Intellectual Property
President Jair Bolsonaro sanctioned Law No. 13,966 of December 26, 2019, (Brazilian Franchising Law), which regulates the franchising system in Brazil and revokes Law No. 8,955/1994 (former Franchising Law).
The new Franchising Law is an important mark for the franchising in Brazil, not only because it is more detailed than the previous legal text, but also because it corrects the terminology of the former law to avoid the possibility of framing this type of agreement as a consumer or employment relationship (it also makes reference to the non-existence of such relationships between franchisor and franchisee’s employees) and clarifies some issues that were being debated/handled by the judiciary.
The new Law adopts a clearer terminology to enforce the franchisor's obligation to provide the franchisee with a Franchise Offering Circular (COF) at least 10 days prior to signing the agreement or payment of the franchising fees by the franchisee. If the franchisor does not observe this provision, then the franchisee may argue for the nullity or invalidity of the contractual relation, as the case may be, and request the refund of the amounts paid with monetary correction.
Furthermore, the new Law removes the provision that required the indication of a guarantee fee; and it is clear about the need for details on (i) penalties and fines; (ii) transfer and succession rules; and (iii) rules related to the territorial action policy (including the territorial competition between franchisor’s owned units and franchised units).
As for intellectual property rights, the Law adopts the terminology "trademarks and other intellectual property rights" rather than providing only the right to use "trademark or patent", in order to make the scope of industrial property rights that can be licensed broader.
For international franchises, the new legal text of the Law provides that the contracting parties shall be free to state the applicable law to the agreement between the domicile of the franchisee or the domicile of the franchisor.
Finally, it is noteworthy that this Law was sanctioned by the president with one single veto (article 6), which specified the bidding rules applicable to this business model in government-owned companies, mixed-capital companies and entities controlled by the Federal Government, states, municipalities and the Federal District.
This new Franchising Law will come into force by the end of March this year.