Item 14 is your “secret sauce” or proprietary information. As a rule, we claim everything as proprietary; the website, the contents of the manual, the methods, the advertising, the training program, etc. If you have any patents or other very specific proprietary information, let us know so we can call it out generally in this section.
You must also make sure all of your key people are signing a confidentiality and non-compete agreement. If you don’t respect the information and don’t take steps to protect it, you’re going to have a hard time legally enforcing the confidentiality of your information. For example, if you have secret recipes, make sure anybody who has access to those recipes signs an NDA. Otherwise, it’s going to escape into the public domain. And once it becomes generally available in the public domain, you no longer can protect the information and stop others from using it.
Sample Item 14-1
ITEM 14: PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION
You do not receive the right to use any item covered by a patent or copyright, but you can use the proprietary information in the Belmont Operating Manual. The Operating Manual is described in Item 11. Item 11 also describes limitations on the use of this manual by you and your employees.
You must also promptly tell us when you learn about the unauthorized use of this proprietary information. We are not obligated to take any action, but we will respond to your notification of unauthorized use as we think appropriate. We will indemnify you for any loss you sustain as a result of any action brought by a third party concerning your use of this proprietary information.
This is a sample section from a fictional FDD for Belmont Muffler Shops that was prepared by the Federal Trade Commission as a compliance guide for franchisors preparing their FDD. These are used to provide an idea of what these items may look like in an FDD, but keep in mind, your FDD will most likely vary significantly from these examples.
Sample Item 14-2
ITEM 14: PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION
U.S. Patent No. 399442 was issued to CTF International, Inc. on December 4, 1993. It describes a process for exhaust system installation. The process describes the steps in making a straight length of exhaust pipe, bending this pipe, coating the inside and outside of this pipe with our Pipe Protector, and installing the exhaust pipe on a motor vehicle. You will use equipment utilizing this process.
Our right to use or license this patent is not materially limited by any agreement or known infringing use.
You must tell us immediately if you learn about an infringement or challenge to our use of this patent. We will take action that we think is appropriate. You must also agree not to contest our interest in these or our other trade secrets.
If we decide to add, modify, or discontinue the use of an item or process covered by a patent or copyright, you must also do so. Our sole obligation is to reimburse you for the tangible cost of complying with this obligation.
Although we are not obligated to defend your use of these items or processes, we will reimburse you for damages and reasonable costs incurred in litigation about them.
This is a sample section from a fictional FDD for Belmont Muffler Shops that was prepared by the Federal Trade Commission as a compliance guide for franchisors preparing their FDD. These are used to provide an idea of what these items may look like in an FDD, but keep in mind, your FDD will most likely vary significantly from these examples.
