As mentioned, trademarks and trade names are not the only types of intellectual property that legally require disclosure. Logos, advertising and commercial symbols associated with the franchisor must be disclosed, too.
Logos are fairly easy to understand. They generally take the form of artistic renderings of designs representing trademarks or trade names. As such, the issues regarding logos are similar to those listed above for trademarks and trade names.
Advertising may be a less clear-cut concept, but there should be a separate disclosure item regarding how it is undertaken in general. It is common for franchisees to pay into a centralized ad fund for national or regional campaigns, but they might also access some of the same materials for local advertising on their own accord, with the franchisor’s approval.
‘Commercial symbols’ is a much less common term, referring to certain types of renderings and drawings that are not strictly logos, but are directly associated with the franchise system and, as such, must be disclosed.
Undisclosed intellectual property
The other core types of intellectual property include patents, industrial designs and copyrights, but none of the regulated provinces currently address these in their franchise legislation.
Interestingly, in 2005, the Uniform Law Conference of Canada (ULCC) developed and adopted a ‘Uniform Franchises Act,’ for the purpose of suggesting a model regulatory regime for use across Canada. (At the time, only Alberta and Ontario had legislation in force that directly regulated franchising.) The model regulation included considerably expanded disclosure regarding intellectual property, including descriptions of the following:
- Any patents, copyrights and proprietary information and rights associated with
- The status of those items.
- The franchisor’s right to modify or discontinue
- Any known impediments to their use.
- Any known or alleged material infringements
More than 10 years later, British Columbia’s new franchise legislation does not involve a more inclusive disclosure requirement with regard to intellectual property. Nevertheless, if a franchisor has applied for or obtained patents for certain proprietary products or services that are fundamental to its franchise system, then those would most likely be legally considered material facts that should be disclosed. The same issues could apply to copyrights or industrial designs, which are also essential components of franchise systems.
As such, franchisors should pay careful attention to the preparation of their franchise agreements and disclosure documents in relation to all forms of intellectual property that are important to the operations of their businesses. And in turn, any franchisees who feel they have suffered a loss due to inadequate or incomplete disclosure should consider their associated legal rights to all of the material facts.
Frank Zaid practised franchise law for 40 years and has appeared as an expert witness in franchise disputes. Today, he is a franchise mediator, arbitrator and ombudsman with ADR Chambers in Toronto, where he chairs a special panel to resolve franchise disputes. He also operates his own business, Frank Zaid FRANlegal Support Services. For more information, contact him at (416) 322-8300 or (416) 362-8555 or via e-mail at email@example.com or firstname.lastname@example.org.