The Role of Intellectual Property in a Franchise Agreement

Franchise agreements are contracts entered into between franchisors—typically established brands such as McDonald’s—and individuals or small businesses seeking to operate a franchise location. By their very nature, franchise agreements allow the franchisee to lawfully use the franchisor’s intellectual property (IP)— such as trademarks, copyrights, patented programs, or secret recipes—in exchange for a fee or a certain percentage of profits.

Intellectual property protections are at the heart of every franchise relationship. That’s why you need a dedicated business law firm with experience handling both the contractual and IP aspects of franchise agreements. Contact the lawyers at BDWFD today by calling (303) 329-3363 or connecting with their team online.

Overview of Federal IP Law

Intellectual property laws protect creators’ rights to profit from their creativity and inventiveness. This means you cannot generally use another person’s artwork, brand name, patented processes, or inventions for commercial gain. Federal law recognizes four main types of intellectual property:

• Trademarks: Most often arising in franchise agreements, trademarks include names, symbols, or designs used to distinguish businesses or goods. The name of a franchised business in Colorado is generally a protected trademark.
• Copyright: Copyright laws protect artwork and other written works, including corporate jingles. Copyrights arise in franchise agreements if you’re selling items with copyrighted artwork, such as the ‘Hamburglar,’ or displaying the same.
• Trade Secrets: Trade secret laws protect the franchisor’s confidential business information from which it derives value, such as a secret sandwich or drink recipe.
• Patents: Patents apply to unique inventions that the franchisor created or purchased. Patents arise in franchise agreements involving specific machines or mathematical formulas, but are less common than trademarks and copyright considerations in this area of law.

Both federal and state laws provide civil—and in some cases, criminal—remedies for the misuse or infringement of intellectual property rights in Colorado. For this reason, it’s essential to work with legal counsel during the franchise process to ensure you understand your rights to use intellectual property under the franchise agreement.

Intellectual Property Considerations in Colorado Franchise Agreements

When you enter into a franchise agreement, much of the agreement’s value comes from your right to utilize recognized branding, business models, formulas, or recipes. However, you are also obligated to protect this information from misuse. Strong franchise agreements not only grant you the explicit right to use the franchisor’s IP, but they also require you to make every effort to protect trade secrets.

Further, these agreements generally contain clauses allowing the franchisor to terminate the contract and seek damages if you misuse IP or take any action to ‘harm the brand.’ Claims that you misused intellectual property can result in substantial damages for both breach of contract and under Colorado state and federal IP laws.

Contact Our Experienced IP and Franchise Law Attorney

Every franchise agreement incorporates intellectual property law. It’s essential to understand the scope of your licensed rights to use the franchisor’s IP, as well as your obligations to safeguard that IP and maintain brand integrity.

Whether you need help reviewing, drafting, or understanding your copyright and trademark rights under a Colorado franchise agreement, contact the experienced business lawyers at BDWFD today by calling (303) 329-3363 or connecting with their team online.