The relationship between a national organization and its chapters is meant to be mutually beneficial, but sometimes conflict arises. It’s helpful to lay a solid foundation for the relationship in a good chapter affiliation agreement. Here are the important elements.
Many associations use local chapters to engage members, deliver programs, and explore new growth opportunities. To keep the relationship between parent organizations and chapters on solid ground, it’s important to have a good chapter affiliation agreement in place.
This agreement can guide both the parent organization and the affiliated chapter to promote the organization’s brand and mission purpose consistently and to enhance the association’s program offerings. It is critical to establish expectations and responsibilities on both sides and to explain how any financial arrangements will work, such as joint or reciprocal membership and membership dues collection structure. The agreement should also protect the trademarks, copyrights, and other assets of the parent; help mitigate the parent’s liability risks; and spell out what happens if and when the affiliation ceases to exist.
In the chapter affiliation agreement, the parent organization should establish requirements regarding standards for certification programs, educational conferences and seminars, membership, and other activities to ensure that the chapter conducts them in a manner consistent with the organization’s brand and mission. The agreement should also specify limitations on the chapter’s scope of activity, such as defining its geographic territory to avoid potential competition among chapters.
If the parent organization provides financial support or membership benefits to local chapters, the affiliation agreement should clearly describe how this arrangement operates. For example, if the organization has a joint or reciprocal membership structure between the parent and its chapters, the affiliation agreement should include terms regarding dues collection, membership benefits, and any reporting and recordkeeping requirements.
The agreement should also include expectations regarding the chapter’s governance and legal status, such as requiring the chapter to incorporate as a legal entity, maintain a business bank account with proper accounting, duly file its Form 990 with the IRS, and obtain its own liability insurance coverage.
In addition to providing clear operating guidelines and standards, some affiliation agreements include a periodic reporting or meeting requirement. This gives the parent organization an opportunity to review the chapter’s most recent activities, offer timely support, discuss key policy positions, and keep good records of activities taking place at the chapter level.
It is critical to establish expectations and responsibilities on both sides and to explain how any financial arrangements will work, such as joint or reciprocal membership and membership dues collection structure.
From a legal perspective, the most important element of a chapter affiliation agreement is the parent organization’s grant of a trademark license to the affiliated chapter. The parent organization should assert trademark ownership and secure federal trademark registration with the U.S. Patent and Trademark Office.
If the parent has international chapters, it is advisable to seek trademark registration in the local jurisdiction. In most other countries, trademark registration is based on the “first to file” principle instead of the “first to use (in commerce)” framework used in the United States. For example, in a “first to file” country, if a competing or hostile affiliate successfully files a trademark application with the parent organization’s trademark, the parent may be prohibited from using its own trademark (often its name and acronym) in that country, even after the affiliation ends.
Given the importance of protecting the association’s trademark, the chapter affiliation agreement should include a provision clearly stating that the trademark is owned by the parent organization, and the chapter’s use of the trademark is based on a license granted by the parent. This provision should also include any appropriate specifications regarding the chapter’s use of the trademark—such as which design elements (colors or fonts, for example) are permissible and how to display the trademark in the chapter’s communication channels. The agreement should make clear that the chapter’s right to use the trademark ceases upon disaffiliation.
A parent organization often provides copyrighted content to its chapters or may engage chapters to develop content jointly. Depending on the arrangement, the chapter affiliation agreement should specify issues concerning copyright ownership, scope of copyright license grant, any copyright content usage restrictions, required attribution, and related points.
For content that is developed jointly, all contributors could be deemed joint copyright owners. As a result, if there are no contractual terms stating otherwise, each copyright owner enjoys the same exclusive rights offered by the copyright law, including the right to prepare derivative works without obtaining permission from another joint owner. To avoid potential disputes between the parent organization and chapter, if the affiliation arrangement involves any use, access, or creation of copyrighted content, it is advisable to include appropriate terms to address copyright issues in the chapter affiliation agreement—including what happens when the affiliation ends.
Given the evolving legal landscape regarding personal data and privacy, the chapter affiliation agreement should include provisions addressing the use and protection of personal data. If the parent organization has privacy and data security policies in place to protect membership data, the chapter should be required to follow the same policies and protocols.
For associations with international chapters based in the European Union, the processing or transfer of personal data from an EU data subject could trigger compliance issues involving the General Data Protection Regulation. For U.S.-based associations not subject to GDPR, if the chapter affiliation arrangement involves personal data sharing, it is advisable to incorporate contract terms consistent with best-practice privacy principles, such as transparency, data minimization, and purpose limitation.
Finally, the chapter affiliation agreement should address issues that may arise when the affiliation relationship ends. For example, the termination provision might require the chapter to automatically assign to the parent organization any copyright ownership of jointly developed materials. If the chapter has membership data stored in its database, the termination provision should address how that data—especially any personal data—should be handled following disaffiliation. Mostly important, this provision should make clear that the chapter no longer has the right to use the organization’s trademark upon termination of the chapter affiliation agreement.
Dorothy Deng is a partner at Whiteford, Taylor & Preston, LLP, in Falls Church, Virginia.