Checking Trade Mark Rights Before Franchising Your Business

A brand that customers recognise is not necessarily ready for franchisees to use. The outlet’s name may still be awaiting registration, the certificate may be held by the founder personally, or the protection may not cover the activities being offered. Before expanding through a franchise network in Indonesia, check your trade mark rights so that any promise to let prospective franchisees use the brand has a clear legal basis.

1. Distinguish between using a brand and holding registered rights

In Indonesia, franchising is specifically governed by Government Regulation No. 35 of 2024 on Franchising, which replaced Government Regulation No. 42 of 2007. One of the criteria for a franchise is that it must have recorded or registered intellectual property. The franchise offering prospectus must also include an intellectual property certificate or a letter confirming its recordal.

For trade marks, the principal legislation is Law No. 20 of 2016 on Trade Marks and Geographical Indications, as amended. Trade mark rights are acquired once the mark is registered. Proof that an application has been filed must therefore not be treated as if it were a trade mark registration certificate.

You should also distinguish between a company name, a social media account name, a domain name and a registered trade mark. Ownership of one does not automatically confer rights to the others. Even an outlet that has been trading for many years should check its trade mark registration status.

Start by listing the brand elements that franchisees will actually use: the business name, main logo, product brands and service names. Identify which are central to the franchise offering and which are merely supporting elements. This helps prevent the review from stopping at a single certificate that may not be particularly relevant.

2. Match the certificate to the outlet’s activities

Check the records in the Intellectual Property Database maintained by Indonesia’s Directorate General of Intellectual Property (DJKI), then compare them with the certificates and documents held by the company. A database search is an initial check, not a substitute for legal assessment if a dispute or uncertainty over status emerges.

Prepare a checklist for each trade mark covering:

• The form of the protected mark, including its name or logo design.
• The registration number and the rights holder’s name.
• The classes and descriptions of goods or services listed.
• The filing date, protection period and renewal status.
• Any assignment or licence documents.
• Any differences between the registered mark and the branding used by the outlet.

Read the descriptions of goods or services, not just the class numbers. For example, a business that sells packaged products and also operates a restaurant service needs to assess whether its trade mark protection covers both activities. Registration for one category of products does not automatically cover every business activity carried out under the same name.

Under Indonesia’s Trade Marks Law, a registered trade mark is protected for ten years from its filing date, and that protection can be renewed. Add renewal deadlines to the company’s compliance calendar and assign clear responsibility for them.

If the outlet’s logo has changed, do not assume that the old certificate covers every aspect of the new design. Seek an assessment of whether the changes require an additional application before promising the new design to franchisees as their official brand identity.

3. Ensure the franchisor has authority to grant permission

An often-overlooked issue is the distinction between the trade mark owner and the party that will sign the franchise agreement. For example, the mark may be registered in the founder’s name, while the company makes the franchise offering. The founder’s relationship with the company does not, in itself, provide a basis for granting rights to use the mark.

Choose an appropriate route: assigning the rights to the company or obtaining a licence from the trade mark owner. This choice should take account of governance, tax, business continuity and plans for asset ownership. Assignment is not the only option, but whichever route is chosen must be supported by adequate documentation.

If using a licence, check whether the company is authorised to permit franchisees to use the trade mark. Permission to use it for the company’s own outlets does not necessarily include that authority. Also ensure that the licence’s territory, permitted activities and duration align with the rights you intend to grant to franchisees.

The Trade Marks Law provides for licence agreements to be recorded with the Minister. An unrecorded licence agreement has no legal effect against third parties. Do not therefore assume that registering the franchise automatically completes the recordal of the trade mark licence. Seek professional advice on the documents and recordal requirements involved.

4. Align the offering with the findings of your review

Once the review is complete, use a single verified list of trade marks to prepare the prospectus and the schedules to the agreement. The details of each mark, its owner, its protection status and the basis of the franchisor’s authority must be consistent.

The agreement should explain which forms of the mark may be used, the activities for which they may be used, the approval rules for promotional materials, and the prohibition on franchisees registering the mark or related brand identifiers in their own names without permission. It should also establish a duty to report suspected infringement and identify who is responsible for taking legal action to protect the rights.

If an application is still pending or the chain of permissions is unclear, do not present the rights as secure. Resolve these issues before making a firm promise in the offering that franchisees will be entitled to use the mark.

Practical step: before accepting your first franchisee, prepare a single file containing the certificates, status-check results, scope of goods or services, legal basis for permission to use the marks, and renewal calendar. Make sure every mark promised to franchisees can be traced back to its rights holder and to the franchisor’s authority to grant its use.