Trademark Assignment versus Trademark Licensing in the UAE: What Businesses Need to Understand

An assignment transfers ownership of a trademark to another party, while a licence allows another party to use the trademark without any change in ownership. Under UAE law, a trademark owner may pursue either route, but the two are governed by different rules, documentation requirements and consequences if a dispute arises later. Getting the distinction wrong, whether in a corporate transaction, franchising arrangement or straightforward brand licensing deal, can leave a party without the rights it believed it had secured.

 

The Legal Framework

 

Trademarks in the UAE are governed by Federal Decree-Law No. 36 of 2021 on Trademarks. The Executive Regulations issued under Cabinet Decision No. 57 of 2022 provide the procedural framework for registration, assignment, licensing and other dealings with trademark rights. Both assignments and licences are recognised under this framework, and both may be reflected in the Trademark Register maintained by the Ministry of Economy.

 

What an Assignment Does

 

An assignment is, in substance, a transfer of ownership. The owner conveys the trademark, together with the rights attached to it, to another party, either for consideration or without it, if the parties so agree. The law also permits a mark to be pledged, transferred together with a business and its assets, or passed on through inheritance or gift.

 

Once an assignment is completed and recorded, the new owner assumes the rights previously held by the original owner, including the right to use the mark, license it to others and take action against infringers.

 

What a Licence Does

 

A licence is a different type of arrangement. The owner retains the trademark and may continue using it while permitting one or more other persons or companies to use it under agreed conditions. Ownership does not change. What passes to the licensee is a contractual right of use, limited by the scope agreed between the parties, whether in relation to territory, product category or duration.

 

A licence may be exclusive, meaning that only the licensee may use the mark within the agreed scope, or non-exclusive, allowing the owner to license the same mark to others.

 

Recording with the Ministry of Economy

 

This is one of the most significant distinctions between the two arrangements. An assignment must be recorded in the Trademark Register for it to have effect against third parties. If an assignment is signed but not recorded, it may still bind the parties to the transaction, but the Register remains the formal record of ownership for third-party purposes.

 

An unrecorded assignment therefore leaves the assignee in a weaker position, particularly where enforcement or a subsequent transfer of the mark is involved.

 

Licences are treated differently. The law requires a licence agreement to be in writing and duly notarised, but recording it in the Register is not a condition of its validity. Even so, parties may choose to record licences because this provides a clearer evidentiary record and can be relevant where a licensee needs to demonstrate its rights to third parties or customs authorities.

 

Requirements for a Valid Assignment

 

An assignment instrument must identify the registered trademark precisely, including its registration number and class, and confirm that the parties have the requisite authority to enter into the transaction. The Ministry's recording process typically requires a notarised and legalised power of attorney, evidence of the underlying registration, the executed assignment and payment of the prescribed fee. The application may be filed in person or through the Ministry's e-services portal.

 

Once the process is completed, an updated certificate is issued reflecting the new proprietor. Until the Register is updated, the transfer will not have effect against third parties.

 

Requirements for a Valid Licence

 

A licence agreement requires the same drafting care as any commercial contract, particularly because the law imposes a default restriction: unless the owner agrees otherwise, the licensee may not assign the licence or grant sub-licences to third parties.

 

A properly drafted licence should address the scope of permitted use, territory, duration, goods or services covered, quality-control obligations and the owner's right to inspect and supervise use of the mark. The duration may not exceed the remaining protection period of the underlying registration.

 

Termination provisions should also be clearly defined. Ambiguity over termination, rights following termination and continuing obligations often becomes apparent only after the commercial relationship has broken down.

 

Comparing the Two Arrangements

The practical differences follow from the nature of each arrangement. An assignment transfers ownership, while a licence grants a limited right to use the trademark without transferring ownership.

 

An assignee, as the new owner, may generally assign or license the mark, subject to applicable legal and contractual restrictions. A licensee's ability to do either is restricted unless the licence expressly provides otherwise.

 

Ownership also gives the proprietor a direct basis to pursue infringement proceedings, while a licensee's position depends largely on the terms of the licence and the authority granted by the trademark owner.

 

Standing to Bring Infringement Proceedings

 

Once an assignment is recorded, the new owner's standing to bring infringement proceedings is generally clear because the Trademark Register reflects it as the registered proprietor.

 

A licensee's position is more dependent on the circumstances and the specific terms of the licence, including whether the owner has authorised the licensee to act, whether the licence is exclusive and how any damages recovered are to be allocated between the parties.

 

Parties negotiating a licence are therefore well advised to address enforcement rights expressly in the agreement, rather than leaving the issue unresolved until an infringement occurs.

 

Common Issues in Practice

 

Several problems recur in practice. Assignments may be executed between the parties but never recorded, leaving the Register out of step with the actual commercial position. Assignment instruments may also fail to identify the registered mark with sufficient precision or omit powers of attorney required by the Ministry.

 

Licensing arrangements, meanwhile, are sometimes concluded without adequate quality-control provisions. This can weaken the owner's position if the reputation or distinctiveness of the mark is later affected by the licensee's use.

 

Ambiguous territorial or product scope is another frequent source of dispute, as is an unclear chain of ownership where earlier transfers were not properly recorded.

 

Due Diligence Considerations

 

Where a trademark forms part of a larger transaction, such as a share sale, merger or corporate restructuring, verifying its current position on the Trademark Register is an essential step.

 

This should include confirming the recorded owner, reviewing any recorded assignments or licences affecting the mark, checking for pledges or other encumbrances, tracing the chain of title back to the original registration and confirming whether any cancellation, opposition or infringement proceedings are pending.

 

A mark that appears unencumbered on the surface may have an unrecorded history that becomes apparent only through closer examination of the Register and the underlying file.

 

Conclusion

 

An assignment and a licence both provide recognised means of dealing with a trademark under UAE law, but they are not variations of the same transaction. One transfers ownership; the other grants a defined right of use while ownership remains with the trademark proprietor.

 

The formalities attached to each, from the recording of assignments to the notarisation of licences, are important to preserving the accuracy of the Trademark Register and protecting the rights of the parties.

 

Businesses structuring either type of transaction should therefore treat these formalities as an integral part of the deal. The commercial intention behind an arrangement is important, but the legal rights ultimately available to the parties will depend on how the transaction is documented, completed and, where required, recorded.

 

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