Under what condition will Chatime pay the costs incurred in commencing or defending legal proceedings relating to the Intellectual Property?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
11.4 Protection of Intellectual Property
- (1) Franchisee must:
- (a) Provide all reasonable assistance to Franchisor to register and enforce Franchisor's intellectual property rights in the Territory;
- (b) Take all reasonable steps to protect the Intellectual Property against any action or infringement by any person;
- (c) Immediately notify Franchisor of any actual or potential threat or claim of infringement with respect to the Intellectual Property.
- (2) Franchisor, at its absolute discretion, will determine whether to commence or defend legal proceedings relating to the Intellectual Property.
- (3) Payment of all Costs incurred in commencing or defending legal proceedings relating to the Intellectual Property will be made by Franchisor, provided that Franchisor has authorized the taking of any such action.
- (4) Franchisee must cooperate fully with Franchisor in relation to any actions conducted under this clause 11.4 and must not bring any actions itself relating to the Intellectual Property.
- (5) Save for remittance of Costs under clause 11.4(3) (if any), Franchisor will be entitled to receive the proceeds of all actions conducted under this clause 11.4.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime will cover the costs of commencing or defending legal proceedings related to its intellectual property if it has authorized the action. This means that Chatime retains control over any legal actions concerning its trademarks, copyrights, and other intellectual property rights.
For a prospective franchisee, this clause offers some protection. Chatime, not the franchisee, decides whether to initiate or defend legal proceedings related to intellectual property. If Chatime authorizes such action, it will bear the costs. This protects the franchisee from unexpected legal expenses related to intellectual property disputes.
However, the franchisee must cooperate fully with Chatime in any such legal actions and cannot initiate any legal actions themselves related to the intellectual property. The franchisee will not receive any proceeds from these actions, except for the remittance of costs if any. This arrangement ensures that Chatime maintains control over its brand and intellectual property, while the franchisee is expected to support Chatime's efforts in protecting these assets.