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
• 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
• Creates an overall competitive environment
which benefits society as a whole
Any distinctive words, letters, numerals, pictures, shapes,
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 are protected through use or
• 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
• 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
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
• 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
• 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
• 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
• 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).
• 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, 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 takes a former franchise to
Court for its website 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
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
three-dimensional designs
– shape of products
Do you want a watch or a
• 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
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
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.

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