Licensing your trade mark? Learn the 7 clauses your licence

Credits: Vitaly Gariev (Unsplash)

Licence to Lose? Protect Your Trade Mark

You’ve registered your trade mark. You’ve licensed it to a distributor, franchisee, or related company. Job done — right?

Not quite. Under Australian law, a licence agreement that just sits in a drawer, without being actively used, can cost you the trade mark entirely. Two Federal Court cases show exactly how — and exactly what saves you.

The rule hiding in plain sight

Section 8(1) of the Trade Marks Act 1995 (Cth) says a person is an “authorised user” of your trade mark only if they use it “under the control of the owner.” Section 8(2) goes further: their use only counts as your use — for the purposes of defending against a non-use removal action — “to the extent only that” you actually control it.

Section 8(3) and 8(4) spell out two accepted forms of control: quality control over the goods or services, or financial control over the licensee’s trading activities. Section 8(5) confirms control isn’t limited to those two — but you need to show something real.

That single word, “control,” is where brands are won or lost.

The case that changed everything

In Lodestar Anstalt v Campari America LLC 2016 FCAFC 92, Campari licensed its WILD GEESE and WILD GEESE WINES trade marks to an overseas wine company. The licence had quality control clauses. Wine was being sold. Surely that’s “use”?

The Full Federal Court disagreed — unanimously. Having the right to control quality in a contract isn’t enough. Campari never actually checked, approved, or enforced anything in three years. The court held that control must be “actual control… as a matter of substance,” not a theoretical possibility sitting in clause 12 of an agreement nobody looked at again. Both trade marks were removed from the Register. A real, trading brand lost its legal protection over a paperwork gap.

The exception: family businesses get a break

Three years later, Trident Seafoods Corporation v Trident Foods Pty Ltd 2019 FCAFC 100 softened this — for corporate groups. Trident Foods owned the TRIDENT marks; its related company Manassen sold the products. There was no formal, actively-policed licence at all. Yet the Full Court found “authorised use” anyway, because the companies shared directors and operated with a “unity of purpose” — one common goal of maximising sales and protecting the brand. Where Lodestar involved two unrelated companies with nothing but a contract between them, Trident involved a genuinely intertwined group. Control could be inferred rather than proven clause by clause.

The lesson: if your business structure doesn’t have that tight, common-purpose relationship, don’t rely on hope — build real control into your licence and use it.

The 7 things your licence needs

A quality control mechanism, not just a clause — the right to approve packaging, marketing, or service standards, actually exercised (s 8(3)).
Or a financial control mechanism — approval rights over pricing, budgets, or accounts if quality control isn’t practical (s 8(4)).
An inspection and reporting rights clause — and a diary reminder to actually use it.
A sign-off process for new materials, packaging, or marketing before they go live — with a paper trail.
Record-keeping obligations on your licensee, so you have evidence of oversight if ever challenged.
A registered “authorised user” recordal, giving your licensee useful rights under section 26 (like standing to sue infringers) and giving you a documented, formal relationship the Registrar recognises.
A genuine enforcement pathway — a right to correct or terminate for non-compliance, actually acted on if breached.

Why this matters more than most business owners realise

A trade mark is often the single most valuable, least protected asset in a business. It doesn’t get insured, audited, or reviewed the way physical assets do — until a competitor spots the gap and files a non-use application. By then, it’s too late to go back and fix three years of inaction.

The good news: this is entirely preventable. A properly drafted licence, paired with a simple annual compliance habit — checking in, approving materials, keeping records — closes the gap completely.

If you licence your brand to anyone, including a related company, it’s worth having your agreement reviewed against these seven points before it becomes someone else’s argument in a courtroom.

Get in touch for a trade mark licence review, and protect the brand you’ve spent years building.