A trademark is more than a legal registration. It represents trust, reputation, and commercial value built over time. For many businesses, especially those expanding into new markets or working with distributors, manufacturers, or franchise partners, trademark licensing becomes a powerful business tool.
In Nepal, trademark licensing is legally permitted, but it must be handled carefully. A poorly drafted or unrecorded license can weaken your brand, create ownership disputes, or even expose you to loss of rights. This article explains how trademark licensing works in Nepal, what the law allows, the risks involved, and how to license your brand safely and strategically.
What Is Trademark Licensing
Trademark licensing is a legal arrangement where the owner of a registered trademark (the licensor) permits another party (the licensee) to use the trademark under defined conditions. Ownership of the trademark does not change. Only the right to use the mark is granted, usually for a specific purpose, territory, or duration.
In everyday business terms, licensing allows you to monetize your brand without selling it. For example, a Nepali clothing brand may allow a manufacturer to use its brand name on garments, or a foreign brand may license its trademark to a local distributor in Nepal.
Legal Basis for Trademark Licensing in Nepal
Trademark licensing in Nepal is governed by the Patent, Design and Trade Mark Act, 2022 (1965). The Act allows a registered trademark owner to grant permission to another person to use the mark, provided the permission is in writing and properly recorded.
The law also makes it clear that unauthorized use of a registered trademark is prohibited. This means licensing is not optional documentation. It is a legal safeguard for both the brand owner and the user.
In practice, the Department of Industry (DOI) is the authority that records trademark licenses. A license agreement that is not recorded with the Department may have limited legal value in disputes.
Types of Trademark Licenses in Nepal
Understanding the structure of the license is essential before drafting an agreement.
Exclusive License
Only one licensee is allowed to use the trademark in the defined territory or sector, and even the trademark owner may be restricted from using it in that scope.
Non-Exclusive License
The trademark owner can license the mark to multiple parties and continue using it themselves.
Sole License
A middle ground where only one licensee is appointed, but the trademark owner retains the right to use the mark.
Choosing the wrong license structure can limit your future business options, so legal guidance at this stage is critical.
What Can Be Licensed and What Cannot
Only registered trademarks can be safely licensed in Nepal. Licensing an unregistered trademark exposes both parties to legal uncertainty, especially in enforcement or dispute situations.
The licensed use must also respect Nepal’s public policy and trademark refusal grounds. A trademark cannot be licensed for uses that are misleading, immoral, against public order, or damaging to national interest.
Key Elements of a Safe Trademark License Agreement
A trademark license agreement should never be a generic or informal document. At minimum, it should clearly cover the following:
Identification of the Trademark
Exact trademark details, registration number, class, and scope of protection.
Scope of Use
Where, how, and for what goods or services the trademark can be used.
Territory
Whether the license applies to all of Nepal or specific regions only.
Duration
Start date, end date, renewal conditions, and termination triggers.
Quality Control
This is crucial. The trademark owner must retain the right to monitor quality. Failure to do so can weaken trademark distinctiveness.
Royalties and Fees
Clear payment structure, currency, timelines, and audit rights.
Prohibition of Sub-Licensing
Unless explicitly allowed, sub-licensing should be restricted.
Termination and Consequences
What happens to unsold stock, packaging, and branding after termination.
Trademark Licensing Costs in Nepal
Trademark licensing in Nepal involves government fees and professional or administrative costs. While the official government fees are relatively modest, businesses should budget realistically for the full process.
Government Fees
Under the Patent, Design and Trade Mark Act and the Department of Industry’s fee schedule, the key official costs include:
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Recording of trademark license or permitted use: NPR 1,000
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Amendment or cancellation of recorded license: NPR 1,000
These fees are payable to the Department of Industry at the time of filing the joint application for recording the license.
Government fees are subject to change by notification, so current confirmation is always recommended before filing.
Professional and Ancillary Costs
In practice, the larger portion of the cost comes from professional services and documentation. These may include:
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Drafting or reviewing the trademark license agreement
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Legal due diligence on the trademark registration status
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Preparing and filing the joint application at the Department of Industry
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Translation and notarization of documents if the licensor is foreign
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Power of Attorney preparation and legalization if required
Professional fees vary depending on complexity, exclusivity, territory, and whether the license involves a foreign party. Simple non-exclusive licenses cost less, while exclusive or multi-class arrangements require more detailed legal drafting.
Trademark Licensing Process in Nepal: Step by Step
Trademark licensing follows a defined but practical process. While timelines may vary slightly depending on documentation quality and departmental workload, the following reflects real-world experience.
Step 1: Confirm Trademark Registration Status
Before licensing, the trademark must be validly registered in Nepal. If the trademark is not registered, licensing should not proceed until registration is complete.
Estimated time: Immediate check
Step 2: Draft the Trademark License Agreement
The license agreement is drafted to define scope, territory, duration, royalties, quality control, and termination conditions.
Estimated time: 3 to 7 working days depending on complexity
Step 3: Execute the Agreement and Power of Attorney
Both parties sign the license agreement. If a foreign licensor is involved, a Power of Attorney is usually executed in favor of a Nepali law firm or agent.
Estimated time: 3 to 10 working days depending on international coordination
Step 4: File Joint Application at the Department of Industry
A joint application is submitted to record the license, along with the executed agreement and prescribed fees.
Estimated time: Filing completed within 1 working day
Step 5: Review and Recording by the Department
The Department verifies documents and records the license in its register.
Estimated time: 2 to 4 weeks in standard cases
Step 6: License Becomes Legally Effective Against Third Parties
Once recorded, the license is recognized under Nepalese law and enforceable against third parties.
Typical Timeline Summary
In most straightforward cases, trademark licensing in Nepal takes approximately 4 to 6 weeks from drafting to official recording, assuming documentation is complete and there are no objections.
Complex cases involving foreign licensors, translations, or extensive negotiations may take longer.
Risks of Improper Trademark Licensing
Many businesses underestimate the risks of informal or poorly managed licensing.
Loss of Trademark Control
Without quality control clauses, your brand reputation can suffer.
Risk of Cancellation
If the trademark is not used properly or consistently, it may become vulnerable to cancellation for non-use.
Ownership Disputes
Unclear agreements can lead to claims of implied ownership or goodwill transfer.
Enforcement Problems
Unrecorded licenses make it harder to take legal action against infringers.
These risks are avoidable with proper legal structuring.
Why Professional Legal Support Matters
Trademark licensing sits at the intersection of intellectual property law and commercial strategy. Mistakes can be expensive and difficult to reverse.
At Axcel Law Associates, we assist businesses with:
- Trademark licensing strategy and structurin
- Drafting and reviewing license agreements
- Recording licenses with the Department of Industry
- Advising on compliance, renewals, and enforcement
Our approach focuses on protecting brand value while enabling sustainable commercial growth.
Conclusion
Trademark licensing in Nepal offers significant opportunities for brand expansion and revenue generation, but only when done correctly. A properly structured, documented, and recorded license protects both the trademark owner and the licensee, ensuring long-term brand integrity.
Whether you are a Nepali business licensing your brand locally or an international company entering the Nepal market, professional guidance is essential. With the right legal framework in place, trademark licensing can become one of your most valuable business tools.
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