Briefing Note

Relationships between Charities and Businesses

Updated June 2012

Introduction

Many charities rely on businesses for funding. Examples of such fundraising by businesses would include making a contribution to a charity for each product sold or a lump sum donation. When carrying out fundraising activities on behalf of a charity, businesses often use the charity’s trade mark to identify where the money is going. However, charities often do not fully protect their brand in these situations. Where charities wish to maintain control over third parties’ use of their trade mark, they would be well advised to require fundraisers to enter into an agreement with them containing a trade mark licence.

Why might a charity wish to restrain or control others who fundraise on its behalf?

Although it may seem unusual to want to restrain fundraising activities being undertaken on the charity’s behalf, it is important for a charity to maintain control over its own brand and how it is used. The charity may wish to control fundraising undertaken on its behalf where:

  • A business is making money as a result of the charity’s brand being used, but the charity is not receiving a sufficient return;
  • The charity wants to be able to grant an exclusive right to use its brand to another business;
  • The business operates in an industry with which the charity does not want to be associated; or
  • The charity considers the fundraising method used to be inappropriate and/or inconsistent with its brand.

Trade Marks and Trade Mark Licences

Trade marks, or brands, refer to signs which are used by businesses or charities to differentiate their products or services from those of others. The importance of protecting brand image cannot be overstated. Trade mark creation, registration, management and protection are therefore critical to any business or charity seeking to obtain and maintain brand loyalty.

If the charity’s trade mark is not currently registered, we would be delighted to assist with this. Registration of a trade mark protects the charity’s right to exclusive use of that mark in connection with the goods or services for which it is registered. It also gives the charity the right to take action against any person who uses an identical or similar mark in connection with similar goods without authorisation.

A trade mark licence is an agreement where an owner of a registered trade mark authorises another person to use that mark. Such a licence allows the trade mark owner to exercise considerable control over how the mark is used by the licensee. For example, the licence can set out the activities which the mark can be used for and any limits on such usage, any requirements the licensee is to fulfil in order to be permitted to use the mark and the permitted territorial scope and duration for the use of the mark.

In the case of agreements between charities and businesses fundraising on their behalf, it is beneficial for a trade mark licence to be contained in what is known as a ‘section 59 agreement’ (so called because such agreements are required by s59 of the Charities Act 1992).

Why have a section 59 agreement?

A section 59 agreement is a written document that governs the relationship between the fundraiser and the charity. It is, in fact, unlawful for a business or individual to undertake fundraising activities for the benefit of a charity without there being an agreement in place between the fundraiser and the charity which satisfies certain prescribed requirements. Such an agreement is also an ideal mechanism to set out the parameters of the relationship between the charity and the business, including restrictions on the use of the charity’s trade mark.

A section 59 agreement is required to include:

  • The names and addresses of the parties to the agreement;
  • The date on which the agreement is signed, and the period for which the agreement is to subsist;
  • Terms relating to the termination of the agreement;
  • Terms relating to variation of the agreement;
  • A statement of the principle objectives of the agreement and the method to be used in pursuance of those objectives;
  • Provision as to the sums or proportions of consideration that are to be given to the charity; and
  • Provision as to any amount by way of remuneration or expenses which the business is entitled to receive in connections with the agreement

The agreement is also an extremely useful means to deal with other aspects of the relationship between the parties such as:

  • Any explicit grant of licence of any relevant trade marks, including a description of the mark and any restrictions on how it may be used;
  • Any warranties on the use of the charity’s branding, such as non-infringement of any relevant third party rights;
  • A requirement that the business do nothing to damage the charity’s reputation and termination rights for any breach of this requirement;
  • Any guidelines on use of the brand; and
  • Provision for what happens to any stock bearing the charity’s brand at the end of the agreement.

A well-drafted section 59 agreement can deal with many potential problems, including those arising from trade mark infringement, before they arise and can ensure that both parties are aware of the parameters of their agreement. Care needs to be taken in the drafting of such a document as the agreement in itself is likely to be considered by HMRC to imply a licence for the business to use the charity’s trade mark. Charities therefore need to ensure that the terms on which they are allowing the business to use their mark are clearly and expressly set out.

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