Thursday, May 29, 2008

The backbone of a franchise operation usually involves the licensing of a bundle of intellectual property (“IP”) rights from the franchisor to the franchisee.  This bundle of rights can include IP regulated by statute (such as trade marks, patents, designs and copyright) and other forms of IP (such as know-how, confidential information and trade secrets).
 A trade mark includes any sign capable of being represented graphically and includes words, letters, numerals, names, devices, signatures, as well as the more non-traditional marks such as shapes, colours and containers for goods.  The main function of a trade mark is to distinguish the goods and/or services of one proprietor from another, and one of the reasons that we register trade marks is to prevent others from making unauthorized use of the marks.  This is especially important in a franchise system, where the use of the trade marks will be licensed to franchisees.
 Common mistakes include not ensuring in advance that the marks are available for use and registration, not registering the marks, not protecting all the relevant marks, choosing a weak mark that will be difficult to enforce, not protecting the marks in all the relevant jurisdictions and not monopolizing the equivalent domain name, if available.
 Copyright, broadly speaking, is the right given to the creator, author or other person who may own the copyright in certain types of works, not to have that work copied (reproduced) without authorization.  The types of works include artistic works (which included the logo-elements of trade marks) and literary works (including manuals and other written material that may embody the know-how in a business).  Copyright only covers information that has been reduced to a material form.  When commissioning a work, such as the design of a logo, the person who actually creates the logo is usually the owner of the copyright, unless it is assigned in writing to the person who commissioned the work.  Common mistakes include not reducing information to a material form, not documenting know-how, not keeping proper records regarding the creation of a work, not regulating ownership of joint works via contract, not making use of contractual provisions (such as confidentiality agreements) to protect know-how and commissioning works without taking steps to acquire the copyright in the work.
Properly protecting the IP in a franchise system is a vital success-factor in ensuring the long-term viability of the business system.  
 Marius Gerber is a director in the Intellectual Property department at Bowman Gilfillan.