TOPIC -Intellectual Property and Franchising- Laws in India. PARTHA PRATIM SINHA AT LEXCLIQ

Intellectual Property and Franchising- Laws in India

The term franchise is not defined in Indian law, but it is described by Black’s Law Dictionary as:
a licensee from the owner of a trademark or trade name authorizing another to offer a product or service under that name or mark.

In other terms, a franchisee is a firm where a parent company provides its business strategy and brand name to a third party. Individuals own and manage franchises, but they are branded and overseen by much larger global corporations.

Legal issues governing Franchise
Frachising Agreement
Intellectual property and its protection
Competition and taxation concerns
Tortious issues
Weighting and measurement concerns
Data protection
Property laws
Labor laws

Intellectual property rights and its protection in Franchising
In India there is no specific, comprehensive single law which regulated or governs the intellectual property in franchising business and its related aspects. There are different laws which governs various aspects of intellectual property, which somehow or the other covers the franchising related concerns as well.

Major laws in this regard are:
Indian Contract Act, 1872
Trade Marks Act, 1999
The Copyrights Act, 1957
Patent Act, 1970
Design Act, 2000

Indian Contract Act, 1872
Although the Indian Contract Act, in itself does not provide for laws or provisions relating to intellectual property or franchising, or both, however, before forming of a franchise, an contract is to be prepared with covers all the particulars of the franchise to be formed. This contract is called Franchising Agreement. Fundamentally, every franchising relationship is a contractual relationship and therefore, the Indian Contract Act, 1872 would be applicable to all franchising arrangements.

While the Contract Act does not stipulate that a contract has to be in writing, it is advisable to have a formal and written franchising agreement to precisely lay down the rights and obligations of the franchisor and the franchisee. This would aid in the resolution of any future deadlocks or disagreements. The contract must address all franchising contingencies. Specific provisions relating to the use, assignment, licence, and other items of the parent company’s intellectual property to be used by the franchise in the conduct of its business shall be included.

Specific and explicit intellectual property provisions aid in establishing the scope of the franchisee’s power to use the parent company’s intellectual property. The franchisee is only allowed to use the Franchisor’s Proprietary Marks in connection with the operation of the franchised unit in the place where the franchise is settled, and all such provisions must be included in the Franchise Agreement. Intellectual property rights are territorial, which means they only apply to the country where the IP is registered or utilized. However, the geographical applicability of IP rights to be used by franchisee must be specified in the franchise agreement.

Before entering into a franchising agreement, the franchisee must show that the IP rights being licenced under the agreement exist and that the franchisor has the authority to licence such rights. The franchisee should ensure that the rights being licenced do not infringe on any third-party intellectual property rights to avoid future liabilities. The nature of the rights granted, as well as the scope of those rights, must always be indicated in the licence. The franchisor must decide how much know-how, rights, and trade secrets to transfer up to the franchisee during and after the agreement’s termination.

Trade Marks Act, 1999
A trademark registered in the name of proprietor, shall be used by him only, however, under section 48 of the Act, is provided for use of trademark other than the registered proprietor, called as registered user. Registered user can use trademark in respect of any or all of the goods or services in respect of which the trade mark is registered. A new franchise of any business shall register themselves as the, registered user, for the free use of trademark. The permitted use of a trade mark shall be deemed to be used by the proprietor

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