Licensing your brand to a hotel owner

As international hotel chains grow in stature across the Middle East, foreign brand owners need to be aware of their rights, in order to avoid brand exploitation, issues of co-branding and the eventual dilution of their message, writes Elizabeth Spong, a senior lawyer from Dubai-based Denton Wilde Sapte

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By  Sarah Gain Published  September 24, 2006

|~|final04.jpg|~|A hotel owner only needs a non-exclusive licence. This way, the foreign brand owner (who may also be the hotel operator) is free to license the brand to another owner of a hotel.|~|Dubai is ahead of Las Vegas in hotel investment per capita and the foundations for new hotels are being laid all over the emirate. Meanwhile, hotel owners are frantically negotiating contracts with international hotel operators — the protectors of some of the best hotel brands in the world. Brand exploitation through hotel management deals is not too different from brand exploitation through a franchisee or distributor. Protecting these brands is the Trademark Licence Agreement (TMLA), but navigating through the legislation of a TMLA requires time, care and attention. Do not allow the local licensee to register your trademarks in its own name. The registration of trademarks to cover all the emirates of the UAE is possible through the UAE’s Ministry of Economy and Planning (MEP) under Federal Law No. 8 of 2002. Before a foreign brand owner even enters into a TMLA with a prospective UAE-based licensee, it should file trademark application(s) with the MEP in the relevant goods/services classes. The foreign brand owner or its intellectual property (IP) holding entity should be the applicant. If not, time and money will be wasted if the licensee refuses to assign the trademark registrations back to you upon termination of the TMLA. If the licensee wants an exclusive licence, my advice is “don’t put all your eggs in one basket...” The type of licensing scenario will determine whether a non-exclusive or exclusive licence is appropriate. For example, according to the Commercial Agencies Law (Federal Law No. 18 of 1981), a commercial agent (similar to a distributor) distributing goods for the foreign brand owner must be given an exclusive licence. This does not necessarily mean exclusivity across the UAE. It is possible to license one or more brands from a stable of brands to a commercial agent to cover one, some, or all of the emirates of the UAE. Conversely, a hotel owner only needs a non-exclusive licence. This way, the foreign brand owner (who may also be the hotel operator) is free to license the brand to another owner of a hotel being built on, say, The Palm, Dubailand or on The World. Similarly, if a sub-franchisee will be operating its sub-franchise in a defined territory in Dubai bordering on another sub-franchisee’s defined territory, there is no point giving either of the sub-franchisees an exclusive licence to cover the whole of Dubai. ||**||Licensee’s obligations|~||~||~|Do include a detailed list of obligations. Rather, include a range of obligations regarding proper use of the brand so it is easier to point to a genuine justifiable reason to terminate the TMLA. TMLAs should have a fixed term or terminate automatically upon termination of a related contract (e.g. the hotel operators’ agreement). This should minimise difficulties associated with terminating the arrangement with the licensee and avoiding the need to pay compensation for unjustified termination. Do consider where the licensee has its assets, and do consider a carve out for injunctions. Foreign brand owners will want the greatest ability to enforce the TMLA in the UAE, as this is likely to be where the licensee resides or has its assets. Furthermore, UAE courts will automatically have jurisdiction to decide disputes arising out of the TMLA in various circumstances. Therefore, unless you provide for disputes to be referred to arbitration (in Dubai at the Dubai International Arbitration Centre or overseas now that the UAE has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards), it may be pointless to provide for overseas courts to have jurisdiction. As the concept of injunctions are not widely recognised in the UAE, you could provide for a carve out to any court of competent jurisdiction for injunctive relief. Be aware, however, that it may be difficult enforcing an interim award for an injunction in the UAE. UAE courts recognise a foreign governing law clause — therefore, you could provide for the TMLA to be governed by a foreign governing law (for example, one which does recognise injunctive relief). Unfortunately, however, it is not clear-cut as to whether Dubai courts will apply a foreign governing law to a dispute over which they have jurisdiction. Other items on a licensee’s wish list may include the use of your brand name in corporate communications. Don’t let the licensee use your brand in their corporate name. Some licensees will want to establish a new entity to run the business involving the foreign brand. Many ask if they can use the brand name in the name of that new entity. Even though they will not own the trademark merely as a result of using the trademark in their corporate name, there is no benefit in letting them use your brand name. This is especially the case if the local entity is not a true joint venture with shares being held by the foreign brand owner. If the licensee is given this right, the TMLA should clearly require the licensee to officially change the name of its entity and remove the brand from any materials showing the licensee’s name following termination of the TMLA. ||**||Co-branding|~||~||~|Co-branding does require joint ownership of IP rights in co-branded materials. Don’t let the licensee use the materials once your licensing arrangement is over. In some circumstances, the foreign brand will appear side by side with the licensee’s own brand name. For example, the licensee might own a shopping centre that is marketed under the licensee’s own name. It may then want the international brands sold in that centre to appear beside the name of the shopping centre on marketing material. The TMLA can provide that the IP in these co-branded materials be jointly owned by the foreign brand owner and the local licensee. However, upon termination of the TMLA, all use of co-branding materials will cease and licensee should delete the brand from any signage, websites, brochures etc. With branded websites, do register any domain names featuring your brand in your own name. Many franchise agreements give the franchisee the right to establish their own local website using a local domain name, e.g. www.brandname.ae, in order to market the franchise throughout the territory covered by the franchise agreement. In such cases, the local domain name should be registered in the name of the foreign brand owner/franchiser as this will avoid any need to resort to a mechanism such as the Uniform Domain Name Dispute Resolution Policy in order to require the licensee to stop using your brand in its domain name if it refuses to do this voluntarily. Similarly, it will then be easier for the domain name to be used by any new franchisee. And finally, don’t feel compelled to register the TMLA. You have your TMLA all signed up. The UAE Trademarks Law allows the parties to register the TMLA, which most likely means that it is enforceable against third parties. For example, the licensee can establish to an infringer or any other third party that only the licensee has the rights to use the brand in the relevant territory. This is most relevant if the licensee is exclusive and you are relying on its co-operation in preventing a third party from infringing your trademark in the UAE. ||**|||~||~||~|Elizabeth Spong is a senior lawyer from Dubai-based firm, Denton Wilde Sapte. For further information please see www.dentonwildesapte.com.||**||

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