Owning a registered trademark in China protects your brand, but owning it is only half the story. Many foreign companies never sell directly in China; instead, they partner with a local manufacturer, distributor, or franchisee who will actually use the mark. That arrangement requires a trademark license — a legal agreement that lets another party use your brand while you keep ownership. Done correctly, licensing turns your trademark into revenue without handing over the asset itself. Done incorrectly, it can quietly strip away your enforcement rights or leave royalties stuck in tax limbo. Here is how trademark licensing works in China in 2026 and how to structure it the right way.
- A trademark license lets a Chinese partner use your mark while you retain ownership of the registration.
- Recordal with CNIPA is mandatory for the license to be enforceable against third parties.
- Licensing keeps your brand asset intact; assignment transfers it permanently — two very different decisions.
- Royalties paid to a foreign licensor are generally subject to Chinese withholding tax.
- Quality control, scope, and termination clauses determine whether the license protects or weakens your brand.
Table of Contents
What Is Trademark Licensing in China?
A trademark license is a contract under which the owner of a registered Chinese trademark (the licensor) authorizes another party (the licensee) to use the mark for agreed goods or services, in a defined territory, for a defined period, in exchange for royalties. The licensor keeps full ownership of the registration; only the right to use it is granted. This is the structure most foreign brands use when they want a local factory to make products under their brand, a distributor to sell under their name, or a franchisee to operate under their logo without transferring the underlying asset.
Chinese trademark law recognizes three forms of license: exclusive (only the licensee may use the mark), sole (only the licensor and the licensee may use it), and ordinary (the licensor may license to multiple parties). The form you choose materially affects your enforcement position, so it should be decided deliberately rather than by default. A company that has completed trademark registration in China can license any or all of the registered classes, but the license should always stay within the goods and services actually covered by the registration.
Trademark Licensing vs Assignment
Before drafting anything, foreign owners should be clear on the difference between licensing a mark and assigning (transferring) it. The two are frequently confused, and the consequences are permanent.
| Factor | Trademark License | Trademark Assignment |
|---|---|---|
| Ownership | Stays with the licensor | Transfers to the assignee permanently |
| Duration | Fixed term, renewable | Permanent unless transferred back |
| Control | Licensor keeps quality control rights | Assignee assumes full control |
| Revenue | Ongoing royalties | One-time transfer price |
| Best for | Partnering without losing the brand | Selling the brand or restructuring |
Most market-entry scenarios favor licensing, because the foreign owner retains the option to change partners or take the brand back when the contract ends. Assignment is generally reserved for genuine sales or corporate restructuring. Whichever route you take, remember that a registered mark is a distinct legal asset — if it is not yet registered, licensing provides little to enforce. If your priority is simply securing the asset first, review how much trademark registration costs in China and the official fee structure before you license.
Why Record the License with CNIPA
Under China’s Trademark Law, a trademark license must be recorded with the China National Intellectual Property Administration (CNIPA) to be effective against third parties acting in good faith. Recordal is not merely administrative paperwork; it is what makes your license enforceable against counterfeiters, parallel importers, and competing claims. An unrecorded license can still bind the two contracting parties, but it may not protect you against a third party who acquires rights in good faith.
Recordal also matters practically at the border and in enforcement. Customs authorities, e-commerce platforms, and courts often ask to see the recorded license when you need to stop trademark infringement in China. A recorded license lets the licensee — not just the licensor — take action against infringers in many cases, which is a major operational advantage when your Chinese partner is the one on the ground.
Key Clauses in a China Trademark License
A well-drafted license is a protection document, not just a payment schedule. Foreign licensors should insist on these clauses:
- Scope and goods. State exactly which mark, which classes, and which goods or services are covered. If the mark is registered in several of the China trademark classes, specify which ones the licensee may use.
- Quality control. The licensor should retain the right to inspect products and approve materials. Uncontrolled licensing can weaken the mark’s distinctiveness.
- Royalties and reporting. Define the royalty base (units, revenue, or fixed fee), payment dates, and audit rights.
- Territory and exclusivity. State whether the license is exclusive, sole, or ordinary, and the geographic scope.
- Term and termination. Include renewal mechanics and clear grounds for termination, especially for quality failures or unauthorized sublicensing.
These clauses should be drafted by someone who understands both Chinese trademark practice and cross-border tax, because the licensing contract itself is often reviewed during tax filings and withholding.
Royalty Tax and Withholding
Royalties paid by a Chinese licensee to a foreign licensor are treated as cross-border payments and are generally subject to Chinese withholding tax. The standard rate is 10 percent, though an applicable tax treaty may reduce it, and value-added tax and surcharges may also apply depending on the arrangement. This is a common area where foreign licensors are caught off guard, because the licensee is the one obligated to withhold.
The practical lesson is to price the royalty with the tax in mind and to confirm the withholding treatment before signing. For a broader view of how these cross-border payments are taxed, see the guide to China withholding tax on dividends, royalties, and cross-border payments.
Common Licensing Mistakes to Avoid
- Licensing an unregistered mark. Without registration, you have little to license and less to enforce. Register first.
- Skipping recordal. An unrecorded license leaves you exposed to third parties.
- Granting exclusivity too broadly. Once exclusive, you cannot license others — and reversing it is costly.
- Ignoring quality control. Letting the licensee cut corners can destroy brand value and even undermine the registration.
- Forgetting the tax. Unplanned withholding can shrink your net royalty materially.
If a dispute does arise — for example, a partner registers a confusingly similar mark or ignores termination — you may need to oppose or cancel a trademark in China or pursue enforcement. Structuring the license correctly on day one is the cheapest way to avoid reaching that point.
How Dan Young Helps
Our trademark services cover the full lifecycle, from registration and class selection to licensing, recordal, and enforcement. For foreign companies operating in Guangzhou, Shenzhen, Foshan, or Dongguan — or partnering with manufacturers and distributors across Guangdong — we draft and record license agreements that protect your brand, structure royalties tax-efficiently, and keep your enforcement rights intact. Whether you need an exclusive license for a single factory or an ordinary license across a distribution network, we can help you set it up properly the first time.
Frequently Asked Questions
Do I need to record a trademark license in China?
Yes. Recordal with CNIPA is required for the license to be effective against third parties acting in good faith. Without recordal, the license may bind the two parties but offers far weaker protection in enforcement, customs, and disputes.
What is the difference between an exclusive and an ordinary license?
An exclusive license means only the licensee may use the mark, to the exclusion even of the licensor. A sole license allows the licensor and the single licensee to use it. An ordinary license lets the licensor grant rights to multiple parties.
How much tax applies to trademark royalties paid to a foreign licensor?
Royalties are generally subject to 10 percent Chinese withholding tax, though a tax treaty may reduce the rate, and VAT and surcharges may also apply. The Chinese licensee is typically responsible for withholding before remitting.
Can a licensee enforce the trademark against infringers in China?
In many cases, yes — an exclusive or sole licensee can take action against infringers, and a recorded ordinary licensee may also act under certain conditions. Recordal makes this enforcement position far stronger.
Should I license or assign my trademark in China?
License if you want to partner locally while keeping ownership. Assign only if you intend to permanently transfer the brand, such as in a sale or restructuring. Most market-entry situations favor licensing.
Disclaimer: This article is provided for general informational purposes only and does not constitute legal or tax advice. Chinese trademark law, tax rules, and CNIPA practice are subject to change. You should consult a qualified professional regarding your specific circumstances before entering into any trademark license or other agreement.
