FDD Item 13: Trademarks Explained
Item 13 of the franchise disclosure document discloses the principal trademarks a franchisee is licensed to use and their registration status with the United States Patent and Trademark Office. It also discloses disputes, agreements, prior rights, and other facts that could limit the franchisee’s use of those marks. Item 13 is governed by 16 CFR 436.5(m).
What Is Item 13 of the FDD?
Item 13 is the trademarks section of the franchise disclosure document. It tells prospective franchisees which principal marks they will operate under and what legal rights, limitations, or disputes may affect their use.
The disclosure requirements are codified under 16 CFR 436.5(m) and enforced by the Federal Trade Commission.
The right to operate under a franchise system’s marks is an important part of many franchise relationships. Item 13 helps candidates understand the registration status of those marks and whether any determinations, agreements, prior rights, or infringement claims could interfere with their use.
What Must Be Disclosed in Item 13?
Item 13 identifies the principal trademarks licensed to the franchisee, explains their registration status, and discloses facts that could materially affect the franchisee’s right to use them.
Principal Trademarks
The franchisor discloses each principal trademark to be licensed to the franchisee. Principal trademarks are the primary trademarks, service marks, names, logos, and commercial symbols used to identify the franchised business.
Item 13 focuses on the principal marks used to identify the business and does not need to list every trademark the franchisor owns.
Registration Status
For each principal trademark registered with the United States Patent and Trademark Office, the franchisor states the registration date and number, whether all required affidavits have been filed, whether the registration has been renewed, and whether the mark is listed on the Principal or Supplemental Register.
Registration on the Principal Register provides federal legal benefits that are not available to marks on the Supplemental Register or marks without federal registration. Item 13 allows candidates to see the registration status of the principal marks they will use.
Unregistered Marks, Applications, and the Prescribed Statement
If a principal trademark is not registered with the United States Patent and Trademark Office, the franchisor states whether it has filed a trademark application, including an intent-to-use application or an application based on actual use.
If an application has been filed, Item 13 includes the application’s date and identification number.
If the trademark is not registered on the Principal Register, including when it appears only on the Supplemental Register, Item 13 must include the exact warning prescribed by the Franchise Rule. The warning explains that the mark does not have the legal benefits of Principal Register registration and that a challenge could require the franchisee to change marks at its own expense.
Disputes That Can Affect Trademark Use
Item 13 discloses determinations, proceedings, litigation, agreements, and prior rights that could interfere with the franchisee's use of the principal trademarks.
Material Determinations and Proceedings
The franchisor discloses any currently effective material determination by the United States Patent and Trademark Office, the Trademark Trial and Appeal Board, a state trademark administrator, or a court concerning a principal trademark.
It also discloses pending infringement, opposition, or cancellation proceedings, including proceedings in which the franchisor unsuccessfully sought to prevent another party from registering a mark to protect a trademark licensed by the franchisor.
For each determination, the franchisor explains how it affects the ownership, use, or licensing of the trademark.
Pending Litigation
Item 13 discloses any pending material federal or state court action involving the franchisor's use or ownership of a trademark or another party's use of a conflicting mark.
For each pending action, Item 13 identifies the forum and case number, describes the claims concerning the franchisor's or another party's use of the mark, and discloses any effective court or administrative agency ruling in the matter.
Agreements That Limit Use
If a currently effective agreement significantly limits the franchisor's right to use or license a listed trademark in a way that is material to the franchise, Item 13 discloses the agreement.
The disclosure describes the nature and extent of the limitation or grant, how it may affect the franchisee, the agreement's duration, the parties, the circumstances under which it may be canceled or modified, and its other material terms.
These agreements may limit where or how the franchisor and its franchisees can use the mark.
The Franchisor's Obligations Around the Trademarks
Item 13 also explains what the franchisor is and is not required to do to protect the principal trademarks and the franchisee’s authorized use of them.
It discloses whether the franchisor must protect the franchisee’s right to use the principal trademarks and protect the franchisee against infringement or unfair competition claims arising from authorized use of the marks.
The disclosure also explains the franchisee’s obligation to report identical or confusingly similar marks, whether the franchisor must take action after receiving notice, and who controls any related administrative proceeding or litigation.
Item 13 further discloses whether the franchisor must participate in the franchisee’s defense or indemnify the franchisee for expenses or damages. It also describes the franchisee’s rights if the franchisor requires the franchisee to modify or discontinue using a mark.
Superior Prior Rights and Known Infringement
Item 13 discloses whether the franchisor knows of any superior prior rights or infringing uses that could materially affect the franchisee’s use of the marks in the state where the franchised business will be located.
For each infringing use that could materially affect the franchisee, the franchisor describes the nature and location of the infringement, how long it has continued to the extent known, and any action the franchisor has taken or expects to take.
Common Mistakes Franchisors Make With Item 13
A mark on the Supplemental Register is federally registered, but it is not registered on the Principal Register.
The prescribed warning still applies to a Supplemental Register mark. However, the disclosure about a pending trademark application applies when a principal mark is not registered with the United States Patent and Trademark Office.
Disclosing Only Principal Register Marks
A franchisor may overlook marks on the Supplemental Register or principal marks that are the subject of pending applications.
Item 13 should reflect the actual status of every principal mark the franchisee will be licensed to use, including any applicable registration, application, and prescribed-statement requirements.
Assuming the Franchisor Must Defend Every Claim
Item 13 does not automatically require the franchisor to defend the franchisee or protect every trademark.
Instead, the franchisor must disclose whether it has those obligations, who controls related proceedings, whether indemnification is available, and what the franchisee must do to receive any protection.
Incomplete Dispute and Agreement Disclosures
Item 13 covers more than court litigation. It can also require disclosure of administrative determinations, opposition or cancellation proceedings, agreements limiting the franchisor’s rights, superior prior rights, and known infringement.
Leaving out one of these categories can give candidates an incomplete picture of the marks they will use.
Outdated Registration and Litigation Details
Registrations require maintenance filings, applications may move to registration, and trademark disputes can arise or be resolved.
Item 13 should be reviewed whenever the FDD is updated so that registration numbers, affidavit status, renewal status, applications, determinations, proceedings, and litigation remain accurate.
How Item 13 Connects to Other FDD Items
Item 13 pairs most closely with Item 14, which covers patents, copyrights, patent applications, and proprietary information. Item 13 handles the principal marks that identify the franchised business, while Item 14 handles other intellectual property used in the system.
The franchisee’s duty to use and protect the trademarks may appear in the Item 9 obligations table, which commonly points back to Item 13.
Item 11 may describe the franchisor’s advertising, system standards, and operating controls, while Item 16 separately covers restrictions on the goods or services the franchisee may offer and, where applicable, the customers it may serve.
The franchise agreement that grants the trademark license is generally attached as an exhibit under Item 22.
Franchise Genesis
How Franchise Genesis Helps Franchisors Prepare Item 13
Item 13 explains the status of the principal marks a franchisee will use, so accuracy matters. Getting it right means identifying the principal trademarks, stating each mark's registration status correctly, including the exact prescribed warning when it applies, and disclosing any determinations, proceedings, agreements, prior rights, or infringement that could affect the franchisee.
Franchise Genesis works with franchisors to prepare a franchise disclosure document that is accurate, compliant, and built to support franchise sales.
Experienced franchise attorneys are included in the development program. They help franchisors confirm the registration and application status of each principal trademark, include the required statements, and keep Item 13 aligned with trademark records and the franchise agreement.
Questions
Frequently Asked Questions
What is Item 13 of the FDD?
Item 13 discloses the principal trademarks a franchisee is licensed to use, their registration status with the United States Patent and Trademark Office, and any disputes, agreements, prior rights, or infringement that could limit the franchisee’s use of them. It is governed by 16 CFR 436.5(m).
What are principal trademarks?
Principal trademarks are the primary trademarks, service marks, names, logos, and commercial symbols used to identify the franchised business. Item 13 does not require disclosure of every mark the franchisor owns.
What if the trademark is not federally registered?
The franchisor states whether it has filed a trademark application and provides the application’s date and identification number when applicable. If the mark is not registered on the Principal Register, Item 13 must also include the exact warning prescribed by the Franchise Rule.
Does the prescribed warning apply to marks on the Supplemental Register?
Yes. A Supplemental Register mark is federally registered, but it is not registered on the Principal Register, so the prescribed warning applies.
Does Item 13 require the franchisor to defend the franchisee?
Not automatically. Item 13 discloses whether the franchisor must protect the franchisee’s right to use the marks, defend infringement or unfair competition claims, control litigation, or provide indemnification.
How is Item 13 different from Item 14?
Item 13 covers the principal trademarks that identify the franchised business. Item 14 covers other intellectual property, including patents, pending patent applications, copyrights, and proprietary information such as trade secrets.
Does Item 13 need to be updated when trademark status changes?
Yes. Registrations require maintenance filings, applications may move to registration, and disputes may arise or be resolved. Item 13 should be reviewed whenever the FDD is amended so the disclosures remain accurate.