Trademarks and Franchises
Deciding on becoming a franchisee is no easy business; a lot goes into the final decision. A key element when deciding to purchase a franchise is the issue of the trademark.
According to Investopedia, “the term trademark refers to a recognizable insignia, phrase, word or symbol that denotes a specific product and legally differentiated from all other products of its kind. A trademark exclusively identifies a product as belonging to a specific company and recognizes the company’s ownership of the brand. Therefore, trademarks are generally considered a form of intellectual property and may or may not be registered.” Considering this definition, a previous article discussed that purchasing a franchise includes receiving intellectual property from the franchisor. So what makes trademarks such a vital aspect to consider when investing in a franchise?
As noted above, trademarks are a form of intellectual property and thus play a significant role in any franchise. Trademarks include logos, taglines, designs, slogans, and distinctive names that are attached to a business that set it apart from others in the industry. For example, the yellow ‘M’ is the unmistakable trademark of McDonald’s, no matter where in the world you may go. Thus a trademark ensures that your customers easily recognize products and services provided by your business. A US trademark is registered with the United States Patent and Trademark Office (USPTO); once this is done, only you can use the trademark and may file a lawsuit against any company that tries to infringe on this trademark. Speak to a lawyer for franchise agreement to learn more.
Regarding a franchisee, a common question asked is whether they need to do the filing to register a trademark. In the franchise agreement, the franchisor grants permission to the franchisee to use their trademark by using a license. As such, the franchisor is still the trademark owner, but the franchisee has the right to use it. Therefore, where the franchisor has trademarks, they need to disclose each trademark with the franchisee in the Franchise Disclosure Document. In addition, they must provide information as to whether or not the trademark is registered with the USPTO. Further, they must also disclose any pending applications for trademarks and the renewal status for trademarks.
If there are unregistered trademarks, the franchisor must provide the appropriate trademark registration disclaimer in the FDD. You should consult with a franchise attorney before purchasing a franchise to know what your rights and obligations are.
Resource Box: If you seek an agreement for international franchise partners, the author recommends Internationalfranchiselaw.com to find competent counsel.
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