5 Most Common Intellectual Property Issues In Franchising

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Table of Contents

• 1. Identify the Franchisor’s Intellectual Property
• 2. Are you Licencing the Intellectual Property?
• 3. Are there Limits on Your Intellectual Property Licence?
• 4. How Will The Franchisor Protect the Intellectual Property?
• 5. Are there Notification Procedures In Place?

If you are a franchisee or are considering entering into a franchise agreement, you have undoubtedly read the intellectual property provisions of your franchise agreement. The franchisor’s intellectual property is likely the most valuable assets a franchisee can access on entering into an agreement.

In franchising, the intellectual property typically consists of the franchisor’s trade marks, copyrights, and trade secrets. Ownership gives the franchisor rights to exploit these assets just like they would physical assets such as machinery and equipment. In a franchise agreement, the franchisor usually provides the franchisee with a licence or permission to use this intellectual property under certain conditions and for running the franchise.

If you are a franchisee or are considering entering into a franchise agreement, here are some of the things that you should consider about intellectual property. 

1. Identify the Franchisor’s Intellectual Property

Identify the franchisor’s intellectual property and confirm its validity. Ensure that the franchisor’s trade marks, patents or design registrations are in order, registered under the franchisor’s name and are current. Confirm also that any copyright and trade secrets are managed and protected.

2. Are you Licencing the Intellectual Property?

The franchise document should clearly set out the franchisor’s intellectual property. However, ensure that you clearly understand whether you have licenced or are assigned the IP, as well as the conditions that attach. More commonly in franchise relationships, a franchisor licences their IP to the franchisee. The franchise document will establish the franchisor’s ownership and subsequent licence to the franchisee.

3. Are there Limits on Your Intellectual Property Licence?

The franchise agreement will also establish the conditions and restrictions imposed on the franchisee’s licence to use the IP. For example, the franchisee may not be able to use the IP unless it is about the running of the franchise. They will not be able to sublicence or assign their licence to others. The Agreement will also likely include a provision for maintaining the confidentiality of trade secrets.

4. How Will The Franchisor Protect the Intellectual Property?

The franchise document should also clearly explain how the franchisor intends to maintain the value of its intellectual property through prosecution and enforcement. For example, you should find out how the franchisor promotes their IP and enforces their IP. What actions would they take if their trade mark is infringed and who is responsible for taking this action?

5. Are there Notification Procedures In Place?

Lastly, make sure that if you do enter into a franchise agreement, that you maintain the same level of vigilance as the franchisor when it comes to protecting and enforcing the franchise’s intellectual property rights. You should immediately notify the franchisor if you feel that somebody has infringed their intellectual property. Remember that as a franchisee, the reputation of the franchise system also affects your business.

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Questions about how to protect your franchise’s intellectual property? Let our intellectual property lawyers know on 1300 544 755.