Who pays the costs of legal action taken by 360 Painting against infringers of the 360 Painting marks?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall promptly inform Franchisor in writing of any infringement or imitations of any Marks, the System, or any act of unfair competition against Franchisor or Franchisee as to which Franchisee has knowledge. Franchisee shall not make any demand or serve any notice, orally or in writing, or institute any legal action or negotiate, compromise or settle any controversy with respect to any such infringement or unfair competition without first obtaining Franchisor's written consent. Franchisor shall have the exclusive right to institute, negotiate, compromise, settle, dismiss, appeal or otherwise handle any such action and take such steps as it may deem advisable to prevent any such action and to join Franchisee and any other franchisees as a party to any such action to which Franchisor may be a party and to which Franchisee is or would be a necessary or proper party, but nothing herein shall be construed to obligate Franchisor to seek recovery of costs or damages of any kind in any such litigation, the assertion or waiver of such claims being within the sole discretion of Franchisor. The costs of any such action shall be paid by Franchisor, and any recovery obtained from such infringers shall be paid to Franchisor.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 FDD, 360 Painting retains exclusive control over legal actions regarding infringement of its marks. The FDD states that if a franchisee becomes aware of any infringement or imitation of 360 Painting's marks or system, they must promptly inform 360 Painting in writing. The franchisee cannot take any independent legal action without 360 Painting's written consent.
360 Painting has the sole right to manage any legal action, including negotiation, settlement, and dismissal. The document clarifies that 360 Painting is not obligated to pursue recovery of costs or damages in such litigation, as this decision is at their discretion.
Importantly, the FDD specifies that 360 Painting will bear the costs of any legal action against infringers. Furthermore, any monetary recovery obtained from infringers will be paid directly to 360 Painting. This arrangement means that franchisees are responsible for reporting potential infringements, but 360 Painting assumes the financial burden and reaps any financial benefits from legal proceedings.