Licensing a Trademark in China: Exclusive, Sole and Non-Exclusive Licences

Licensing a Chinese trademark registration to a distributor, manufacturer, franchisee or joint venture is routine, but a licence drafted for another country often misses points that matter under Chinese law. The type of licence decides who can sue infringers. Some clauses are mandatory, and the contract must also work with recordal, customs protection and cross-border royalty payments. This guide covers the three licence types, the clauses a China licence should contain and the practical points foreign licensors run into.

Three types of licence

• Exclusive licence: within the agreed term, territory and goods, only the licensee may use the mark. The trademark owner itself may not use it.
• Sole licence: the owner and the licensee may both use the mark, but the owner may not license anyone else.
• Non-exclusive licence: the owner may use the mark and license any number of other licensees.

The type decides who can take action against infringers. Under the Supreme People's Court interpretation on trademark civil disputes:

• an exclusive licensee may sue in its own name;
• a sole licensee may sue together with the owner, or alone if the owner does not sue;
• a non-exclusive licensee may sue only with the owner's express authorisation.

If the contract does not state the type clearly, both sides can lose time when an infringement case starts.

Clauses a China trademark licence should contain

1. The marks and registration numbers, including the Chinese-character mark if one is used, and the goods or services covered. Use outside the registered goods is not licensed use.
2. Licence type: exclusive, sole or non-exclusive.
3. Territory and term. The term should not run beyond the registration. If it does, provide for renewal.
4. Royalties and payment, including who bears taxes (see below).
5. Quality control: standards, inspection rights and sampling. Chinese law requires the licensor to supervise the quality of the licensee's goods.
6. Labelling: the licensee must show its own name and the place of origin on the goods. This is mandatory under Article 43 of the Trademark Law.
7. Sub-licensing: prohibited unless expressly allowed.
8. Enforcement: who monitors the market, who files platform and customs complaints, who pays and how damages are shared.
9. Maintenance: who handles and pays for renewal, and who answers non-use cancellation actions.
10. No filing, no challenge: the licensee may not apply for identical or similar marks, including Chinese transliterations, and may not attack the licensed registration.
11. Termination: grounds for ending the licence, how long the licensee may sell remaining stock, and the transfer of any marks it registered in breach.
12. Recordal: who files the licence recordal with CNIPA.
13. Language and disputes: a bilingual contract with a prevailing language, and arbitration (for example CIETAC or HKIAC) or a chosen court.

Recordal: not a condition of validity, but worth doing

Article 43 requires the licensor to report the licence to CNIPA for recordal. An unrecorded licence is still valid between the parties, but it cannot be raised against a bona fide third party, for example a later assignee of the mark. Recordal also makes it easier for the licensee to prove its standing to online platforms and courts. Details are in our guide to China trademark licence recordal.

Points specific to foreign licensors

• Register first, including the Chinese name. A licence is only as strong as the Chinese registration behind it. A distributor that knows your brand and registers it first is a common problem. See opposition, invalidation and non-use cancellation.
• Customs. If your marks are recorded with China Customs, list licensees and contract manufacturers in the recordal so their genuine exports are not held. See China Customs IP recordal.
• Royalties and tax. Royalties paid from China to a foreign licensor are generally subject to Chinese withholding tax, often reduced under a tax treaty. Larger outbound payments also need a tax filing before the bank remits. Decide in the contract whether royalties are gross or net of tax, and take tax advice before signing.
• Use counts for you. Use by a licensee counts as use of the mark and helps defend against non-use cancellation. Ask licensees to keep sales records, invoices and photos of goods bearing the mark.
• Keep the registration alive. Renewals, changes of name or address and assignments must be recorded, or the licence and the recordal can fall out of step. See Keeping a China Trademark Alive.

Frequently asked questions

Can I license a mark that is still pending in China? You can sign a licence, but recordal is only available for registered marks. Provide for recordal once registration is granted.

Does an assignment of the mark end the licence? A recorded licence can be relied on against the assignee. An unrecorded licence may not survive a transfer to a buyer who did not know about it.

Can my Chinese subsidiary use the mark without a licence? In practice it should still have a written licence, recorded with CNIPA, so that its use clearly counts as licensed use and it can deal with platforms, customs and courts.

J&C Intellectual Property Agency (JCIPO), founded in 2008, is a CNIPA-recorded trademark agency and a member of the China Trademark Association. We draft licence terms, file recordals and act for foreign licensors in China, see our assignment and licensing service. Patent filings are handled through an affiliated patent agency.