If Chatime Developer's rights to intellectual property in Developer's Improvements are not capable of assignment to Franchisor, what type of license does the Developer grant to the Franchisor?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) If Developer's rights to or intellectual property rights in Developer's Improvements are not capable of assignment to Franchisor, Developer grants to Franchisor or its nominee as and when the intellectual property rights are created an exclusive, worldwide, royalty free, fully assignable perpetual license in respect of Developer's Improvements, which may only be terminated by Franchisor, for Franchisor to use Developer's Improvements and grant others the right to use Developer's Improvements.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, if a Developer creates intellectual property improvements that cannot be assigned to Chatime, the Developer grants Chatime or its nominee a specific type of license. This license is exclusive, meaning only Chatime can use the improvements. It is also worldwide, allowing Chatime to use the improvements anywhere.
Furthermore, the license is royalty-free, so Chatime doesn't have to pay any royalties to the Developer for using the improvements. It is fully assignable, meaning Chatime can transfer the license to someone else. The license is perpetual, lasting indefinitely, and can only be terminated by Chatime. This license grants Chatime the right to use the Developer's improvements and also to allow others to use them.
This arrangement ensures that Chatime can fully utilize any improvements made by its Developers, even if the intellectual property rights cannot be directly transferred. It protects Chatime's ability to maintain and expand its system by incorporating new ideas and innovations from its Developers, while also providing clarity on the usage rights of those improvements.