In franchising activities, the most common and basic business resource is the trademark. Trademark is a symbol of the franchisor's business brand and carries the commercial value of the franchisor's brand. Because of this, trademark issues are often the focus of legal disputes in franchising activities.

In judicial practice, franchisors usually engage in franchise investment when their brands are in good condition. There are also franchisees who are willing to complete the franchise as soon as possible, but have not registered the trademark before franchising. However, if they apply for registration immediately, It takes nearly a year from application to successful registration, and many business opportunities are missed. As a result, many franchisors directly use unregistered trademarks to carry out franchise activities. So, if an unregistered trademark is used for franchising activities, will the validity of the franchise contract signed by both parties be affected? Are there any legal risks?

Article 3 of the "Commercial Franchise Management Regulations" (hereinafter referred to as the "Regulations") stipulates that the operating resources in the franchise contract shall be "registered trademarks, corporate logos, patents, proprietary technologies, etc. ", has clearly listed trademark business resources as "registered trademarks", and unregistered trademarks are no longer considered to be business resources from the perspective of legislation; however, in judicial practice, when the court handles franchise contract disputes over unregistered trademarks, as long as the superior transfers Most courts recognize that the franchisor has "business resources" that can reflect the franchisor's business value and competitive advantages, such as trade secrets, trade names, an overall business image with its own style, and the future mentioned here that have a certain impact. Registered trademark.

It can be seen that the possibility of the court deeming the franchise contract invalid because the franchisor has not registered a trademark is basically non-existent.

However, using an unregistered trademark comes with legal risks.

1. An unregistered trademark does not have the exclusive right to use it, so it is impossible to prevent others from using the same or similar trademark.

2. Trademarks may be registered by others. Trademark registration in my country implements a voluntary registration system and adheres to the first-to-file principle. In this way, if the franchisor only holds or uses the licensed trademark without filing an application for registration, others can register it first. Once someone else successfully registers, the franchisor's remedy is to object to the cancellation or invalidation procedure.

3. The prior right to use an unregistered trademark is strictly limited to the "original scope of use". If a franchisor wants to expand its market beyond its original operating area or develop other types of licenses, the risk of facing infringement compensation lawsuits filed by other registered trademark owners will also be high.

4. If a lawsuit occurs, and the franchisee claims that the franchisor has not fulfilled its information disclosure obligations and this constitutes fraud, it claims to rescind or terminate the contract, the franchisor will face a very passive situation and may eventually be responsible for the return of the money collected. Legal liability for franchise fees, payment of liquidated damages, and compensation for losses.

In summary, in order to reduce business risks, it is recommended not to use unregistered trademarks to carry out franchise activities.