This blog post was written by INTA's 2015 Non-Profit Committee.
Your nonprofit organization has developed a brand associated with its goods and services. If the organization has chapters, members, or other affiliates, you need to have a license agreement with each affiliate.
Your affiliates are going to use your marks to demonstrate to the public their connection with and support of your organization. If their use of your marks is improper, that use, while well meaning, actually could undermine the strength or validity of your marks. You should, therefore, regulate affiliates’ use of your marks through a license agreement. With such an agreement you permit each affiliate to use your marks if and only if the affiliate uses them in the proper way.
Your license agreement should contain, among other things, the following provisions:
- Trademarks. Define the trademarks that are covered by the agreement, including both registered and common-law marks.
- Scope of License. Specify the uses that the affiliate may make of your marks, including the goods and services on or in connection with which the affiliate may use your marks. Also specify any uses that the affiliate may not make of your marks.
- Ownership. Explicitly state that your organization is the owner of your marks.
- Trademark Use Guidelines. Explicitly state how your marks should appear when used by the affiliate. (See “Protecting Your Nonprofit Organization’s Trademarks: Provide Guidelines for Use of Your Marks by Supporters.”)
- Quality Control. Provide quality control provisions whereby your organization must approve an affiliate’s use of your marks prior to each proposed use and the organization has the right to request additional samples of use or an accounting of all samples of use.
- Termination. Include a termination provision in case an affiliate breaches the agreement.
License agreements are also important if your organization enters into a co-branding arrangement with another entity.
Nonprofit organizations based in the United States should bear in mind that the U.S. Internal Revenue Service levies an unrelated business income tax (UBIT) on income earned from activities regularly carried on by a tax-exempt organization that are not substantially related to the organization’s tax-exempt purpose. It is possible that income derived from trademark licensing could, under some circumstances, be considered UBIT.