A franchisor (or creator/developer of a business) licenses his or her techniques, intellectual property (trademarks, copyrights, trade secrets, and potentially patents), marketing, basic know-how, and rights to sell branded items and services to a franchisee through franchising.

A typical franchisor–franchisee relationship lasts several years, during which time the franchisor provides various levels of support to their franchisees, including marketing, training, and technical assistance.

The franchisor will also allow franchisee the ability to use their trademarks, copyrights, and other intellectual property so long as they are in good standing with the company. In most cases, there is an agreement that spells out how the intellectual property is to be used by all involved parties.

IP Elements to Include in a Franchise Agreement

A franchisor should think about what intellectual property they have that needs to be protected and what restrictions or requirements they want to place on the franchisee’s use of that IP.

For example, a franchisor may want to:

1. Maintain control over how its brand is used by requiring approval of all marketing materials before they are used.
2. Prevent the unauthorized use of its trademarks, copyrights, and other intellectual property.
3. Require that any new products or services developed by the franchisee using the franchisor’s intellectual property be assigned or licensed back to the franchisor.
4. Restrict how the franchisee can sell or transfer its interest in the franchise.
5. Require that the franchisee keep confidential any information that is not publicly available about the franchisor’s business operations or plans.

When negotiating a franchise agreement, both the franchisor and the franchisee should keep in mind that intellectual property issues can be a source of dispute. If you are not able to reach an agreement on these issues, they may need to be resolved in court.

To help avoid such disputes, it is important to work with an attorney when creating your agreements from the start. If you are considering licensing your business or you are already in the process of a negotiating a franchise agreement with a third-party and you want to ensure that your intellectual property needs are addressed, we are here to help. Contact our IP attorneys at 888-666-0062 to schedule a consultation.

DISCLAIMER: The information contained in this article is for informational purposes only and is not legal advice or a substitute for obtaining legal advice from an attorney.