Avoid These Costly Mistakes: How to Licence a Trademark in Nigeria the Right Way
Introduction
In Nigeria’s fast-growing commercial environment, trademarks are more than just brand identifiers—they’re valuable assets. Yet, many businesses unknowingly make costly mistakes when trying to licence a trademark in Nigeria. Whether it’s using an unregistered trademark, failing to record the licence, or neglecting proper legal documentation, the risks can be severe—from losing IP rights to facing lawsuits. This ultimate guide will help you steer clear of these common pitfalls and walk you through the correct and legal way to licence a trademark in Nigeria without falling into traps that could cost you dearly.
What is a Trademark?
A trademark is a recognizable sign, design, logo, phrase, or combination thereof that identifies products or services of a particular source from those of others. In Nigeria, trademarks are primarily governed by the Trademarks Act, Cap T13 Laws of the Federation of Nigeria 2004, and regulated by the Trademarks, Patents and Designs Registry under the Federal Ministry of Industry, Trade and Investment.
Understanding Trademark Licensing
Licensing a trademark means that the trademark owner (licensor) gives permission to another party (licensee) to use the trademark under defined terms and conditions. This does not transfer ownership, but rather allows shared usage rights—typically for a fee or royalty.
Why Licence a Trademark in Nigeria?
There are compelling reasons to licence a trademark in Nigeria, especially for businesses looking to scale or expand through franchising, manufacturing partnerships, or product distribution:
Monetization – Turn a registered trademark into a revenue stream.
Expansion – Leverage local partners to enter new markets.
Brand Visibility – Enhance brand exposure without directly operating in new territories.
Franchise Development – Lay the foundation for national or regional franchising.
Legal Framework Governing Trademark Licensing in Nigeria
Before entering into a trademark licence agreement, understanding the Nigerian legal framework is crucial. The Trademarks Act does not expressly provide for licensing, but licensing is recognized and allowed under common law principles and practice directions of the Trademarks Registry.
Additionally, the Nigerian Intellectual Property Office (IPO) recognizes recordal of licence agreements, which is crucial for enforcement against third parties.
TYPES OF TRADEMARK LICENSING
A Proprietor of a Trademark can assess his licensing options in the following ways:
SOLE LICENSING
This happens when the owner gives a single licensee permission to use the trademark for a set amount of time. As a result, both the owner and the licensee may use the trademark, and another licensee cannot be granted the same rights.
EXCLUSIVE LICENSING
This happens when the owner gives a licensee the sole commercial licence to use his trademark. In this case, the trademark in question does not give the licensor any commercial rights.
NON-EXCLUSIVE LICENSING
This occurs where the proprietor permits one or more licensees to exploit the trademark.
ADVANTAGES OF TRADEMARK LICENSING INCLUDE
PASSIVE INCOME
An owner of a trademark may grant licences for the use of the mark to as many users or licensees as is practical without running the risk of losing ownership rights, thereby creating additional revenue streams by each such user.
BUSINESS EXPANSION
As this kind of arrangement needs less cash and maximises earnings, it aids a licensee in starting a new business opportunity. The reputation and consumer knowledge of the brand assist the licensee firm as well, and if the licensee chooses to enhance a product, they may be able to make a little amount more money as a result.
ACCESS INTO FOREIGN MARKETS
Licensing a trademark helps the product enter into new markets much easier than if the trademark was used solely by the proprietor. Thus, cumbersome border and regulatory requirements which include the tariff barriers are avoided due to the usage by a domestic company.
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The more often a trademark is utilised, the more well-known the brand is. Shared expenses, especially those for advertising and promotion, are possible.
DISADVANTAGES OF TRADEMARK LICENSING
TRADEMARK THEFT
Since the owner cannot control how the mark is used, especially when it has been licenced to several licensees, licencing exposes the trademark to the market and opens the door for theft.
Step-by-Step Guide on How to Licence a Trademark in Nigeria
Let’s break down the procedure into simple, actionable steps:
Step 1: Register the Trademark
Before licensing, the trademark must be registered or at least filed with the Trademarks Registry. A non-registered trademark cannot be formally licensed under Nigerian law.
Step 2: Draft a Trademark Licence Agreement
The core document of the process is a well-drafted trademark licence agreement. This agreement should contain:
Names and addresses of licensor and licensee
Description of the trademark (with classes)
Territory where the trademark will be used
Duration of the licence
Type of licence (exclusive, non-exclusive, etc.)
Quality control clauses
Royalty/fee structure
Renewal and termination clauses
Dispute resolution mechanism
Tip: Always consult a qualified IP lawyer to draft or vet the licence agreement to avoid loopholes.
Step 3: Record the Licence Agreement with the Nigerian Trademarks Registry
After execution, the licence agreement must be recorded with the Trademarks Registry. This process provides legal validity and enforceability against third parties.
Requirements for Recordal:
Copy of the executed licence agreement
Power of Attorney (if filed by an agent)
Duly completed Form TM 5
Payment of applicable government fees
Once accepted, the Registry will issue an acknowledgement of recordal.
Case Law and Judicial Interpretation
The Nigerian courts have recognized trademark licensing under common law. While case law on this specific subject is still evolving, certain rulings provide clarity on related IP rights.
Case Example: Ferodo Ltd v. Ibeto Industries Ltd (2004) 5 NWLR (Pt. 866) 317
In this case, the Supreme Court emphasized the significance of proof of use and rights derived through licensing in trademark enforcement, showing the judiciary’s willingness to accept licence arrangements, provided they are legally documented.
Legal Considerations and Pitfalls to Avoid
Licensing a trademark is more than a business transaction—it’s a legal relationship with long-term implications. Watch out for:
Failure to Register the Licence – Can render the licence unenforceable.
Ambiguity in Scope – Leads to future disputes.
Lack of Quality Control – Can cause trademark dilution or cancellation.
Non-Payment of Royalties – Breach of agreement terms.
Improper Jurisdiction Clauses – Especially for foreign companies.
Cross-Border Trademark Licensing in Nigeria
Foreign companies seeking to licence a trademark in Nigeria must ensure:
The trademark is either registered in Nigeria or pending approval
They work with local counsel to adapt agreements to Nigerian laws
Compliance with the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, if royalties are to be remitted abroad
Registration with the National Office for Technology Acquisition and Promotion (NOTAP), especially where technology transfer is involved
Tax and Commercial Implications
Trademark licensing arrangements are subject to:
Withholding Tax on royalties (typically 10%)
Stamp Duties on the agreement
VAT, depending on structure
Tax compliance is critical for both licensor and licensee. Always seek advice from a tax lawyer or consultant to ensure alignment.
Best Practices to Licence a Trademark in Nigeria Successfully
Always use a written, legally vetted agreement
Maintain quality control to protect brand value
Keep records of payments and usage
Register the licence agreement promptly
Periodically review the terms
Renewal and Termination of Licence Agreements
Renewal:
Agreements can be renewed upon mutual consent before expiration.
Termination:
Termination clauses should be detailed, including breach scenarios, notice periods, and survival clauses.
Sample Clause: Quality Control
“The Licensee shall ensure that all goods and services bearing the trademark meet the standards prescribed by the Licensor. Failure to maintain quality standards shall constitute a material breach of this agreement.”
Role of Legal Professionals
To licence a trademark in Nigeria effectively, you’ll need:
A trademark agent to file documents
A corporate lawyer to draft the agreement
Possibly a tax consultant for royalty structuring
This ensures your business is legally protected and commercially sound.
THREAT TO REPUTATION
The reputation of the licensor and licensee may suffer if any aspect of the licencing agreement is handled improperly or violated in a way that hurts or discomforts a consumer or client. If several licences are made available, the reputation could suffer on a global scale, hurting many businesses that are not participating. Having an effective quality control clause or policy in place is the only way to address this potential issue. To ensure brand consistency across all licensees, many licence agreements provide a list of best practises to adhere to.
Given the advantages and disadvantages of trademark licencing, it is necessary to underline the significance of creating a licencing agreement between the parties that contains sections outlining each party’s rights and responsibilities.
The requirements for a licencing agreement is as follows:
The details of parties The type of license being offered Description of the trademark The territory where the licensee is to operate Permitted use of the trademark The products or services the licensee may offer with the registered trademark Effective dates Duration/Termination Clause Remuneration/Royalty Clause Provision for Quality control Dispute Resolution Clause
It is interesting, nonetheless, that the main obstacle to registering a trademark licence agreement in Nigeria is the registrar’s right to reject it on the grounds that doing so may encourage market trafficking.
Conclusion
Licensing a trademark in Nigeria is a powerful tool for growth, branding, and market expansion—but it requires meticulous attention to legal and commercial details. From registration and agreement drafting to regulatory recordal and royalty structuring, each step must be handled with precision.
If you’re looking to licence a trademark in Nigeria, don’t go it alone. Partner with legal experts who understand the terrain and can safeguard your intellectual property every step of the way.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
TEL: 08065553671, 08024230080