Beyond the Binder: Item 14 — Patents, Copyrights, and Proprietary Information
Educational series for reading the Franchise Disclosure Document with clear eyes and full context.
What Item 14 covers
Item 14 tells you what intellectual property the franchisor owns or controls and what you may use as a franchisee. It should identify patents, copyrights, and proprietary information that matter to operating the business and explain any material limitations, expirations, challenges, or third party licenses.
Plain language definitions:
Patent: exclusive right to make, use, or sell a specific invention for a limited time.
Copyright: protection for original works such as manuals, training videos, photos, menu designs, and software code.
Trade secret and proprietary information: confidential know how, recipes, formulas, processes, data, and methods that derive value from secrecy.
Why Item 14 matters to you
Durability of your rights: if your ability to operate depends on a patent or a third party license, expiration or termination can hit your unit’s operations and resale value.
Access and updates: who controls manuals, software, and content, and whether you will receive updates as the system evolves.
Costs and constraints: IP can lock you into vendors, platforms, and consumables, which affects margins and exit options.
Risk allocation: if someone sues for infringement, you need to know who defends whom, who pays, and what happens to your right to keep operating.
What good Item 14 disclosures look like
A clear list of patents with numbers, titles, jurisdictions, and expiration dates, and a statement on whether they are actually used in the system.
A summary of copyrights for manuals, training content, creative assets, and software, including whether franchisees get a license to use and modify any materials.
Trade secret protocols described at a high level: how the brand protects recipes, processes, and data, and what you must do to keep them confidential.
Third party licenses that are critical to operations called out plainly: term length, renewal rights, and what happens if the license ends.
Ownership and control of digital assets: point of sale data, websites, social handles, photography, and advertising accounts, and your rights when you leave the system.
Indemnification scope: who defends IP claims, any limits, and any insurance requirements related to IP risk.
Common red flags
Vague claims of proprietary tech with no patent numbers, no maintenance status, and no way to verify use in the system.
Franchisor is only a licensee of a critical technology or recipe, with a short renewal window or termination at the licensor’s convenience.
Mandatory vendor lock in tied to claimed trade secrets, with high markups and no performance standards or audit rights.
One way confidentiality where you face strict obligations, while the franchisor’s own protection measures are not described or are weak.
Silence on data ownership for customer lists, email databases, loyalty programs, and ad accounts, which can evaporate your local goodwill.
Social media and content assignment that transfers all content you create to the franchisor, with no local license retained if you exit.
No plan for patent expiration when patents are nearing the end of life, yet the brand still markets exclusivity as a key differentiator.
Due diligence checklist
Use this before you sign, and again during renewal or transfer.
Patents
List every patent cited in Item 14: number, country, filing date, and expiration date.
Ask whether the patented invention is required for daily operations, or merely optional or promotional.
Confirm who pays for maintenance and enforcement, and whether there are current disputes or reexams.
Copyrights and content
Confirm that you will receive a non exclusive license to use manuals, images, training videos, and advertising templates during the term.
Ask whether you may adapt templates to local law and whether approvals will be timely and commercially reasonable.
Clarify ownership of photos, videos, and copy that you or your agency create for local use.
Trade secrets and proprietary processes
Request a description of how trade secrets are protected and how you should train staff on confidentiality.
Verify that recipes or processes do not require consumables that only one affiliated vendor can supply at unverified prices.
Third party technology and licenses
Identify any essential software, data, music, content, or equipment that the franchisor only licenses from others.
Ask for the term, renewal rights, and contingency plan if the license ends or the vendor fails.
Data and digital property
Clarify who owns customer data, loyalty history, domain names, local website pages, ad accounts, and social handles.
Confirm export rights: format, timing, and cost to receive a usable copy when you leave.
IP claims and insurance
Ask who defends you in an infringement claim related to approved system elements.
Confirm whether cyber or media liability insurance is required and what limits the franchisor expects.
Key questions to ask the franchisor and counsel
Which patents, if any, are central to the competitive advantage promised to franchisees, and when do they expire.
What third party contracts could limit my ability to operate if they end, and what are the backup plans.
What happens to my customer data and locally produced content if I transfer, non renew, or terminate.
Will I receive updated manuals and software for the full term, and are update fees capped or predictable.
If an IP dispute arises, may I continue operating while the dispute is pending, and who pays for substitutions or rebranding if required.
Intersections with other Items
Item 1 and Item 8: supplier control and affiliate markups can reveal whether the claimed trade secrets are a pretext for locked margins.
Item 11: training and technology promises should match the IP described in Item 14.
Item 13: trademarks live here for many systems, confirm consistency with the trademark disclosures and any litigation.
Item 17: post term obligations should align with confidentiality, return of materials, and data export rights.
Item 19: if performance claims are tied to proprietary tech, make sure the tech actually exists and is in use.
Clause watch: language that deserves a second read
Assignment of inventions by franchisee: some systems require that any improvement you devise belongs to the franchisor without compensation.
Content assignment: all creative output is assigned to the franchisor, with no retained local license even for historical portfolio use.
Audit gag provisions: confidentiality terms that bar necessary sharing with advisors, lenders, or prospective buyers, which can chill due diligence and exit.
Five minute screening
Are patent numbers and expiration dates actually listed.
Do you see any third party licenses that are essential to daily operations.
Does the document say who owns data and social channels.
Is there a clear indemnity for approved use of system IP.
If a patent expires during your initial term, is there any plan described.
If two or more answers are no, slow down and dig deeper with counsel.
Action plan
Make a table of the Item 14 assets: patents, copyrights, trade secrets, third party licenses. Note term, renewal, and operational reliance.
Cross check Item 14 against training descriptions, vendor lists, and the operations manual table of contents.
Confirm data and content ownership in the franchise agreement and any technology riders.
Ask for written clarification on any third party license that is critical to operations, including what happens upon termination.
Budget for IP related insurance if the agreement shifts risk to you.
Takeaway
Item 14 tells you whether the moat is real or marketing. Strong, transparent IP positions can support pricing power and exit value. Vague claims, expiring rights, or fragile third party dependencies place the risk on the franchisee while the franchisor retains control.
This article is for information and education only. It is not legal, financial, or tax advice. Franchise agreements and FDDs vary by system and by year, and your rights depend on the specific documents you sign and the laws of your state or province. Always review the current FDD and the full franchise agreement with qualified counsel and a financial advisor before you sign or wire funds.
