Recording a Trademark Licence in China: Who Files, What Is Needed and Why It Matters

Introduction: recording a licence is not optional housekeeping

Where a foreign brand owner licenses a Chinese company to use its mark, or where a Chinese subsidiary is licensed by its overseas parent, there is a filing that many owners either overlook or defer. Recording the licence with CNIPA appears administrative. In practice it determines whether the licence is effective against third parties, whether royalties can be remitted, and whether the arrangement survives a challenge.

This article deals with the procedural side: when a recordal is needed, who files it, and what the filing involves.

What a licence recordal does, and what it does not

A trademark licence does not require recordal to be valid between the parties. The licensor and licensee can agree whatever they wish, and the agreement binds them without the office's involvement.

What recordal adds is effect against third parties. An unrecorded licence may leave the licensee exposed in enforcement, and may complicate matters in an infringement action or a customs seizure. Recordal is also generally expected in practice whenever the licence needs to be evidenced to an authority, a bank or a customs body.

Two limits are worth stating at the outset. Recordal does not transfer ownership, and it does not create rights the licensor did not have. It is a public registration of an existing arrangement, not a source of rights.

Who files

The application is normally filed by the licensor, by the licensee, or by an appointed agent acting for either. Where the licensor is a foreign entity without habitual residence or a place of business in China, a Chinese trademark agency must be appointed to act.

This is a frequent point of confusion. An overseas parent that has licensed its Chinese subsidiary may assume the subsidiary can handle the recordal directly. The subsidiary can act, but where the licensor is a foreign party the agency requirement attaches to that party, and the practical consequence is that a Chinese agency should be instructed.

What the filing involves

The recordal application sets out the parties, the registration being licensed, the goods or services covered, the type of licence, and the term. Supporting documents typically include the licence agreement or an extract from it, and evidence of the parties' legal existence.

Two practical points dominate. First, the description of the licensed goods or services, and the term of the licence, must be consistent with the agreement. A recordal that describes a scope broader than the agreement, or a term longer than it, will be objected to. Second, where the agreement is in a foreign language, a Chinese translation is required for the recordal, and the translation is what the office examines. Ambiguity in the original becomes an objection in translation.

Licence types and why the distinction matters

Chinese practice distinguishes several forms of licence, and the distinction is not cosmetic:

Exclusive licence. Only the licensee may use the mark, to the exclusion of the licensor itself.
Sole licence. The licensor may not licence others, but may continue to use the mark itself.
Ordinary licence. The licensor may use the mark and licence others.

The licence type determines who may bring infringement proceedings and on what basis. Under the arrangements governing enforcement, an exclusive licensee may sue in its own name where the licensor does not act. A sole licensee may do so where the licensor neither sues nor licenses another. An ordinary licensee generally must obtain the licensor's authorisation.

Recordal is what makes the licensee's status visible to a court or an enforcement authority. A licensee asserting exclusive rights under an unrecorded licence faces an avoidable evidentiary problem.

Term, renewal and termination

The recordal must reflect the actual term of the licence. Where the licence is renewed, the recordal should be updated. Where it terminates, the parties should consider whether to record the change, since a recordal that remains on the register after the licence has ended misstates the position.

A common error is to record a licence for a term longer than the remaining life of the registration. A licence cannot outlast the registration it depends on, and a recordal framed that way will be queried.

Quality control and the licensor's exposure

One substantive point deserves mention because it has procedural consequences. Where a licensor fails to exercise reasonable control over the quality of goods or services provided by the licensee, there is a risk that the licence is treated as an unregulated transfer of rights rather than a genuine licence.

If the arrangement is recharacterised in that way, the recordal is not the problem — the underlying agreement is. But the recordal is where the arrangement becomes visible, so it is the point at which the agreement's quality-control provisions should be reviewed.

The relationship with a licence that is never recorded

Some licensors take the view that because the licence binds the parties without recordal, recordal can be deferred indefinitely. That is a defensible commercial position only if nothing ever needs to be proved.

The situations in which it stops being defensible arrive without much warning. A customs authority seizes counterfeit goods and asks the licensee to establish its standing. A court asks an exclusive licensee to show that it holds the rights it asserts. A bank examining the value of the mark as collateral asks who, if anyone, has rights over it. In each case the licensee needs the recordal to exist, and it cannot be produced retroactively to the date it was needed.

The practical rule is to record the licence at the time it is granted, rather than when it first becomes necessary to prove.

Royalty remittance and the recordal

There is a further reason foreign licensors record licences: remittance of royalties out of China. Chinese banks and the tax authorities expect the licence arrangement to be documented, and the recordal is part of that documentation. A licensor attempting to repatriate royalties under an unrecorded licence should expect questions, and possibly refusal.

This is a payment-side concern rather than a trademark-law one, but it is usually the moment at which the omission becomes apparent, and it is the reason recordal is often described as essential rather than merely advisable.

Frequently asked questions

Is it mandatory to record a trademark licence in China?

It is not required for the licence to bind the parties, but recordal is what gives the licence effect against third parties and is generally expected wherever the licence must be evidenced to an authority, a bank or a customs body.

Who can file the recordal application?

The licensor, the licensee, or an agent acting for either. Where the licensor is a foreign entity without habitual residence or a place of business in China, a Chinese trademark agency must be appointed.

What documents are required?

The application identifying the parties, the registration, the goods or services, the licence type and the term, together with the licence agreement or an extract and evidence of the parties' legal existence. A Chinese translation is required where the agreement is in a foreign language.

Can my Chinese subsidiary file it directly?

The subsidiary can act for itself, but where the licensor is a foreign party the agency requirement applies to that party. In practice a Chinese trademark agency is instructed for the recordal.

What do exclusive, sole and ordinary licences mean?

An exclusive licence excludes even the licensor. A sole licence permits the licensor to use the mark but not to licence others. An ordinary licence permits the licensor to use the mark and to licence others. The type determines who may sue and on what basis.

Does the recordal need updating if the licence changes?

Yes. A renewal or a change in terms should be reflected, and a recordal that remains on the register after the licence ends misstates the position. A recordal should also not claim a term longer than the registration's remaining life.

Does recordal affect my ability to enforce the mark?

It supports enforcement. The licence type determines who may bring proceedings, and under what conditions. Recordal is what makes the licensee's status visible to a court or an enforcement authority.