Is The Standardx required to participate in a franchisee's defense if there is a proceeding involving Copyrighted Materials?

According to The Standardx's 2025 Franchise Disclosure Document, The Standardx is not required to participate in a franchisee's defense if there is a legal proceeding involving Copyrighted Materials. The FDD states that The Standardx does not need to participate in the defense or indemnify the franchisee for damages and expenses if the franchisee is involved in an administrative or judicial proceeding related to Copyrighted Materials, especially if the proceeding's outcome is unfavorable to the franchisee. This means that if a franchisee is sued for copyright infringement related to materials used in their The Standardx hotel, the franchisee will likely be responsible for their own legal defense.

This arrangement places the risk of copyright-related legal issues squarely on the franchisee. While The Standardx retains control over any litigation or administrative proceeding arising from any infringement, challenge, or claim concerning any Copyrighted Materials, they are not obligated to assist the franchisee in their defense. This could create a significant financial burden for the franchisee, who would need to cover legal costs and potential damages independently.

However, the franchisee must notify The Standardx immediately of any apparent infringement or challenge to their use of any Copyrighted Materials or Confidential Information. The franchisee must also allow The Standardx to control exclusively any litigation or administrative proceeding arising from any infringement, challenge, or claim or otherwise concerning any Copyrighted Materials or Confidential Information. The franchisee must sign any documents and take any other reasonable actions that The Standardx deems necessary to protect their interests in any litigation or other proceeding or otherwise to protect and maintain their interests in the Copyrighted Materials and Confidential Information. The Standardx will reimburse the franchisee's reasonable out-of-pocket costs for taking any requested action.

Prospective franchisees should carefully consider this aspect of the franchise agreement and factor in the potential costs of defending against copyright claims. It would be prudent to discuss with The Standardx what specific support or guidance they might offer in such situations, even if they are not legally obligated to provide a full defense. Additionally, franchisees may want to explore insurance options to mitigate the financial risk associated with copyright litigation.