Protecting franchise intellectual property is important in franchising because it helps to protect the parent brand’s common identity from being diluted by franchisees or being used by competitors or others illegally and to the franchisor’s detriment. In a franchisor-franchisee relationship, the franchisor typically has a pre-established brand and protected intellectual property, which the franchisee then pays a royalty payment for its exclusive use for a certain period of time.
There are two main types of intellectual property that are used in franchising. On the one hand, there are those that arise from a registration process and which may include patents, trademarks and registered designs. On the other hand, there is intellectual property that is not registered, which may include trade names, logos and marks. These are typically not registered or are incapable of being registered and may include trade secrets, know-how, etc.
When a franchisor franchises their business, they will inevitably register their intellectual property with the right regulatory bodies and authorities. Once done, the franchisor is the owner of this intellectual property, which they then “licence out” to franchisees to use for the duration of the franchise agreement. As such, franchising and intellectual property are inextricably linked and a franchisee needs to carefully consider the franchise agreement and determine if the franchisor is the true owner of the brand’s intellectual property.
Franchisees typically do not own the franchisor’s intellectual property. Instead, they are the “users” of this intellectual property and are therefore licensed to use it in their product and/or services offering, marketing and advertising efforts, packaging, uniforms, vehicle branding, etc.
In many cases, a breach of intellectual property can result in financial and reputational damage to the franchisor and as such, an infringement of intellectual property can lead to legal disputes and claims for damages.
Every franchisee doing their due diligence is highly advised to carefully study the franchise agreement and especially the section in the agreement which deals with intellectual property. Because the field is quite complicated to navigate, it’s strongly recommended that you research relevant laws and regulations and speak to a franchise attorney or an expert in intellectual property law. They can help you go over the franchise agreement and determine whether intellectual property of the franchisor is properly registered and what your rights and obligations as a franchisee would be under the franchise agreement. In addition, you can consult associations and other industry organisations are another good source of information.
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