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A Comparative Study on Obligations of the Franchisor and the Franchisee Regarding Trademarks under Korea and USA Law

As trademarks are essential to the running of the franchise business, issues regarding the trademarks would be the fundamental consideration for the contracting parties. This study discusses obligations of the franchisor and the franchisee regarding trademarks under Korea and USA laws. Legal questions concerning trademarks are identified, and solutions which the contracting parties should take into account are suggested. Firstly, the franchisor should have trademark rights or the right to license to use a trademark. And the franchisor must take control to maintain the value of its trademark and to prevent misleading use of its trademark by the franchisee. But as the extent of control is not provided under Korea and USA laws, the adequate control clause should be included in the franchise agreement. Secondly, for preventing the public confusion or deception, the franchisee is required to adequately use a trademark. Moreover once the infringement of a trademark arises, the franchisee shall inform the franchisor of infringement of trademark rights. This duty is helpful to appropriately deal with infringement of a trademark.