IP rights franchising agreements now governed by specific provisions

The Italian government has enacted its first statute regulating IP rights franchising agreements. Law 129/2004, which came into force on May 25, (i) sets forth specific requirements that must be included in all IP rights franchising agreements, and (ii) requires that franchising agreements established before May 25 2004 have a year from that date to comply with the law’s provisions.

The new law defines ‘franchising agreements’ as contracts between two legally and economically independent parties in which one party – the rights holder – grants the other party the right to use its IP rights (trademarks, trade names, designs, utility models, copyrights, know-how, patents, technical assistance or consultation services) in a specific geographical area to help commercialize certain goods and services.

The new statute provides that the franchisor must give the potential franchisee a complete copy of the agreement at least 30 days prior to execution. The franchising agreement must:

• be in writing;
  
  
• have a term of at least three years; and
  
  
• expressly indicate:

  o the capital investment needed to start the franchise business;

  o the initial expenses that will be incurred prior to starting the franchise business;

  o the formula for calculating royalty payments; and

  o exclusive territory provisions, if any.

The law also provides that, prior to seeking dispute resolution through either the courts or arbitration, the parties may attempt to resolve their disputes through the mediation service provided by the chamber of commerce in the district in which the franchising business is located.

Francesca Rolla, Lovells, Milan