After discussing cases of termination of the franchise agreement and some of its consequences, one of the most common cases involves infringement of the franchisor’s trademark rights when the former franchisee continues to use the trademark after the end of the franchise agreement.
As a reminder, the franchise agreement provides for a trademark license from the franchisor, authorizing the franchisee to use said trademark as brand name and to promote the point of sale.
A former franchisee, who no longer benefits from the franchise agreement, and who nevertheless continued to use the trademark without authorization:
- On the advertising sign near the point of sale to indicate its location,
- As a trade name mentioned on the company registration certificate, and
- As a company name
is committing trademark infringement.
As a reminder, any perpetrator of trademark infringement is in principle liable to the following penalties :
- payment of damages related to economic loss on the one hand and moral damage on the other,
- in addition to criminal penalties : a fine up to €300,000 and 3 years’ imprisonment (Article L. 716-10 of the Intellectual Property Code).
The franchisor can also decide to initiate a claim against the former franchisee for breach of the post-term obligations specified in the franchise agreement, rather than for counterfeiting.
To find out about your rights and obligations before drafting a franchise agreement, please do not hesitate to contact us.