How to protect your trademark on social media when granting a business license?

Trademark licensors are struggling to keep pace with the use of social media as a business advertising tool but, as technologies advance, the provisions of the license agreements are also changing.

A fundamental principle of the trademark law is that the owners must control the use of their marks.  This is quite easy if you have your own shop and advertise your own business. What happens when you grant a license to others?

Advertising, a special section in any license agreement

Quality control may be more difficult if the owner allows others to produce goods or provide services while using his trademark. A serious problem occurs when a licensee uses a trademark without authorization, for advertising purposes, which may damage the reputation of that mark. Unless the licensor exercises his control in advertising, he may find that an undecided or unsatisfied licensee has published a content which is inconsistent with the image the trademark owner wishes to communicate or, even worse, which distorts the trademark. A licensee may also post a content which unintentionally violates the trademark or advertising rights of other parties, exposing the trademark owner to disputes and potential damage.

To prevent such problems, most license agreements provide that the trademark owner must approve in advance all the notices which incorporate the mark. The licensee must inform the licensor of all the publications where he intends to promote the licensor’s mark and the licensor is to approve them within a certain period of time, usually between 10 and 15 days. This method functions well for print, radio and television advertising.

What changes in the era of social media

However, the fact that the business environment is now using social media to advertise their goods and services has made the 10-day deadline less relevant. The license holders wish and must have the capacity to communicate with customers using their favorite media. Five years ago, a website was a need. Today, most licensors wish to promote their business using Facebook, Twitter and Instagram. But the essence of these systems is ”now” not ”in 10 days from now”, which means that the decision making management should be changed so as to allow instant communication with end consumers who need real time information.

This evolution of the ways in which companies advertise their goods and services has led to a change in the implementation by licensors of the quality control over licensees. It is unlikely that most licensors can be available 24/7 to immediately approve all the requests sent by licensees before the postings on social media have already spread very much. The license providers are struggling to adapt themselves to this new reality. The challenge consists in developing a system which allows licensors to involve in daily interaction with others via social media and also in giving licensors the opportunity to control the quality of his trademark.

Solutions…

One solution is to dramatically shorten the deadline for the prior approval of advertising on social media. A licensor can ask a licensee to communicate any postings or tweets to the trademark owner. If no rejection is received by the licensee within 24 hours, he may post the content. If licensors consider this method to be non-functional, another solution is to remove the necessity of prior approval in certain situations. The license provider may agree that the licensee is allowed to use Twitter and Facebook to advertise the licensed services, without getting a prior approval from the licensor. In any of these scenarios, the licensors reserves the right to delete the tweets and remove or change the postings at any time.

The reality is that, at the time when the licensor finds his trademark to be improperly used, the tweet or the e-mail could have been read, sent, re-posted or saved by thousands of people. There is no practical way to avoid that. However, one solution to the problem is to include in the license agreement a provision according to which the licensee will be in significant breach and liable for damage if the licensor has to rectify the social media activity of the licensee more than three times within a certain moment/period. Such clause should provide a certain incentive, so that the licensee will exercise due care in using the trademark on social media.

A licensor should regularly review the internet and social media sites of the licensee to identify and solve a problem as soon as possible. To that end, the trademark may be registered in Google Alerts which will send notifications whenever a trademark appears on internet.

One of the benefits of social media is that they provides the licensor with the possibility to conduct due diligence before signing an agreement with a future licensee. The license provider should review the social-media accounts of each potential licensee. This will give the licensor the opportunity to assess how the licensee used social media in the past and whether a clause for posting verification is or not necessary to be imposed. To avoid such situations, the opinion of an expert in license agreements would be really helpful.