Intellectual property rights are an essential part of all franchise agreements, and contain licences of intellectual property rights (IPRs) in relation to trade names; trademarks; image; reputation; exclusive manufacturing or selling rights; and goodwill.
Ways in which to use intellectual property rights and their protection against misuse are among the most important concerns of the franchisor.
Therefore, before commencing a franchising relationship, a prospective franchisor must ensure that all the relevant intellectual property associated with the business is adequately protected.
The franchise agreement will usually contain provisions which allow the franchisee to use the various trademarks without competing with anyone other than the other franchisees.
If the intellectual property is not protected, competitors may be able to use the franchisor’s intellectual property.
This is particularly the case if the intellectual property of the franchisor is generic or not sufficiently distinctive.
To protect against this, the franchisors should obtain expert advice from a properly qualified trademark attorney or intellectual property lawyer to ensure that any key trademark will be registrable and will not be open to challenge.
Whilst successful businesses will usually have their intellectual property adequately protected, this may not be the case when the business expands and becomes a franchise group.
In this case, it may be necessary to develop new brands or trademarks and use marketing material which would ordinarily consist of or include copyright works.
This is of particular concern for international franchise relationships – that is, foreign franchisors who wish to establish their business in Australia, Australian franchisors seeking to establish their business overseas or any business that has a website which enables borders to be crossed electronically.
It is important to ensure that the relevant Australian intellectual property rights are secured by way of:
- ownership and registration (in the case of patents, trademarks and designs)
- ownership by way of creation, operation of law or assignment (in the case of intellectual property for which no registration system exists, such as copyright works and confidential information).
These rights also need to be of continued use in Australia and the franchisor needs to have a policy of taking action against anyone who uses such property without permission.
As will be outlined below, it is very important for all of the franchise’s intellectual property to be protected both by legal means and by the franchise agreement between the franchisee and franchisor.
It is very important for franchisors to carefully consider the intellectual property that needs to be protected and to seek legal advice on the best method by which to protect it.
Intellectual Property Issues for Franchisors and Franchisees
- Trademark Protection
- Business name registration
- Protection of Image and appearance (including phone numbers and contact details)
- Confidentiality Agreements
The above post is as information only and not legal advice.
Kanchana Kariyawasam is a Senior Lecturer in Business Law at Griffith University and Adjunct Research Fellow to the Australian Centre for Intellectual Property in Agriculture (ACIPA). She holds both Masters and PhD degrees in Intellectual Property Law. She has published journal articles in the areas of intellectual property, Indigenous intellectual property-related issues and commercial law. She worked as a Postdoctoral Research Fellow at the University of Queensland before joining Griffith in July 2007.