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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,
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:
Apart from trademarks and trade names the other important intellectual property is copyright. In any franchise
Unlike
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
Copyright is infringed if another person reproduces the
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
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: