Entrepreneurship and Small Business (ESB) Certification Practice Exam

What is the purpose of trademark licensing?

1. To create new products

2. To protect intellectual property rights

3. To allow the use of brand names, logos, or slogans

4. To increase prices of goods

The correct answer is: To allow the use of brand names, logos, or slogans

The purpose of trademark licensing primarily revolves around allowing the use of brand names, logos, or slogans by another party under specific conditions set forth in a licensing agreement. This legal arrangement enables the licensee to utilize a brand's reputation, recognition, and goodwill to market their products or services, often leading to the enhancement of the licensed brand's market presence. Such licensing can significantly benefit both the licensor, who can generate revenue without directly producing or selling goods, and the licensee, who gains access to established branding that can facilitate customer trust and accelerate market entry. The other choices relate to aspects of trademark and intellectual property but do not capture the primary goal of trademark licensing. While creating new products can be an outcome of utilizing licensed trademarks, it is not the principal purpose. Protecting intellectual property rights is indeed a significant aspect of trademarks, but it is more about safeguarding the rights rather than the direct goal of licensing. Lastly, the objective is not to increase prices of goods, as that can depend on multiple market factors rather than being a result of trademark licensing itself.