Franchisees – take an “interest” in your rights

22 May 2009 Topics: Franchising

Intellectual property is key

Franchising offers many advantages for business owners. The success of a franchised business depends upon information sharing between franchisor and franchisee and the protection of both parties’ interests.

One keystone of franchising is the licensing and use of trade marks. To be classified as a ‘franchise’ under the Franchising Code of Conduct, the business must be substantially or materially associated with a trade mark or commercial symbol. The use of the trade mark or symbol allows a franchisee to utilise the good will and reputation already established by the franchisor. As such, it is important for franchisees to understand their rights when it comes to intellectual property and how to properly protect it.

Under section 113 of the Trade Marks Act 1995 (Cth), a person can apply to have an interest or right in respect of a registered trademark recorded by IP Australia. The nature of a franchisee’s interest in a trade mark is constituted by a legal right under the Franchise Agreement. It is important to have this right protected to prevent any inconsistent dealings with the intellectual property of the franchisor.

Franchisees should be aware that the consent of the owner of the intellectual property is required before the franchisee can register an interest in the trade mark. Therefore, a prospective franchisee should ensure that there is an obligation on the franchisor (or the owner where this is a different entity to the franchisor) to consent in the franchise agreement.

Intellectual property is the essence of franchising. Therefore, its protection is of vital importance, not only for the owners of intellectual property and franchisors but for franchisees as well.

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