If the franchisor has not yet obtained trademark registration at the time of signing the franchise agreement, how will the court view this?
In one notable case, the Taiwanese drink brand Xing Fu Tang signed a licensing agreement with franchisees in Hong Kong and Macau before securing trademark registration in those regions. The court ruled that Xing Fu Tang had violated the agreement and ordered them to pay NT$5.7 million in damages and return NT$300,000 in product payments to the franchisees.
So yes, you can still authorize a franchise without a registered trademark, but it comes with serious risks:
1. Without trademark rights, if a franchisee chooses not to renew and continues using the brand, you cannot claim trademark infringement.
2. Without trademark rights, if a third party registers the trademark first, your paying franchisee might sue you and demand compensation for the franchise fees they paid.
Have you heard any other interesting franchise stories from the beverage industry?
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