questions
Q: Can I license a mark whose application is still under examination? A: A contractual agreement is possible, but official recordal of the licence is linked to the registered mark, so it is advisable to review the situation with a specialist.
Q: Can the licensee sue infringers? A: That depends on what the agreement and the relevant laws provide, so this issue must be dealt with expressly in the contract.
How Can We Help?
FATIMA AL ASMARI Law & Intellectual Property Company in Jeddah drafts and reviews licence agreements and records them with the competent authority for clients in all regions of the Kingdom. Book a consultation and let us help you license your trademark with confidence.
Legal sources
This article is for general awareness and is not legal advice.
