Franchising and Trade Marks
Trade marks are important for all businesses looking to create brand recognition. However, for franchises, trade marks are crucial to the business model, as brand recognition creates a sense of familiarity and trust across locations. As franchising becomes increasingly common in Australia, separating franchisees from their competitors is a clear commercial priority.
Trade Mark Registration
Trade marks can take the form of a mark, sign, logo, word, picture, or packaging. Registering trade marks is an important component of intellectual property protection. Prudent intellectual property protection requires businesses to carefully select, differentiate, and monitor their trade marks. In Australia, the Competition and Consumer (Industry Codes—Franchising) Regulation 2014 codifies the importance of trade marks in franchising. Section 5(1)(c) states that a franchise agreement is an agreement under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:
- owned, used or licensed by the franchisor or an associate of the franchisor; or
- specified by the franchisor or an associate of the franchisor
Thus, all franchises must be able to be identified as such. This is best ensured through trade mark registration.
Trade Marks and Franchisors
Trade Marks and Franchisees
Franchisees must be licensed to use the trade mark. The terms of the license agreement should be contained within the relevant franchise agreement, as franchisees are expected to use trade marks in accordance with the terms of the agreement and the direction of the franchisor. Use in accordance with the terms of the license agreement is important to ensure that trade marks are not subject to non-use challenge.
Both franchisors and franchisees maintain the risk of trade mark infringement claims from third parties. As franchisees generally use trade marks in accordance with the terms of the license agreement, franchisees should seek warranties from the franchisor in the case of any infringement claims. Franchisors should seek to avoid this eventuation through early registration, thorough monitoring, and prompt opposition of trade marks.
If you require advice surrounding franchising or intellectual property disputes, or have any questions regarding intellectual property protection and registration, speak with one of our experienced business lawyers by calling us at (02) 4929 7002, emailing us or completing an enquiry form.