Is Chatime required to defend a franchisee against infringement claims arising from the franchisee's use of Chatime's trademarks?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
You must immediately notify us when you learn of the use of, or claims of right to, a trademark identical to or confusingly similar to any of the Trademarks. While we are not required to defend you against claims of infringement or unfair competition arising out of your use of the Trademarks, participate in your defense or indemnify you for expenses or damages if you are a party to an administrative or judicial proceeding involving any of the Trademarks or if the proceeding is resolved unfavorably to you, or take any other affirmative action when notified of the use of or claim of right to a trademark identical to or confusingly similar to any of the Trademarks, we will pay for the costs incurred in commencing or defending legal proceedings relating to these uses or claims if we authorize the taking of any such action. We and La Kaffa have the right to control all administrative proceedings or litigation involving the Trademarks. If we undertake the defense or prosecution of any such legal proceeding, you are required to execute any documents and do such acts as may be necessary in our counsel's opinion to carry out such defense or prosecution.
Source: Item 13 — Trademarks (FDD pages 38–40)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime is not required to defend a franchisee against claims of infringement or unfair competition that arise from the franchisee's use of Chatime's trademarks. Chatime also is not obligated to participate in the franchisee's defense, indemnify the franchisee for expenses or damages if the franchisee is involved in an administrative or judicial proceeding related to the trademarks, or take any other affirmative action when notified of trademark use or claims. However, Chatime will cover the costs of commencing or defending legal proceedings related to these uses or claims if Chatime authorizes such action. Chatime and La Kaffa retain the right to control all administrative proceedings or litigation involving the trademarks.
This means that if a franchisee is sued for trademark infringement due to their use of Chatime's trademarks, Chatime is not obligated to provide legal defense or cover the franchisee's expenses. This could leave the franchisee responsible for significant legal costs and potential damages. However, if Chatime authorizes legal action, they will cover the costs associated with it.
It is important for a prospective Chatime franchisee to understand this allocation of responsibility. While Chatime owns the trademarks and has the right to control legal proceedings, the franchisee bears the initial risk of defending against infringement claims unless Chatime decides to take action and cover the costs. Franchisees should factor this potential liability into their business planning and consider obtaining appropriate insurance coverage.
Franchisees are required to notify Chatime immediately if they become aware of any use of or claims to a trademark that is identical or confusingly similar to Chatime's trademarks. Additionally, franchisees must execute any documents and perform any acts deemed necessary by Chatime's counsel to carry out the defense or prosecution of any legal proceeding undertaken by Chatime.