Under what condition will Kidokinetics defend and indemnify a Kidokinetics franchisee against expenses related to intellectual property infringement?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee and Franchisee's principals agree to indemnify, defend and hold Franchisor, its affiliates, and its respective members, directors, officers, employees, agents, partners, shareholders, agents, contractors, successors, assignees, personal representatives, heirs and legatees of all these persons or entities ("Indemnitees") harmless to the fullest extent permitted by law, from and against and to reimburse them for all claims, obligations, liabilities and damages ("Claims"), including any and all taxes, directly or indirectly arising out of, in whole or in part: (a) the operation of Franchisee's Kidokinetics Business, and Franchisee's advertising; (b) the use of the Marks and other Confidential Information; (c) the transfer of any interest in this Agreement or Franchisee's Kidokinetics Business in any manner not in accordance with this Agreement; (d) the infringement, alleged infringement, or any other violation or alleged violation by Franchisee or any of Franchisee's principals of any patent, mark or copyright or other proprietary right owned or controlled by third parties; or (e) libel, slander or any other form of defamation of Franchisor, the System, or System franchisees by Franchisee or any of Franchisee's principals.
For purposes of this indemnification, "Claims" will mean and include all obligations, actual, consequential, punitive and other damages, and costs reasonably incurred in the defense of any action, including attorneys', attorney assistants' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses, whether or not such claims exceed the amount of insurance coverage available to Franchisor through Franchisee.
Franchisor has the right to defend any such claim against Franchisor in the manner Franchisor deems appropriate or desirable in Franchisor's discretion.
Such an undertaking by Franchisor will, in no manner or form, diminish Franchisee's and each of Franchisee's principals' obligations to indemnify the Indemnitees and to hold them harmless.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Kidokinetics does not defend and indemnify its franchisees against expenses related to intellectual property infringement. Instead, the franchise agreement stipulates that the franchisee is responsible for indemnifying, defending, and holding Kidokinetics harmless from any claims, obligations, liabilities, and damages, including taxes, arising from several circumstances. These circumstances include the operation of the franchisee's Kidokinetics business and advertising, the use of the Marks and other Confidential Information, and the infringement, alleged infringement, or any other violation or alleged violation by Franchisee or any of Franchisee's principals of any patent, mark or copyright or other proprietary right owned or controlled by third parties.
This indemnification extends to all obligations, actual, consequential, punitive, and other damages, as well as costs reasonably incurred in the defense of any action. These costs include attorneys', attorney assistants' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses, regardless of whether such claims exceed the amount of insurance coverage available to Kidokinetics through the franchisee. Kidokinetics retains the right to defend any claim against it in the manner it deems appropriate, without diminishing the franchisee's obligation to indemnify and hold Kidokinetics harmless.
This arrangement places a significant financial burden on the franchisee, as they are responsible for covering all costs associated with intellectual property infringement claims, even if those claims arise from the franchisee's use of Kidokinetics's Marks or System. Prospective franchisees should carefully consider this indemnification clause and consult with legal counsel to fully understand the potential financial risks involved. It is also advisable to secure adequate insurance coverage to mitigate these risks.