How can I keep software secrets from Franchisor? - Financial Times

Published on 5 Jul 2010 under category: article

Question put forwards by Jonathan Moules, Business Questions

As published in the Financial Times – 03 July 2010 p29

I am the franchisor of a small chain of software developers. I am looking to sign a contract with a new franchisee, but am concerned about the protection of our software secrets. What steps can i take to make sure these stay within the company?

If you have an underlying business model that relies on maintaining the integrity of confidential information, strong safeguards are clearly required when dealing with new franchises. Before allowing access to any sensitive information during sales negotiations, you should require any potential franchisee to go ahead, the franchisee should enter into a detailed software licence together with the franchise agreement. The licence would make clear: what data you are seeking to protect; that it remains your property; and that the franchisee may only use it for legitimate purposes. The licence would also deal with what happens when the franchise ends (I.e. the franchise stops using the information and does not retain copies). In exchange for the opportunity to join your network, the franchisee should also agree not to operate any similar or competing business for at least 12 months after the relationship ends. This will reduce the commercial incentive for franchisees to take data for their own purposes. Clauses of this type must be carefully drafted to be enforceable and, considering the potential damage to your business, it is worth investing in the right advice at the outset.

By Robert Bedford, Solicitor at Cubism Law