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Franchise article series: Franchising and intellectual property

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This article is part of a series of articles that document some key considerations about franchising, including some of the pitfalls and the opportunities which our firm has seen and advised upon over the past two years.

The British Columbia Franchises Act came into force February 1, 2019 (the “Act”). Since the enactment of this legislation, the Franchise Law Practice Group at Pushor Mitchell LLP has helped franchisors and franchisees navigate the Act, ensuring that those interested in operating a franchise business are compliant with the legislation’s many requirements so that they can focus on what is most important: running a successful business!

In one of our previous articles, we discussed the importance of a franchise disclosure document and how it is intended to summarize and disclose all material facts regarding a franchise to any prospective franchisee. One element of this disclosure relates to the intellectual property of the franchisor. Under the British Columbia Franchises Regulation, a franchisor must disclose “a description of the rights the franchisor has to the trademark, trade name, logo or advertising or other commercial symbol associated with the franchise.”

Generally speaking, a trademark is a symbol, word, design, slogan or logo used to distinguish a brand or product from others. A trademark serves to differentiate one business (franchise) from another and to identify the source of the products and services that the business offers. Trademarks are very important and often assist consumers in recognizing the brand of a certain business.

Under the terms of a franchise agreement, a franchisor usually grants a franchisee with the ability to use the franchisor’s trademarks. While a franchisee will not own the trademark (these rights remain with the franchisor), a franchisee can use the franchisor’s trademarks in operating a franchise.

As a franchisor, any trademarks should be registered under the Canadian Trade-Marks Act, which results in the reservation and protection of a franchisor’s trademarks across Canada. Otherwise, a franchisor might not have the exclusive ability to use a trademark, which could greatly diminish the value of a franchise. Franchisors need to be attentive in protecting their trademarks and should ensure that franchisees only use trademarks pursuant to the terms of the franchise agreement. In addition, a franchisor should ensure that no unauthorized third parties are using their trademarks.

Often, when first consulting with prospective franchisors, we will concurrently advise and assist them with the registration of their trademarks while we prepare the franchise documentation (this process can take over a year from start to finish). This process should be done as soon as possible to ensure that a franchisor’s intellectual property (and essentially, the value of their franchise) is protected.

By Patrick Bobyn, Pushor Mitchell LLP

Occasional Contributors

In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.
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