Trademark Licensing for Franchises in Taiwan: Check Authority, Scope and Contingency Plans Before Signing

Investing in a franchise in Taiwan means acquiring not just an operating model, but also permission to use the brand identity. The fact that other franchise outlets display the signage does not necessarily mean the franchisor has authority to license it to you. Nor does a trademark registration certificate mean that every product, service and promotional channel is covered. Before joining a franchise network, establish exactly what you may use, who is granting permission and how long that permission lasts—before committing money to fitting out and opening your outlet.

1. Understand why trademark information must be disclosed

Taiwan does have rules governing franchising. The Fair Trade Commission has issued its Principles for Handling Cases Involving the Business Conduct of Franchisors, with Article 25 of the Fair Trade Act providing the legal basis for addressing relevant, obviously unfair conduct. These principles guide administrative enforcement in franchise transactions; they do not amount to government approval of individual franchise agreements or brands.

Under the principles, the important information a franchisor must provide in advance includes the names of the intellectual property rights, their permitted scope of use and any restrictions relating to trademarks, patents, copyright and other rights licensed to franchisees. Disclosure is required ten days before entering into a franchise or preliminary franchise relationship, within a reasonable period determined for the particular case, or within a period agreed by both parties. Do not wait until you have ordered your signage to request the licensing information.

A franchisor's failure to provide important information without proper justification may breach Article 25 of the Fair Trade Act if it constitutes obviously unfair conduct and is sufficient to affect the trading order. Not every omission automatically makes the agreement invalid or entitles you to a full refund. Questions concerning trademark rights themselves must be assessed under the Trademark Act, while contractual performance and damages also involve the Civil Code. Franchise transactions are generally not consumer transactions, so you should not assume that the protections of the Consumer Protection Act apply.

2. Trace the brand back to the actual source of licensing authority

Ask the franchisor to list the Chinese names, English names, logos and combined marks that franchisees will actually use, then check each one individually. Words and logos may be separate trademarks: one certificate does not establish that everything is covered.

You can use the trademark search records maintained by Taiwan's Intellectual Property Office, under the Ministry of Economic Affairs, to check:

• Identification of rights: whether the trademark name, representation, registration number and owner match.
• Scope of protection: whether the designated goods or services correspond to the outlet's actual business activities.
• Current status: whether the mark is pending or registered, and whether its term of protection and any relevant changes are clear.
• Licensing chain: if the owner is not the franchisor signing the agreement, what gives the franchisor the right to use and sublicense the mark.

“An application has been filed” is not the same as “registration has been granted”. Equally, if the owner is the founder, an affiliated company or an overseas parent company, that relationship alone does not establish the franchisor's authority to license the mark to franchisees.

If the franchisor is not the owner, ask to see documents sufficient to establish its sublicensing authority, or written confirmation from the owner. Focus on territory, duration, permitted uses and sublicensing conditions. Commercially sensitive information may be redacted, but those key details should not all be concealed. Public search records are no substitute for licensing documents either. If there is doubt about the status of the rights or the legal effect of the documents, have them checked by a Taiwanese lawyer or trademark professional.

3. Put the permitted uses into a practical schedule

An agreement that simply says “permission to use the brand” may not adequately cover day-to-day operations. Consider preparing a trademark-use schedule containing the approved artwork and versions, and specifying the authorised outlets, licence period, goods or services, and uses requiring prior approval.

At a minimum, check each of the following:

• Physical operations: whether shop signage, menus, uniforms, receipts, packaging and in-store displays are included.
• Online promotion: whether the brand may be used on the outlet's social media accounts, online advertisements, delivery-platform pages and business listings on map services.
• Locally produced materials: whether printers, photographers or advertising agencies may use the brand files on your behalf, and who is responsible for approval.
• New uses: whether co-branded products, seasonal gift boxes or off-site events require additional permission or fees.

For example, permission to operate a drinks outlet should not be taken as permission to print the brand on every kind of retail product. The goods or services covered by trademark protection and the uses permitted under the franchise agreement are two separate matters that need checking.

Photographs, illustrations, fonts and music supplied by the brand may also involve third-party copyright. Ask which materials may be used in paid advertising, which may be displayed only through specified channels, and whether franchisees may modify them. Receiving the files from the franchisor does not give you unrestricted permission to use them.

4. Allocate costs and responsibilities if the licence is interrupted

One particularly important timing risk is that the franchisor's upstream licence may expire while your franchise agreement is still running. The need to renew a trademark registration does not itself indicate a problem with the brand. However, responsibility for renewal, arrangements for extending the upstream licence and the consequences of a failure to renew should all be discussed before the outlet opens.

Before signing, ask the franchisor to confirm its licensing authority in writing. The agreement should also require prompt notification of rights disputes, termination of a licence or significant changes that could affect the outlet's use of the brand. Then agree how the following matters will be handled, taking account of the different possible causes:

1. If someone alleges infringement: who will provide evidence of the rights, coordinate the response and bear reasonable legal costs.
2. If use must be suspended: what happens to signage, packaging and promotional materials, and how royalties will be calculated during the suspension.
3. If the outlet must change brands: who pays for new signage, reprinted materials, updates to online pages and any necessary closure.
4. If lawful use cannot be restored: what termination rights the franchisee has, and how fees already paid, unused materials and losses will be dealt with.

These are risk-allocation terms to negotiate, not categories of compensation automatically guaranteed by law. The agreement should also distinguish between defects in the franchisor's licensing authority and a franchisee's unauthorised alteration of artwork or use beyond the agreed scope, rather than placing all responsibility on one party regardless of the cause.

Practical takeaway: Before paying, obtain a trademark list, evidence of licensing authority, a schedule of permitted uses and terms covering any interruption. Your franchise fee and opening budget have a sound basis only once you have confirmed that your outlet can use the brand lawfully and on an ongoing basis.