What is Trademark Licensing?

Trademark licensing is a business practice in which a company purchases the license, or right to use, the trademark owned by another company. A doll manufacturer, for example, may purchase the rights to create a doll based on a popular cartoon character. The trademark itself, including rights to the name and likeness of the character, is retained by the company offering the license. In fact, that company is free to license other items based on the same character, and sometimes even other dolls, if allowed to do so by the trademark licensing agreement.

A trademark denotes legal ownership of a name, product or concept, much the same way a copyright denotes legal ownership of a creative work. The Walt Disney Company, for example, has a trademark on the name "Disney." Other companies cannot use the name for their own products unless they have entered into a trademark licensing agreement with the entertainment giant. Disney stringently protects its trademark, as it stands to make millions from such trademark licensing. The appearance of a popular trademark can guarantee sales of a licensed item, even if the manufacturer has no other connection with the trademark holder.

Trademark licensing began in the late 19th century, when the value of such licensing was first realized by businesses seeking to increase profitability. Rather than invest the money to create a nationally recognized identity, companies could license the trademarks of other companies that already had such national recognition. The licensing companies, in turn, benefited from increased exposure of their trademarks. In addition, they could increase their product lines without investing in expensive manufacturing concerns, such as doll-making facilities.

Trademark licensing has become increasingly widespread in the late 20th and early 21st centuries. Companies will sometimes license their popular trademarks to hundreds or even thousands of other companies, as happened with the animated cartoons Teenage Mutant Ninja Turtles and The Simpsons. Charles Schulz’ Peanuts cartoon characters and the superheroes of Marvel and DC Comics have also been the objects of multiple trademark licensing, as have many Disney characters.

In the last decade of the 20th century, large corporations began financing civic arenas and sports stadiums in exchange for trademark licensing in the name of the venue. This increased corporate presence in formerly public areas was not without controversy. Such trademark licensing was termed by some as “brandalism,” a play on the word “vandalism.”