The Terrifying New York Definition of a Franchise

It is all too easy for an intellectual property practitioner in the US to fall into the bad habit of assuming that everything about IP is the same in every state of the US.  The other day a discussion in the E-Trademarks listserv offered a reminder of a particularly nasty trap for the unwary — the terrifying New York definition of a franchise.

In many states that have franchise laws, the definition of a franchise relationship is something like this:

  • a fee;
  • a trademark; and
  • a marketing plan prescribed in substantial part by the franchisor.

In such states, a mere trademark license without more would not be considered a franchise.  But in New York, to fall under the franchise laws, you need only this:

  • a fee;  and
    • a trademark; or
    • a marketing plan prescribed in substantial part by the franchisor.

From this it may be appreciated that under New York law a simple trademark license is a franchise.  This exposes the trademark owner to a broad range of risks including prosecution by the New York attorney general.

This sorry state of New York law has been noted and commented upon here and here.  This needs fixing.  Maybe this is a job for the New York Intellectual Property Law Association to try to fix.

For now, the practitioner drafting a trademark license might want to avoid saying that New York law applies.

By the way, if you are a trademark practitioner, you might want to join the E-Trademarks listserv.  It’s a great community of trademark practitioners.

 

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