Trademark Licence Agreement: Template & Guide (Nepal)

A trademark licence agreement in Nepal is a written contract where the registered owner (licensor) permits another party (licensee) to use the mark, while ownership stays with the licensor. Under the Patent, Design and Trademark Act 1965, the agreement must be registered with the Department of Industry (DoI) to be legally effective against third parties.

Key Takeaways

• A trademark licence agreement lets a licensee use a registered mark — ownership never transfers unless you file a separate assignment.
• Nepal law requires the licence to be recorded with the Department of Industry; an unrecorded licence offers little protection if a dispute arises.
• Quality control clauses are not optional — if the licensor doesn't police quality, the mark risks cancellation for non-use or misleading the public.
• Royalties can be structured as a flat fee, a percentage of revenue, or a hybrid; Nepal has no statutory royalty floor or ceiling.
• The licence should spell out territory (Nepal-only or cross-border), duration, exclusivity, and renewal terms in plain language.
• A registered licence shields the licensee from a "non-use" cancellation attack — licensed use counts as use by the owner under Sec. 18C.
• Foreign brand owners licensing to a Nepali entity must appoint a local agent and supply a notarised Power of Attorney.

What is a trademark licence agreement under Nepali law?

A trademark licence agreement is a contract that splits ownership from usage. The licensor keeps title to the registered mark; the licensee gets the right to use it on goods or services, usually in return for a royalty. Nepal's Patent, Design and Trademark Act 1965 doesn't dedicate a standalone chapter to licensing — instead, the practice rests on the permitted-use logic in Sec. 21D, which says a mark may be used by someone other than the owner only with a written transfer of rights or permission. A well-drafted licence is that written permission. Because Nepal is a first-to-file jurisdiction, the underlying registration must exist before you can meaningfully license it — you can't licence an unregistered mark and expect the DoI or a court to enforce the arrangement.

Why record a trademark licence with the Department of Industry?

Recording the licence with the DoI turns a private contract into a publicly recognised right. Once recorded, the licensee's use of the mark counts as use by the owner — this is critical because under Sec. 18C, a registered mark that isn't used within one year of registration can be cancelled. If a brand licenses its mark to a Nepali manufacturer and the licence isn't recorded, a competitor could argue the mark is vulnerable to cancellation for non-use. Recording also puts third parties on notice; if a dispute reaches the DoI's quasi-judicial division or a court, the recorded agreement is prima facie evidence of the licence terms. Without recordal, you're left relying on general contract law, which is slower and less certain.

Who needs a trademark licence agreement in Nepal?

Any business that wants to let another entity use its registered brand without selling the mark outright needs one. Common scenarios include a foreign brand licensing a Nepali distributor to manufacture and sell under the brand name, a franchise arrangement where a Kathmandu café uses a Pokhara-born restaurant's registered logo, or a holding company that owns a portfolio of marks and licenses them to operating subsidiaries. Even intra-group licences — where a parent company in another country licenses a Nepali subsidiary — should be recorded, because the DoI treats the two entities as separate legal persons. A licence agreement is also the correct instrument when a brand owner wants to grant exclusive territorial rights: one licensee for Bagmati province, another for Lumbini, each with a defined scope.

Essential clauses every Nepal trademark licence must include

A licence that holds up at the DoI and in a dispute isn't a one-page letter — it needs precision on at least eight points. First, identify the mark exactly as it appears on the registration certificate, including the registration number and NICE class. Second, define the scope of licensed goods or services — is it all goods in Class 25, or only footwear within that class? Third, state whether the licence is exclusive, sole, or non-exclusive; exclusivity affects the licensor's own right to use the mark in Nepal. Fourth, set the territory — a pan-Nepal licence, or limited to specific districts. Fifth, fix the duration and renewal mechanism; most licences run for a term shorter than the 7-year registration period and renew in tandem. Sixth, insert a quality-control clause requiring the licensee to meet specified standards and allow the licensor to inspect. Seventh, define the royalty structure and payment schedule. Eighth, include termination triggers — breach, insolvency, or failure to meet sales minima — and a post-termination obligation to stop all use and return or destroy branded materials.

How do you register a trademark licence agreement with the DoI?

Recordal is a documentary filing, not a re-examination of the mark itself. The process is administrative but detail-sensitive — incomplete notarisation is the single most common reason for rejection. Here are the steps:

1. Execute the licence agreement. Both parties sign; the licensor's signature must match the name on the trademark register. If the licensor is a company, attach a board resolution authorising the licence.
2. Notarise the agreement and Power of Attorney. The licensee typically needs a notarised Power of Attorney authorising a local agent to interact with the DoI. Two witnesses must attest the PoA.
3. Prepare supporting documents. These include a copy of the trademark registration certificate, the licensor's latest tax clearance letter, and — for foreign licensors — a notarised copy of the home registration certificate in English.
4. File with the Department of Industry. Submit the complete set to the DoI's Foreign Investment and Technology Transfer Section, which handles industrial property recordals. The application for record amendment or endorsement is the relevant form.
5. DoI review and endorsement. The DoI checks that the mark is in good standing and the licence terms don't violate public conduct or morality grounds under Sec. 18(1). If satisfied, it endorses the licence on the registration certificate or issues a separate notice of recordal.

What documents are required for licence recordal?

The DoI expects a consistent paper trail. You'll need the original signed licence agreement (in English or with a notarised Nepali translation), a notarised Power of Attorney from the licensee if filed through an agent, a board resolution from each corporate party, a copy of the valid trademark registration certificate, tax clearance for the licensor, and — for foreign licensors — a notarised copy of the home-country registration certificate. If the mark was filed with a priority claim under the Paris Convention, keep that priority document in the packet. Every notarised document must carry the notary's seal and the signatures of two witnesses; the DoI is strict on this.

How long does licence recordal take, and what drives the timeline?

Plan on 4–8 weeks for a straightforward, well-prepared filing. The DoI's review is administrative, not substantive like a new trademark examination, so it moves faster. Delays creep in when the paperwork isn't consistent — the name on the licence differs slightly from the name on the register, or a notary seal is missing. If the mark is currently under opposition or a cancellation action, the DoI will typically hold the licence recordal until that dispute is resolved. For a foreign brand licensing to a Nepali entity, factor in extra time for obtaining and couriering notarised home-registration certificates.

What does a trademark licence cost? (qualitative breakdown)

The total cost of putting a trademark licence agreement in place has three components. The government recordal fee is a fixed, modest amount per mark per class — because Nepal requires one application per NICE class, a brand licensed across three classes pays three recordal fees. The second component is professional legal fees for drafting or reviewing the agreement and preparing the DoI filing; this varies with the complexity of the royalty structure, exclusivity terms, and whether cross-border tax considerations are involved. The third component, relevant mainly for foreign licensors, is the cost of notarisation, translation, and document couriering. None of these costs recurs annually — the recordal is a one-time event — but if the licence is amended (new territory, new products), an amendment filing triggers a separate fee. For a current figure tailored to your mark, use the trademark fee calculator or reach out through our contact page.

Royalties and payment structures

Nepali law doesn't prescribe how royalties must be set, so parties have wide contractual freedom. The most common structures are a flat annual licence fee, a percentage of net sales revenue (typically 2–8% depending on the industry and brand strength), or a hybrid with a minimum guaranteed payment plus a revenue share above a threshold. For foreign licensors, the royalty is a cross-border payment — make sure the agreement addresses withholding tax obligations under Nepal's Income Tax Act and specifies which side bears the tax. The agreement should also define how sales are reported and audited; a clause giving the licensor the right to inspect the licensee's books once a year is standard practice and wise to include.

Common mistakes that invalidate a Nepal trademark licence

The most frequent error we see is failing to record the licence at all — the parties sign a contract, shake hands, and assume that's enough. Under Nepali practice, an unrecorded licence offers almost no protection against a non-use cancellation action, and a licensee cannot sue an infringer in its own name. Another mistake is licensing a mark that isn't yet registered; in a first-to-file system, an unregistered mark carries no statutory rights to license. A third pitfall: omitting quality-control provisions. Without them, the licensor risks the mark becoming generic or misleading, which can trigger a DoI cancellation. Fourth, vague territory clauses — "Nepal" is clear; "South Asia" is not. Fifth, failing to update the recordal when the licence is renewed or amended; the DoI's register should match reality. Finally, parties sometimes execute a licence that looks more like a franchise agreement but doesn't comply with Nepal's franchising norms — if the relationship includes operational manuals, training, and site selection, get separate legal advice on the franchise dimension.

Realistic Nepal example: a handicraft brand

Imagine "Himala Weave," a registered trademark in Class 24 (textiles) owned by a Bhaktapur-based pashmina producer. The owner wants to licence the brand to a separate Kathmandu export house that will market shawls under the Himala Weave name to buyers in Europe. They sign a five-year exclusive licence agreement covering all of Nepal, with a royalty of 6% of net export revenue, paid quarterly. The licensee agrees to maintain the handloom quality standards specified in an attached schedule, and the licensor has the right to inspect the workshop twice a year. They notarise the agreement, attach a board resolution from each company, and file for recordal with the DoI. Once endorsed, the export house can use the mark with confidence, and the licensor is protected — the licensed exports count as use, keeping the registration alive and defensible.

How does a licence differ from an assignment?

An assignment transfers ownership of the mark; a licence only grants permission to use. In Nepal, an assignment must be recorded with the DoI on a separate form and the government fee for assignment of ownership applies. Once assigned, the original owner has no further rights. A licence, by contrast, is a relationship — it can be terminated, renewed, or made non-exclusive. For a brand owner who wants to enter Nepal without losing the asset, a licence is almost always the right tool. If the goal is a permanent sale of the brand in Nepal, use an assignment agreement instead.

Legal basis and related frameworks

The core authority is the Patent, Design and Trademark Act 1965, particularly Sec. 21D (permission to use) and Sec. 18C (non-use cancellation). Nepal is a member of the World Intellectual Property Organization and a signatory to the Paris Convention, which means foreign applicants can claim priority and their marks receive national treatment. The Department of Industry administers the recordal process through its Foreign Investment and Technology Transfer Section. While the TRIPS Agreement sets minimum standards Nepal is progressively implementing, the 1965 Act remains the operative statute — there is no separate trademark licensing act. For any licence that involves a foreign licensor, foreign-exchange regulations administered by Nepal Rastra Bank may also apply to royalty remittances, so coordinate with your bank early.

Licence termination and its consequences

When a licence ends, the licensee must stop all use of the mark immediately. The agreement should oblige the licensee to remove the mark from signage, packaging, websites, and social media within a defined period — 30 days is common. If the licence was recorded, file a notice of termination with the DoI so the public register no longer shows the licensee as authorised. A former licensee who continues using the mark after termination is infringing, and the owner can pursue enforcement through the DoI's quasi-judicial process. The cleanest agreements also address what happens to unsold inventory: either the licensee can sell it off during a short wind-down window, or it must be destroyed or rebranded.

In short, a trademark licence agreement in Nepal is a powerful tool for brand expansion without losing ownership — but it's only as strong as its recordal with the Department of Industry. The agreement must be in writing, notarised where required, and followed through with a DoI filing that puts the licence on the public record. Whether you're a Nepali brand scaling through local partners or a foreign brand entering the Nepal market through a local licensee, getting the licence terms right — and recording them — protects both sides.

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If you need a trademark licence agreement drafted, reviewed, or recorded with the Department of Industry, start with a trademark search to confirm the mark's status, then get in touch — our team handles the agreement, notarisation, and DoI filing end to end. You can also explore our trademark registration service if the mark hasn't been registered yet.