A brand is a franchisor’s number one asset. Nichola Jenkins advises you on how to protect and maintain it.
Branding is key to the success of any franchise. A strong business name and logo, together with distinctive get up or trade dress, makes the business instantly recognisable to customers, and puts a clear marker on quality of the products or services supplied by the franchisor and its franchisees.
Competition will always be a threat to any successful business, and, therefore, it is vital to the franchisor and its franchisees that intellectual property in the brand is adequately protected.
Registered brand protection
A distinctive name and/or logo, protected as a registered trade mark, is one of the most effective ways for a franchisor to ensure its brand is protected. A registered trade mark will apply in respect of specified goods and/or services and will continue indefinitely for as long as renewal fees are paid.
Franchisors should seek to register their name and logo in all key territories where their business is operated, whether this is US, UK, Europe (in respect of all members of the European Union from time to time) or other international territories.
If a franchisor becomes aware that an unauthorised business is using its registered trade mark (or a similar version of it) to sell similar products or services to its own, an infringement action can be brought to prevent further use of the trade mark and claim damages.
Unregistered brand protection
Another important aspect of a brand is its “get-up” or “trade dress” which concerns the physical appearance or overall commercial image of a product or service that identifies it as the franchisor’s business, and distinguishes it from third party products or services.
Trade dress or get up may include aspects such as livery, packaging, décor, menu layout/style, or website design, and can consist of such elements as size, shape, colour and texture, to the extent those elements are not a functional part of the product.
A name or logo can also be protected as unregistered elements of a brand, to a lesser degree of protection than for a registered trade mark.
Unregistered rights grow stronger the more the brand or trade dress is used in connection with the franchised business and/or its products and services.
If a franchisor is concerned that a third party is using its (unregistered) name or logo, or trade dress to the extent customers of the business would be deceived, the franchisor can bring a claim in the UK for “passing off”, which requires the franchisor to show: there is sufficient goodwill or reputation in the brand; the third party is making a false representation that their goods and services are those of the franchisor to induce customers; and the misrepresentation has caused (or is likely to cause) damage to the franchisor’s reputation or business.
The elements of a brand (whether registered or unregistered rights) must be used and monitored, in order for a franchisor to maintain intellectual property rights in the brand. Registered trade marks are vulnerable to cancellation if not sufficiently used in relation to a business, and goodwill in unregistered rights depends on substantial use of the brand.
Franchisors should therefore carry out a periodic review of their registered trade mark portfolio to check that trade marks: have been genuinely used to at least a reasonable degree in the last few years; have been used in relation to all the goods / services covered by the registration that are currently marketed or planned; and are backed by satisfactory evidence of use.
Franchisors should also consider with regard to their future business strategy: whether there are there any goods / services currently marketed or planned that are not covered by a trade mark registration; whether the brand is used, or might be used in the future, in a country or countries where it is not yet registered or an application filed; and consider filing new applications to enhance protection.
Franchisors should also check regularly that trade marks and other brand elements are used consistently by franchisees. A key part of brand maintenance strategy is the preparation of a detailed brand manual setting out how franchisees must use different elements of the brand. This should cover all registered and unregistered rights, and information and specifications for fonts, logo size, placement and pantone colours.
Franchisors should be very specific in the franchise agreement about which trade marks and unregistered rights form part of the brand. The franchise agreement should also ensure any trade mark licence is limited and specific to the business and the territory, and specifically provide for goodwill arising on use of the brand any unregistered rights in the brand to accrue to the franchisor
The franchisor will then be able to control use of the brand by including obligations on the franchisee in the franchise agreement to: comply with the brand manual and any other directions of the franchisor in relation to use of the brand; operate the franchised business only under the franchisor’s brand and trade marks, and no other branding or marks; desist from sub-licensing of the brand to any third party; procure supplies of printed items or stationery, require regular samples of printed items (such as menus) for approval where the franchisee accepts responsibility; ensure any uniforms which form part of the brand are clean, tidy and worn appropriately by staff; and ensure premises are well maintained and decorated where décor forms part of the brand.
The franchisor should also secure the right to monitor or audit the franchisees’ use of the brand, and be able to take action promptly to correct any issues.
It is very important for franchisors to take steps to enforce their rights in their brand. Allowing a third party to infringe a registered trade mark or misrepresent an association with the brand can cause damage to the reputation and dilute the value of the brand.
Franchisors should carry out regular monitoring of competitors and potential competitors, to check whether any trade marks or other brand elements are being used in a way that would constitute infringement or passing off. If this is the case, prompt action in the form of a cease and desist letter is often sufficient to stop the offending action.
Since franchisees are often in the best position to spot infringement since they will be aware of the activities of competitors, the franchise agreement should include obligations on the franchisee to inform the franchisor promptly if they become aware of any infringement or misrepresentation of the brand within their territory.
However, the franchisor should always reserve the right to take control of any action against infringers or in respect of passing off, subject to any reasonable assistance required of the of the franchisee.
ABOUT THE AUTHOR
Nichola Jenkins is a Legal Director in Shoosmiths’ business advisory division. She is a specialist intellectual property lawyer and works with clients on a wide range of matters concerning the protection, enforcement and exploitation of intellectual property. http://tinyurl.com/y7rkq5rb
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