Trade Marks and Franchise • Intellectual property rights are inherent to a franchise. Without IP there can be no franchise • IP – Trademarks – Designs – Patents – Copyright – Trade Secret Trademarks and their Importance to Franchising • What is a trademark – A sign that distinguishes the goods and services of one enterprise from that of another • The life blood of a franchise – Identifier, communicator and indicator of source. – Immediate consumer recognition, communicates a way of doing business – Effective way of business expansion Function of a trademark • Protects consumers – They can differentiate between similar goods – Information as to the source (quality, reputation, trust) • Protects the company – – Enables the company to build up a reputation and a loyal clientele and thus a market niche (brand) • Creates an overall competitive environment which benefits society as a whole • • • Any distinctive words, letters, numerals, pictures, shapes, colours, In some countries: sounds, smells, three-dimensional marks Advertising slogans – Its finger lickin good (KFC) Choosing a trademark • Do not – Use the same word as the product it is trying to sell (“detergent” for detergent) – describe what it does (“clean” for detergent) – be offensive, immoral, or deceptive – Select one already used or registered for same or similar goods or services • Tips for choosing a good mark – Coined (kodak), arbitrary word (apple), suggestive (Microsoft) in that order Protecting and Managing a TM • TM are protected through use or registration • Perpetual protection through registration as long as it is maintained through the maintainance of fees • Prevents unauthorized use with respect to similar goods and services • Famous marks have greater protection Protection Strategies • Strategies should be developed to monitor competitors and other third parties in order to detect and prevent improper usage or potential infringement of the mark(s). • A staff member of the TM owner should be designated to read trade publications; business press; marketing materials of competitors; and in-house production, labeling, and correspondence to ensure that the mark is not stolen by competitors. Mister Softee • Mister Softee is the largest franchisor of soft ice cream trucks in the United States. The company hired private investigators to identify independent ice cream trucks that resemble the Mister Softee vehicles in their color scheme, logos or jingle. • The investigation turned up hundreds of operators who paint their ice cream trucks blue and white and create menu boards and logos identical to Mister Softee's, including the company's famous cone-head trademark. • According to the investigators, they have gathered enough evidence against 30 operators of "rip-off trucks" in New York City and on Long Island for Mister Softee to bring trademark and copyright infringement lawsuits against them. On Discovering Infringing Use • Work closely with trademark counsel; cease and desist letters; • Gathering evidence on each potential infringer and keeping accurate files needed for infringement litigation • Cost-Benefits of a suit Vs. Loss of Goodwill/market share Exploiting a TM; franchising • One important element of franchising is the licensing of IP, particularly TM • TM are an indication of source and in early days could not be licensed • Now it can be licensed but the licensee must take proper care of the TM • The more franchisees there are the more difficult it is to control and prevent dilution Trademark Quality Control • TM clearly identified in the agreement as such • The use of the TM as designated by the franchisor (anything else would be infringement) • Franchisee clearly identified as a franchisee and in no way the owner of the TM • That the franchisee not use the license or the trademarks to incur or secure any obligations or indebtedness. • That the franchisee not use the trademarks as part of its corporate or other legal name. Trademark Quality Control • The franchisee promptly notifies the franchisor if it learns of any improper use of the trademarks, if litigation involving the marks is instituted or threatened against the franchisee and will cooperate fully in defending or settling such litigation. Trademark Quality Control • The goodwill arising from the franchisee’s use of the trademarks accrues to the franchisor’s benefit, and upon expiration or termination of the franchise agreement, no monetary amount will be assigned as attributable to any goodwill associated with the franchisee’s use of the system or the trademarks. Trademark and Quality Control Program • Every Franchisor should develop an active trademark protection program designed to educate the franchisor’s field staff, key vendors, advisors, officers, employees, and all of its franchisees as to the proper usage and protection of the trademarks. Trademark Use Compliance Manual • It contains more detailed guidelines for proper trademark usage, grammar, and quality. Such as: – How the trademark should be displayed and notified (Use of ® , TM, SM) – All documents, correspondence, and other materials on which the franchisee must display the trademarks and identify itself as a licensee. – All authorized uses of the marks and prohibited uses ( for example, they must not be used as part of franchisee’s corporate name). Marriot • New policies to curb abuse of its trademarks. – an online travel company may not use any Marriott trademark in the text or title of any paid search ad. – This would apply to paid ads in search engines such as Yahoo and Google, travel research Web sites such as Expedia’s TripAdvisor and USBestHotels.com, and comparison shopping sites such as NexTag or Sidestep. – Online travel companies may not bid on keyword terms containing Marriott trademarks, whether alone or in conjunction with other terms.” – Web sites and Web pages must comply with Marriott’s Look No Further Best Rate Guarantee – Barred from using Marriott trademarks in tandem with such phrases as “substantial discounts,” “online exclusive rates,” “lowest prices,” “special rates” and “save 70%.” Expanding overseas • TM are territorial rights • Protect your trademark in the markets that you are interested in – National system, regional system, madrid system • Don’t delay. Others may have already registered or begun using the same or similar mark • Be mindful when choosing a TM of possible later export strategies – Chevrolet marketing its Nova car in Latin America (No va = no go) – Initial chinese characters used by coca cola in China (“bite the wax tadpole”. Subsequently changed to “happiness in the mouth”) – Gerber picture of happy baby. In parts of Africa label denoted what was in the bottle The internet • Can the franchisee maintain an independent web site – Common advertising policy • Cyber squatters. People acquiring domain names consisting of TM of others. What policy and actions should be adopted. Subway • Subway takes a former franchise to Court for its website www.subwayuncovered.com which it says infringes its trademarks. • The site states who the trademarks belong to. It however make various allegations against Subway. • Subway has asked a sandwich shop located two miles from the company's headquarters to cease and desist using the name "Steakways," which Subway claims is confusingly similar to its own. • Subway, said that while it supports small business owners it must protect its name if it appears that there may be an infringement. Starbucks v. Starbock Beer • Bell owns a bar in Galveston and attempted to register "Starbock Beer" as a trademark in 2003. • Starbucks opposed the registration and Bell asks the court to declare that his use of the name Starbock Beer in connection with alcoholic beverages is not confusingly similar to or in conflict with Starbucks' marks. • Starbucks suggests that the mark "is both derivative of and dilutive of their trademark rights." Mc and Mac • McDonald’s with 129 restaurants in Singapore states that products such as MacNoodles, MacChocolate and MacTea are likely to confuse consumers, who would associate McDonalds with these products. • McDonald's claims that "Mc" and "Mac" are essential elements of its trademark, which deserve protection. • In a separate forum, the owner of the "Mac" products, Futures Enterprises Singapore (FES) stopped McDonald's Russia from using the brand McCafe in Moscow. • Futures, which has sold instant coffee under the name MacCoffee since 1994, intends to launch a chain of MacCoffee shops in Russia and has held the right to the name in Russia since 1998. Hard Rock cafe • A chain of casual dining restaurants founded in 1971 • There are more than 143 Hard Rock Cafes in over 36 countries at current date, with several more in the works. • Hard Rock Café is more than a restaurant franchise. Their unique success is the inclusion of its own brand merchandise. That is applying their logo to T shirts, mugs, hats, jackets etc which are considered to be collectibles with many being cafe, hotel, or casino specific and can generally only be purchased on site. • Hard Rock even has a pin club for those who collect pins, with members holding meetings to buy, sell, and trade pins. Design Protection • The law protects the ornamental or aesthetic aspects of the product (not the product itself) • Includes lines, colours, shapes, contours, texture etc What is an Industrial Design? three-dimensional designs – shape of products Do you want a watch or a Swatch? • The Swatch Group is among the ten largest users of the system for international deposit of industrial designs (103 applications in 2001) • Distinctive „look“ Two Dimensional Design – Ornamentation, patterns, lines or color on a product When you walk into an Iittala Shop, you are walking into the beautiful and functional world of Scandinavian design. Join our Iittala Shop chain as a franchisee and become part of the movement for lasting everyday design. Today the world has grown aware of the value of longlasting design. Products are expected to withstand daily use yet outlive trends. Iittala is an internationally recognized design brand that offers Scandinavian design based premium homeware. All objects are carefully thought through in form, function and quality.