Definition – Franchise Intellectual Property
Franchise Intellectual Property – Franchises are an advanced kind of licencing in which the franchisor grants a licence to the franchisee for use of its Intellectual Property. This includes its trademarks, trade dress, copyright, know-how, trade secrets, business concept, methodology, and, if applicable, drawings and patents.
All facets of the franchisor’s intellectual property and other ownership are morally acknowledgement in the contract. Both parties make sure they are appropriately given licenses and protected by the franchisee.
The three clauses each Franchise Agreement should include are:
- Grant of rights – This section of the franchise agreement specifies how long you will hold the franchise if you adhere to all of its terms. This provision makes it clear that you are merely “renting” the franchise. Also once your term is over, you must give up the name.
- Set of Obligations – A list of responsibilities of both the franchisee and the franchisor must uphold will often be included in the franchise agreement. However, franchisees typically have more onerous requirements. Moreover, this is the part which contains the clause about “franchise intellectual property”.
- Action to be taken on Termination – Your response to termination should be addressed adequately in your franchise agreement. It will specify what must be done if the franchise is ever sold or cancelled.
Importance of Intellectual Property in Franchising in India
Fundamentally, franchising is the best method for utilising intellectual property (IP). It is an advanced type of licencing right. This allows the franchisee to utilise the IP by the franchisor’s procedures, sometimes known as the “System.”
In other words, franchising is just a way to distribute products or services by methodically sharing the franchisors’ intellectual property. The franchisee pays a fee or royalty to the franchisor in exchange for the use of the intellectual property (IP) rights over the various parts of the franchise.
In most cases, the franchise agreement will state the franchisee has a licence to use the intellectual property for the duration of the agreement. Also they cannot sublicense that use to a third party.
This is inorder to stop anyone who has access to such sensitive information from using it carelessly and possibly lowering the franchise’s worth. Although franchisors may be sometimes too concerned with protecting their intellectual property, this has financial and legal ramifications for both the franchisor and the franchisee.
Obligations in Franchise Agreements Related to Intellectual Property
- If the franchisee learns of any unauthorised third-party use of the IP, it must notify the franchisor immediately so that the franchisor may take appropriate legal action against that third party.
- Acknowledgement that any unauthorised use of the franchisee’s trademark or intellectual property may result in the termination of the franchise agreement and that the franchisor is the rightful owner of those rights.
- To avoid any ambiguity over who is the rightful owner of any modifications or additions to the IP, they are given to the franchisor once ready.
- The franchisor must give its approval before using the IP in any marketing materials.
- The franchise agreement’s period is the only time the IP stands valid.
Why the need for the protection of intellectual property rights in a Franchise Agreement?
Intellectual property rights (IPRs) are highly important commercial assets that help progress each nation’s innovative and technology sectors while also boosting a company’s overall profitability.
The actions and precautions are to better safeguard specific proprietary intangible rights from unauthorised uses and exploitation by franchisees when licencing and transferring intellectual property rights in a franchise agreement.
The franchisors have a general responsibility to maintain their franchise’s brand reputation. This is particularly regarding how the franchise business is operational, the use of their trademark, sensitive information, and promotional materials.
Types of Franchise Intellectual Property
In a business enterprise, trademarks are a crucial intellectual property. This is possible to license through a franchise agreement. A trademark is a symbol to differentiate one company’s products and services from those of another.
A combination of any of these, as well as logos, graphics, drawings, symbols, taglines, numerals, and three-dimensional characteristics, are possible. Because they serve as source identifiers by bringing consumers’ attention to the origin and source of the good or service, they are a crucial component of intellectual property.
Trade Secrets Or Confidential Information of the Business
Generally speaking, trade secrets are confidential in nature, however not all confidential material falls under this category. There are some traits that a trade secret must-have for an allegedly confidential piece of information to become one.
Another significant intellectual property right that is affected by a franchise agreement and therefore needs adequate protection. The creators and original authors of works that are qualified for protection have access to copyright as a legal safeguard.
It grants the creator of a variety of creative expressions, including literary, musical, artistic, and cinematic works, as well as any adaptations of the aforementioned works, an exclusive and transferable right.
What Role Does Sparkleminds Play in Franchise Intellectual Property Assistance?
There are essentially two sorts of franchised businesses
- Product and trade name franchising, in which the franchisee sells the franchisor’s goods or services using the franchisor’s trade name (including trademarks).
- Franchise business models where the franchisee utilises the franchisor’s whole business model (trademarks, goodwill, trade secrets, etc.,). To effectively distribute the franchisor’s goods and services, franchising is a method of sharing its intellectual property.
No specific Franchise Protection Act exists under Indian law. The terms of the franchise agreement regulate protection legislation. It is crucial to emphasise legal documents in India because of this. The franchise agreement outlines rules of what to do and what not to do, whether it’s about protecting the franchise area or protecting franchise investment.
Franchises without trademarks are at a disadvantage to rivals who copy their brand, goods, and business model. This results in a general loss of customers and brand loyalty. Thus, trademarks are crucial elements to protect your company.
For assistance in licencing the franchise’s intellectual property, contact our experts.