Licensed use of a trademark (Trademarks Act s. 50)

In a franchise, the brand stays with its owner. The Canadian Franchise Association describes franchising as a relationship in which an owner gives a licence to use its operating system, name and trademarked materials. A buyer of a franchise resale should ask how that licence will apply to them, so it helps to know what the Trademarks Act asks of it. See do franchise branding rights go with the sale of a location.

Section 50 in its own terms

Section 50(1) is part of the federal Trademarks Act. It applies where an entity is licensed by or with the authority of the owner of a trademark and the owner has, under the licence, direct or indirect control of the character or quality of the goods or services. In that case, for the purposes of the Act, the licensee’s use, advertisement or display of the mark has the same effect as use by the owner. Section 50(2) adds a presumption: to the extent that public notice is given that the use is licensed and who the owner is, it is presumed, unless the contrary is proven, that the owner licensed the use and controls the quality.

What to check or ask

• Which company owns the trademark and whether the licence comes from it directly
• What quality standards and inspection rights the franchise agreement gives the owner
• Whether the licence passes to a buyer and on whose approval
• How the location tells the public that its use of the mark is licensed