Register your right!
Bernard Whyatt, of Brand Protect, explains how before investing in a business opportunity, a franchise owner should always make sure if the brand is protected and what rights they have to use it
Before launching their business, a franchise owner needs to pay the franchisor a sum of money in order to be allowed to use the relevant trademarks and to learn the business secrets.
In this feature I will explain how the franchise owner should do their due diligence to discover what trademarks the franchisor owns. I will also illustrate the importance of a franchise owner registering the fact that they have been granted a licence to make sure that they never lose those rights during the term of their franchise. Finally, I will reveal how they are able to sue third parties even if the trademark owner does not give their permission.
Following their launch, a franchise owner discovers that other businesses are using the same or similar branding to what they have paid the franchisor to use. Naturally they want to know how they can rectify this problem.
Let us assume that the problem competitor has started using a similar trademark for similar goods and services to that for which they have paid a licence.
If the licence owner is a Master Franchise Owner for the whole of this country and the trademark is a UK trademark, then the Master Franchise Owner can sue the competitor for infringement as if they were the owner of the trademark. In order to do this successfully, they must join the trademark owner as either a claimant or a defendant in the court action.
If the licence owner is merely a franchise owner of a territory within the UK, then he does not have the same standing as the exclusive licensee (Master Franchise Owner). In this case, the franchise owner can request that the trademark owner take action against the infringer.
If the trademark owner refuses or fails to do so within two months of being called upon, the franchise owner can bring proceedings in their own name against the infringer. However, the trademark owner still needs to join the proceedings as either a claimant or defendant.
If the trademark owner joins as a defendant but takes no part in the proceedings then they cannot be made liable for any costs awarded.
Therefore, as part of the due diligence of a potential Master Franchise Owner or franchise owner, a check of the Trademark Register should be undertaken to evaluate the extent of trademark protection. Generally speaking, the trademark owner should have registered the brand as a word mark and a logo. Failure to have done so means that the franchise owner may not have the level of protection that they are entitled to.
Once the franchise owner has taken a licence for a trademark and can call themselves a franchise owners, they should record their licence against the trademark.
Failure to register the trademark licence means that if the trademark owner sells the trademark, and the buyer does not know of the rights of that franchise owner, the latter could lose the use of the trademark and, therefore, their business.
A trademark owner cannot prevent a franchise owner from registering their rights against that trademark.
Readers of The Franchise Magazine can receive a FREE clearance search and brand fitness check up worth up to £500.