Enforcing Arbitration Clauses in 'Hidden' or Unlawful Franchise Agreements
September 16, 2003
Licensors, manufacturers, and other businesses that find themselves as unwitting franchisors face interesting issues when they attempt to enforce an arbitration clause. Most registration states will usually have statutory provisions that declare that the sale of an unregistered franchise or the sale of a franchise without the required disclosure is unlawful. <i>See, e.g.,</i> Cal. Corp. Code '' 31110, 31119; 815 Ill.Comp.Stat. ' 705/5; N.Y. Gen. Bus. Law ' 683.1; Wash. Rev. Code ' 19.100.020.(1). However, in the usual case, the sale is not declared to be void, but is voidable through an action for rescission. <i>See, e.g.</i> Cal. Corp. Code '' 31300; Wash. Rev. Code ' 19.100.190(2); N.Y. Gen. Bus. Law ' 691; 815 Ill.Comp.Stat. ' 705/26.
COURT WATCH
September 16, 2003
Highlights of the latest franchising cases from around the country.
'Now for Something Completely Different'
September 16, 2003
No franchise agreement, despite its length and the genius of its drafting, anticipates all commercial realities and advances over its intended life span. For example, until the mid-to-late 1990s, the Internet was a novelty of the military, academia, and entertainment industry, and it formed no part of the commercial landscape for business format franchises. As franchise systems and methods of operation evolve in our technological society, how much of the future should the draftsperson attempt to enmesh in the agreement? Perhaps this issue is less of a concern than first thought. The answer may lie in a doctrine that is, ironically, viewed by franchisors with less favor.
Adding to the Franchisor's Arsenal
September 16, 2003
Franchisors have long packaged a business model along with a collection of intellectual property that includes service marks, trademarks, trade names, logos, trade secrets, and copyrighted materials (<i>eg</i>, operating manuals, product information sheets, and advertising collateral), in order to form a business opportunity that is attractive to potential franchisees. In order to protect franchisees from unfair competition, franchisors have always had federal copyright, trademark, and trade dress infringement actions and state law trade secret and unfair competition actions as part of their legal arsenal against such competitors. This arsenal also includes state law breach-of-contract causes of action against insurgent franchisees failing to 'follow the rules' of the business model (<i>ie</i>, failing to honor the obligations set forth in the franchise agreement crafted by the franchisor). In today's economic and technological climate, one more option should be considered for inclusion in a franchisors' arsenal — business-method patents and the threat of a federal patent infringement suit against unfair competitors and insurgent franchisees.
COURT WATCH
September 16, 2003
Highlights of the latest franchising cases from around the country.
Point: Shootout Between Lawyers and Consultants
September 16, 2003
Five years ago, professionals who served the business world were actively seeking ways to blend across various professions. Accounting firms practiced law; law firms did consulting; and consultants practiced law. In large measure, the same still holds true today, but each of us is a little more reluctant to step out of his zone of comfort. In the post Enron/ Worldcom/Tyco environment, many professionals are on edge.
Counterpoint: A Consultant's-Eye View
September 16, 2003
Tension often exists between lawyer and consultant because many issues do not neatly fall into purely legal or purely business buckets. Consultants chafe at lawyers who make recommendations concerning business strategies that they feel are inappropriate or based upon limited knowledge or research. Lawyers chafe at consultants 'practicing law without a license.' Indeed, from the viewpoint of the professional consultants, the practice of business without due care by lawyers is as risky (maybe more so) for the client as is the practice of law by the non-lawyer.
NEWS BRIEFS
September 16, 2003
Highlights of the latest franchising news from around the country.
BRIEFS
September 13, 2003
Highlights of the latest franchising news from around the country.
COURT WATCH
September 13, 2003
Highlights of the latest franchising cases from around the country.
