Naked Licenses

A trademark does more than just promote a product—it signals to consumers that the goods or services meet certain standards of quality and come from a trusted source. Because of this, many trademark owners in the Philippines consider licensing their marks to third parties, often larger companies with greater production and distribution capacity. In return, the trademark owner may receive royalties.

However, it is a common misconception that a trademark owner can simply grant a license and expect the licensee to use the mark correctly. Under Philippine law and practice at the Intellectual Property Office of the Philippines (IPOPHL), the trademark owner must actively monitor how the licensee uses the mark. If the owner fails to do so, the registration may be vulnerable to cancellation for abandonment.

This situation is known as naked licensing—when a trademark is licensed without proper supervision or quality control. If the licensee produces substandard goods or provides poor services, consumers may be misled. To prevent consumer harm, IPOPHL and courts may consider the mark abandoned if the owner does not exercise sufficient control.

Why Naked Licensing Is Prohibited

The purpose of a trademark is to indicate the source of goods and assure consumers of consistent quality. If a mark is used on inferior or inconsistent products, the trust built with consumers is broken. For example:

• If a local food brand licenses its mark to another manufacturer without monitoring quality, and that manufacturer produces unsafe products, consumers may associate the brand with poor standards.
• If a Philippine clothing brand allows unmonitored licensees abroad to use its mark, and the goods turn out to be counterfeit quality, the brand’s reputation may collapse.

In both cases, consumers suffer and the value of the trademark diminishes.

IPOPHL Practice and Case Examples

In the Philippines, IPOPHL applies quality control requirements under the Intellectual Property Code (R.A. 8293). Trademarks can be cancelled if the owner fails to maintain control over their licensee’s use.

For example:

• In Chung Te vs. Ng Kian Giab (G.R. No. L-6375, 1955), the Philippine Supreme Court emphasized that trademark rights exist to protect consumers from being misled as to the origin and quality of goods. This principle has since guided cases where improper licensing could confuse the public.
• ASEAN practice also provides guidance. In Vietnam, courts cancelled a mark when the owner failed to control multiple licensees, which mirrors how IPOPHL may treat abandonment claims.

These cases highlight that the Philippine system, aligned with ASEAN Common Guidelines, requires trademark owners to maintain supervision over licensees to prevent consumer deception.

Preventing Abandonment: Best Practices for Philippine Trademark Owners

To avoid losing rights through naked licensing, trademark owners should:

1. Include quality control clauses – Licensing agreements should require licensees to meet the owner’s quality standards.
2. Request samples regularly – Owners can demand product or service samples to check consistency.
3. Require reports – Licensees should submit periodic updates on how the mark is being used.
4. Conduct inspections – Trademark owners should reserve the right to inspect facilities or processes.
5. Set termination clauses – Agreements should allow immediate termination if quality standards are not met.

By following these practices, owners show IPOPHL that they maintain control and protect both consumers and the integrity of their marks.

Key Takeaway

Trademark licensing in the Philippines can be a valuable tool for growth, but it comes with legal responsibilities. If an owner fails to exercise control, the mark may be deemed abandoned and subject to cancellation before IPOPHL. Naked licensing is not just a technicality—it exists to safeguard consumer trust and brand reputation.

👉 If you’re considering licensing your trademark, it is wise to consult with a professional IP agent in the Philippines, such as Brealant, Hechanova, or Federis, to ensure your agreements comply with IPOPHL requirements and protect your rights.

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