For a licensor, the valuation of a trademark in the context of a licensing agreement can never rely solely on financial projections or market potential. The real value of the licensed right depends first and foremost on legal parameters that determine the strength of the mark, the security of its use and the long-term preservation of its reputation.
Below are the four essential legal reflexes that every licensor should keep in mind before entering into negotiations.
The licensor’s first reflex should be to evaluate the legal robustness of the trademark to be licensed. A mark that is duly registered, in force, and covering the relevant territories and product categories provides a solid basis for a strong valuation. The degree of distinctiveness, whether inherent or acquired through extensive use, plays an equally decisive role, as a highly distinctive or widely recognised mark justifies a significantly higher royalty baseline than a descriptive or weak sign.
A clear chain of title, free from gaps or ambiguities in past assignments or recordals, further reinforces the credibility of the right being licensed.
Illustration: Several companies have demonstrated the importance of a fully consolidated trademark architecture. Lacoste, for instance, strategically secured numerous figurative variants of its crocodile device worldwide, while LEGO strengthened its portfolio by combining verbal, figurative and three-dimensional marks after earlier litigation concerning the protectability of its iconic brick. These examples show how a properly structured portfolio directly enhances the value of subsequent licensing agreements.
The second reflex is to assess the contentious environment surrounding the mark. This includes reviewing past disputes, oppositions, invalidity actions, non-use challenges, and, more broadly, the ability of the right to withstand legal challenge. A mark that is defended actively, through systematic watch services, oppositions or anti-counterfeiting actions, retains a higher value.
This is the essence of enforcement (i.e., all defence and protection actions implemented to maintain the exclusivity and integrity of the mark), an essential concept for any licensor seeking to preserve the long-term value of their IP assets.
Illustration: Some companies have built remarkably consistent enforcement strategies. Ferrari has long pursued vigorous protection of its prancing horse emblem and visual identity. Disney remains famously vigilant regarding the unauthorised reproduction of its characters across all media. Red Bull has deployed a highly systematic opposition strategy to safeguard the uniqueness of its trade dress and verbal marks. These examples illustrate that a strong enforcement history materially increases the perceived value of the right licensed.
The value of the mark is also shaped by the contractual configuration of the licence. The scope granted (territories, product families, distribution channels) constitutes a direct lever of valuation: broader or exclusive licences naturally justify higher royalty rates.
The duration of the agreement, renewal conditions, provisions for early termination, warranty clauses and liability mechanisms also have a decisive impact. A well-structured, transparent and balanced licence reinforces the licensor’s negotiating position and contributes directly to the overall valuation of the rights granted.
Illustration: The sports industry offers striking examples. Leading European football clubs segment their licensing rights (merchandising, collectibles, digital assets) across territories and channels to maximise the value extracted from their brand. In more industrial settings, companies such as Coca-Cola impose highly detailed contractual specifications on their bottlers, demonstrating how contractual precision is central to the valuation of brand licences within extensive commercial ecosystems.
Brand reputation remains one of the most powerful value multipliers in licensing. A mark that enjoys legal reputation or well-known status benefits from extended protection, including against dilution or unfair advantage in non-similar goods or services.
Quality control obligations imposed by the licensor are equally critical. Brand guidelines, pre-approval processes, technical audits and compliance mechanisms ensure that licensed products maintain the level of quality expected by consumers. Excessively weak control exposes the brand to dilution or loss of distinctiveness, whereas excessively heavy control may discourage potential licensees. The challenge is to strike the right balance.
Illustration: Several industries demonstrate the strategic importance of brand coherence. Apple, for example, has turned its global “Made for iPhone” (MFi) certification programme into a robust quality-control infrastructure, ensuring uniform visual and technical standards across thousands of licensed accessories. In another register, Rolls-Royce grants licences only in exceptionally selective lifestyle or interior-design categories, preserving its aura of exclusivity and, in doing so, significantly increasing the value of each licensed collaboration.
