Why Copyright Protection Matters in Franchising

Introduction

When it comes to protecting intellectual property in franchising, trademarks tend to dominate the conversation, largely because the franchise system’s name and logo are often the key drivers of brand recognition and success. However, one of the assets in franchised businesses that is often overlooked are copyrighted materials.

What does copyright protect?

In Canada, copyright arises automatically, without formal registration, upon the creation of an original work in a tangible form. Copyright protects the expression, but not the underlying idea. Under Section 3(1) of the Copyright Act, R.S.C., 1985, c. C-42 (the “Act”), copyright grants the owner the exclusive rights to produce, reproduce, publish, perform, communicate, or adapt an original work.[1] This includes the right to authorize others, for example franchisees, to use the work or material under certain conditions.

Works that are protected by copyright include:

Literary works (e.g. computer programs, compilation of literary works);
Dramatic works (e.g. choreographic work, mime, scenic arrangement, cinematographic work, compilation of dramatic works);
Musical works (e.g. music or musical composition with or without words, compilation of musical works); and
Artistic works (e.g. paintings, drawings, maps, charts, plans, photographs, sculptures, works of artistic craftsmanship, architectural works, compilation of artistic works).[2]

While copyright arises automatically, there are benefits to registering copyright with the Canadian Intellectual Property Office (“CIPO”). Once the application is submitted and the application fee is paid, a registration certificate and registration number will be issued to the applicant within seven business days.[3] The certificate is deemed presumptive evidence that the registered owner owns the copyright. It can be beneficial in litigation proceedings and in warranting ownership of the copyright to prospective licensees of a work.

How does copyright apply in the context of franchising?

Although registration is not required, registering copyright can be useful in the franchising context. One of the basic premises of the franchise model is that, in return for ongoing payments, the franchisee receives the right to use some of the franchisor’s intellectual property, subject to certain conditions. This includes everything from training manuals, advertising and promotional materials, website content, proprietary software, computer software, menus, newsletters to employees or customers, and operations manuals.[4] Obtaining a copyright registration for these materials helps to ensure that there is no unauthorized use of the materials including by terminated franchisees. It also allows the franchisor to enforce its rights more effectively and to ensure that it has the exclusive right to commercially benefit from the use of the materials.

Canadian franchise law does not specifically regulate copyright. However, the disclosure requirements under the provincial franchise legislation can be interpreted as requiring franchisors to describe all intellectual property licensed to the franchisee.[5] Franchisors should ensure that their franchise disclosure document clearly articulates who owns the copyright. For example, if a third party contractor has been hired to create the materials (such as the training materials, software, or brochures), the contractor, as the author, owns the copyright and not the franchisor. To avoid any future disputes, the franchisor should ensure that it obtains a fully executed assignment of the ownership of the materials or an exclusive licence to use the materials.[6]

What is the importance and benefit of copyright protection for franchisors?

There are compelling reasons for franchisors to register a copyright in their materials. Copyright registration serves as strong evidence of ownership and ultimately provides a creation date, which is invaluable in the event of a future dispute. It also strengthens enforcement efforts, making it easier for franchisors to stop the unauthorized use of the materials and to pursue infringement claims more effectively. This helps to prevent any misuse of the brand’s materials and intellectual property which could damage the brand’s reputation or result in a financial loss. Additionally, it is important to include clear copyright provisions in franchise agreements by defining ownership and the permitted uses allowed by the franchisee. This can help to lower the risk of disputes or litigation arising from the improper or unauthorised use of materials.

Beyond the legal and financial advantages, effective copyright registration and protection supports the foundation of a successful franchise - brand consistency. Franchisors require that all of their locations are uniform in appearance and presentation so that customers receive the same experience, regardless of where they interact with the brand. One of the primary ways to achieve this uniformity and consistency is by franchisors allowing franchisees to use their intellectual property, and specifically the franchisor’s copyrighted material. The distribution of proprietary characters, music, logos, marketing materials, training materials, digital content, uniforms, menus, and even store layouts contributes to maintaining that uniformity. Protecting these assets not only maintains specific quality and standards but also fosters customer trust and loyalty, which helps to reinforce brand reputation and contributes directly to the franchise system’s growth.

Copyright protection can provide franchisors with a competitive advantage and provide an additional revenue stream through licensing the proprietary materials in certain circumstances. A well-protected copyright portfolio can enhance the marketability of the franchise system itself, making it more attractive to prospective franchisees, investors, and partners, all of whom value a well-protected and unique brand. Safeguarding copyright is not just about compliance, but is essential for protecting reputation, deterring infringement, and securing long-term success.

Conclusion

For Canadian franchisors, effective copyright management is essential to protecting some of the core elements of its franchise system. These are assets of their business that require protection, and copyright should therefore be part of the discussion when establishing their franchise system and drafting their franchise agreement and disclosure documents.

At Sotos LLP, our intellectual property team provides full-service, practical support across all aspects of IP protection. We can assist not only with registering your copyright, but also with developing and implementing copyright and trade mark strategies, conducting IP audits, preparing and negotiating licensing and data-sharing arrangements, and enforcing your rights through opposition, infringement, counterfeit, and other litigation proceedings, so that your brand and proprietary materials are properly protected as your franchise system grows.

About the authors

Anna Thompson-Amadei is an associate at Sotos LLP whose practice includes advising clients on trademark and other intellectual property protection, aligning practical brand protection strategies with the growth and day to day needs of their business.

Bailee Kleinhandler is an associate at Sotos LLP in the corporate and commercial group and is building a diverse practice in corporate and franchise law.

[2] Ibid at s 2 and 5(1).

[3] Government of Canada, Canadian Intellectual Property Office, How your application for registration of a copyright is processed (August 7, 2022). https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/copyright/how-your-application-registration-copyright-processed.

[4] Valerie Brennan, “Copyright Protetion for the Franchised Business” (2024) 43:4 Franchise L.J. at 32.

[5] Arthur Wishart Act (Franchise Disclosure), 2000, SO 2000, c 3 at s 5(4).