Who is responsible for paying the costs incurred in commencing or defending legal proceedings relating to the intellectual property of Chatime, and under what condition?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and Guarantor must:
- (1) If it is the owner of any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property in the Territory, immediately upon execution of this Agreement, take all steps necessary to transfer ownership of that intellectual property to Franchisor at Franchisee's cost;
- (2) If, during the Initial Term, either Franchisee or any Guarantor registers any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property in the Territory, the relevant party must immediately upon such registration, take all steps necessary to transfer ownership of that intellectual property to Franchisor at Franchisee's cost; and
- (3) Not, except as otherwise agreed or directed by Franchisor in writing, register any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property or that contains or consists of any Intellectual Property or anything that is substantially identical or deceptively similar thereto or otherwise relates to the Chatime brand or the System. In particular, if Franchisee or Guarantor is a corporation, each must not use the word "Chatime" or any other similar word or derivatives of that word in its corporate name, with acknowledgement that the factors determining similarity of trademarks as stated above include, without limitation, the appearances, concepts, pronunciations, designated classes and designated goods and services of trademarks.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees may bear the costs of legal proceedings related to intellectual property under certain conditions. Specifically, if a franchisee owns intellectual property similar or identical to Chatime's intellectual property in the designated territory, they are responsible for transferring ownership of that intellectual property to Chatime at their own cost immediately upon the execution of the agreement. This includes taking all necessary steps to complete the transfer.
Furthermore, if during the initial term of the franchise agreement, a franchisee or any guarantor registers intellectual property similar or identical to Chatime's intellectual property, they are obligated to transfer ownership to Chatime at their own expense immediately upon registration. This provision ensures that Chatime maintains control over its brand and intellectual property, preventing franchisees from independently registering similar trademarks or names.
Chatime also restricts franchisees from registering any intellectual property similar or identical to Chatime's intellectual property, unless expressly agreed upon or directed otherwise in writing by Chatime. This includes business names, trademarks, and domain names. The agreement explicitly states that if a franchisee is a corporation, it must not use the word "Chatime" or any similar word in its corporate name. These measures are in place to protect Chatime's brand identity and prevent any potential confusion or infringement.
In essence, the franchisee bears the cost of transferring any similar intellectual property to Chatime and must not register similar intellectual property without Chatime's consent. This protects Chatime's intellectual property rights and ensures brand consistency across all franchise locations. Prospective franchisees should be aware of these obligations and the associated costs when entering into a franchise agreement with Chatime.