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Protecting your rights

protecting your rights

Copyright, patents, trade names and trademarks, what does it all mean and why is it so important? Manzoor Ishani explains

The need for franchisees to see that their franchisor adequately protects their intellectual property rights cannot be emphasised enough. This is what makes a particular franchise valuable and is what franchisees will be paying for on an ongoing basis.

Forms of intellectual property, which may be relevant in a franchise arrangement can be divided into two categories. There are those which result from a registration process, eg, patents, trademarks and registered designs, and those which do not, eg, trade names, logos and marks, which are not registered or are incapable of being registered and may include trade secrets, know-how, etc.With regards to trade names, until 1980 there existed a Trade Names Registry, and this kept details of the trade names under which businesses traded if that name was different from the name of the owner of the business. It was thus possible for a member of the public to ‘pay a shilling’ and discover who the owner of a particular business was. Without such a registry and any declaration by the owner of the business as to the identity of the owner, members of the public would have been left wondering who the owner of ‘Smoky Joe’s’ was. However, in the wake of Margaret Thatcher’s sweeping reforms designed to deliver the business from the ‘nanny state’, the Business Names Registry was abolished and replaced by legislation. This meant that any business entity, which conducts a business under a name other than that of its owner must make the name and address of the owner of that business known to the public.

With regards to trade names, until 1980 there existed a Trade Names Registry, and this kept details of the trade names under which businesses traded if that name was different from the name of the owner of the business. It was thus possible for a member of the public to ‘pay a shilling’ and discover who the owner of a particular business was. Without such a registry and any declaration by the owner of the business as to the identity of the owner, members of the public would have been left wondering who the owner of ‘Smoky Joe’s’ was. However, in the wake of Margaret Thatcher’s sweeping reforms designed to deliver the business from the ‘nanny state’, the Business Names Registry was abolished and replaced by legislation. This meant that any business entity, which conducts a business under a name other than that of its owner must make the name and address of the owner of that business known to the public.

There is a distinction between a trade name and a trademark. The latter usually takes the form of a design, logo or device. The only protection afforded to the owner of a trade name against infringement lies at Common Law. This means that a legitimate business confronted with a copycat operation using the same or a very similar trade name must sue in the ordinary courts and convince the judge that the infringer is ‘passing off’ the copycat business as the original business, ie, they are confusing the public into thinking they are dealing with the original business and not a copy of it.

Trademarks, on the other hand, are capable of statutory protection by virtue of legislation. The Patents Office, which contains the Trade Marks Registry, provides facilities for the registration of trademarks so long as they qualify for registration by the criteria laid out in the legislation. A registration without any conditions attaching will give monopolistic rights to its owner to use the marks, and the owner of such a registered mark is, by virtue of his registration, much more easily able to prevent infringement of the trademark.
Where a mark is not capable of registration because it does not qualify (for example, it is either descriptive or non-distinctive) the owner of a mark may still obtain protection against infringement but, again, at common law in ‘passing off’.

To succeed in a passing off action, the owner has to show the following:

  1. The trade name/mark in question belongs to them and that they have a reputation in that trade name/mark and the goodwill it generates.
  2. A misrepresentation has been made by the infringer leading people into thinking that they are dealing with your trade name/mark.
  3. Such a misrepresentation and use by the infringer has caused the owner harm in some way.
    In a franchise operation, the franchisor usually owns the trademark and the franchisee is merely the user. If an owner never uses a mark itself, it may later be argued that the franchisee should be registered in his place. It is therefore advisable, both for franchisor and franchisee, to ensure that the franchise agreement clearly defines who the owner is, that the ‘user relationship’ is clearly set out and where the mark is a registered trademark, that the authority of the franchisee to use that trademark is registered at the Trade Mark Registry.


Apart from trademarks and trade names the other important intellectual property is copyright. In any franchise operation the franchisor’s copyright will exist in a number of important features such as the operations manuals and get-up. Examples of the latter can include packaging (bags, wrapping paper, cartons, etc), advertising (leaflets, point of sale material, press and TV adverts), uniforms, vehicle liveries, shop lay-out, and miscellaneous items such as crockery, menus and letterheads, for example.

Unlike trademarks there is no copyright registry and no means of formally registering one’s copyright to obtain statutory protection.

Copyright essentially means the right not to be copied and arises not from registration but on creation. Copyright is therefore vested in the ‘artist’ or ‘author’ unless the contrary is agreed. Prospective franchisees should therefore take steps at the outset to ensure that their franchisor actually owns the copyright in question.

Copyright is infringed if another person reproduces the copyright work in whole or substantially, without the permission of the person who owns it. Principally, a foundation of a business format franchise consists of a trade name and/or trademark copyright and know-how. Franchising is essentially the transfer of know-how.

If know-how is disclosed to franchisees in confidence, improper disclosure to others may be restrained. However, the ability of a franchisor to restrain a franchisee is conditional upon the information in question not becoming public in other ways, for example, through advertising.

Although confidentiality will usually cover trade secrets, items of information, which are individually in the public domain can also form confidential information when compiled or used in a manner peculiar to the business, eg, customer lists, recipes, etc.

Of course, prevention is better than cure, therefore rights should be secured and evidenced by:

  • Registration where appropriate
  • Control of those who have been given the right to use them
  • The franchisor giving notice of their rights to ownership to third parties (for example, where a trademark is registered the trade mark registration notice, which consists of the symbol ® and, in the case of copyright, a copyright notice, ©, followed by the date of first publication and name of the entity claiming copyright ownership
  • Warning potential infringers, protesting and challenging minor misuses
  • Adequate contractual controls in the franchise agreement and mechanisms as to ‘who does what’ and ‘who pays’ provisions in anticipation of litigation, because when serious infringement of rights occurs, it is important to act swiftly to preserve the possibility of equitable rights, especially injunctions.

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