DISTINGUISH COMMERCIAL FRANCHISING WITH LICENSING
Commercial franchising and licensing are activities which bring certain commercial benefits. However, those activities confuse for start – up. T2H Lawyers will help you to understand about those activities.
To find out the differences in those, we need to understand the true nature of each activity with provisions of law:
Commercial franchising means a commercial activity whereby franchisors permit and require franchisees to undertake by themselves to purchase or sell goods or provide services on the following conditions
Licensing is action which transfer the right to use industrial owners, including the licensors and the licensees. The licensees have rights to use intellectual property rights while the licensor keep their intellectual property rights.
The differences between commercial franchise and license:
| Commercial franchising | Commercial Licensing | |
| Object | Commercial rights (Trading activities are associated with the franchisors’ trademarks, trade names, business knows-how, business slogans, business logos and advertisements) | Rights to use industrial property object. The objects are allowed to perform license not included trade names and geographical indications. |
| Scope | Wider range because associated with the franchisors’ trademarks, trade names, business knows-how, business slogans | Narrower range because transfer of industrial property rights. |
| Purpose | Holding and operating a business system | Focusing on the value of trademarks, industrial designs |
| Types of contracts | – Commercial franchise contracts
– Commercial franchise contracts secondary: contracts between franchisors secondary and franchisees secondary according to common commercial rights. – Commercial rights development contract: franchisees are established many business establishments according to the commercial franchise method |
– Exclusive contract
– Non-exclusive contract – Sub-license contracts |
| Limitations
|
– To franchisees: A franchisee shall be entitled to sub-franchise to a third party (referred to as sub-franchisee) if it is so consented by the franchisor.
– To franchisors: No limitation with franchisors |
To licensors (Exclusive contract): licensors are not allowed to transfer rights to a third party while transferring to licensees |
| Assistance | Supporting for initial training and providing regular technical help for traders who receive rights to manage commercial franchise system | Having agreement between the two sides on support. However, only technical support in the form provided documents, data, expertise for licensees. |
| Supervising rights | Franchisors have rights: To conduct periodical or extraordinary inspections of activities of franchisees in order to ensure the uniformity of the commercial franchise system and the stability of quality of goods and services. |
Commercial franchising is activity which have wider object than Commercial licensing. However, each activity has its own characteristics, depending on the type of contract and agreement between the parties according to Commercial Law and Law on Intellectual Property. With the information and characteristics of each of the above activities, entities would choose suitable business activities to bring their maximum commercial benefits.
Please contact us for detailed advice.
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