USPTO-franchiseAt the foundation of every successful franchise system is the franchisor's intellectual property that has been developed, improved, and expanded over the years to create a unique concept, product, or service readily identifiable by consumers. The intellectual property of a franchise system consists primarily of (1) trademarks and service marks, (2) trade secrets, (3) copyrights; and in some cases (4) traditional and business method patents.
Trademarks and Service Marks
A trademark or service mark is a word, name, symbol, or device used to identify and distinguish the products or services of one person from those of another person and to indicate the source of the products or services. A trademark identifies a product and is used on the product, on containers or labels for the product or on displays associated with the product. A service mark is used in the sale and advertising of services and generally appears in advertising and promotional materials.
A trademark or service mark also provides a guarantee of quality and consistency of the product or service it identifies. It assures the consumer that the products and services purchased today at one location are of the same quality as those purchased at another location. Consumer recognition of and confidence in the product or service identified by the trademark or service mark is the lifeline of a successful franchise system.
In a franchise system, the franchisor grants the franchisee a nonexclusive license to use the franchisor's trademarks and/or service marks in connection with the franchisee's sale of the products and services in connection with the business that constitutes the franchise system.
Types of Marks
Not all words or phrases are entitled to trademark or service mark protection. The mark must, as a preliminary matter, identify the products or services as coming from a particular source. The goodwill and name recognition established by the franchisor is the most valuable component of the franchise for the franchisee. Marks that are generally protectable are those that are coined, fanciful, arbitrary, or suggestive. Generic marks are not protectable, and marks that are merely descriptive of the products or services they identify may not be protected without a showing of acquired distinctiveness or "secondary meaning" (see below).
- Coined, fanciful, or arbitrary. This is the strongest category of mark that can be protected. The mark is either a coined word, such as XEROX, or a word in common usage that has no meaning when applied to the goods and services in question, such as DOVE for dish detergent or body soap. These marks are inherently distinctive and readily distinguish the products or services of one person from those of another.
- Suggestive. A suggestive mark requires the consumer to use some degree of imagination in determining what product or service is represented and, as such, is the next strongest category of mark that may be protected. Owners of suggestive marks are not required to establish "secondary meaning" (see below). Examples of suggestive marks include ORANGE CRUSH for orange drinks and ROACH MOTEL for insect traps.
- Descriptive. Marks that are descriptive of the goods or services they identify cannot be protected unless the manufacturer can establish that its mark has acquired distinctiveness. This requires demonstration that the public associates the particular mark with the goods or services of the specific producer (known as "secondary meaning"). This category would include marks like HOLIDAY INN, for motels, which is descriptive but nevertheless registered because it has acquired distinctiveness.
The host of marks that will be refused registration include those that:
- Are immoral, deceptive, or scandalous
- May disparage or falsely suggest a connection with persons, institutions, beliefs, or national symbols or bring them into contempt or disrepute
- Consist of or simulate the flag or coat of arms or other insignia of the United States, or of a state or municipality or any foreign nation
- Are the name, portrait, or signature of a particular living individual unless he or she has given written consent; or are the name, signature, or portrait of a deceased President of the United States during the life of his widow, unless she has given her consent
- So resemble a mark already registered in the U.S. Patent and Trademark Office ("USPTO") as to be likely, when applied to the goods and/or services of the applicant, to cause confusion or to cause mistake or to deceive
- Are merely descriptive or deceptively misdescriptive of the goods or services of the applicant
- Are primarily geographically descriptive or deceptively misdescriptive of the goods or services of the applicant
- Are primarily a surname
A mark will not be refused registration on the grounds that it is (i) merely descriptive or deceptively misdescriptive of the goods or services of the applicant, (ii) primarily geographically descriptive or deceptively misdescriptive of the goods or services of the applicant, or (iii) primarily a surname if the applicant can show that, through use in commerce, the mark has acquired distinctiveness so that it now identifies to the public the applicant's products or services. Marks that are refused registration on these grounds may also be registered on the Supplemental Register if such marks are in use on or in connection with the goods and/or services identified in the subject application. The Supplemental Register contains terms or designs considered capable of distinguishing the registrant's goods or services but which have not yet acquired secondary meaning.
ABOUT THE AUTHOR
Andrew J. Sherman is a Partner in the Washington, D.C. office of Jones Day, with over 2,500 attorneys worldwide. Mr. Sherman is a recognized international authority on the legal and strategic issues affecting small and growing companies. Mr. Sherman is an Adjunct Professor in the Masters of Business Administration (MBA) program at the University of Maryland and Georgetown University where he has taught courses on business growth, capital formation and entrepreneurship for over twenty (23) years. Mr. Sherman is the author of twenty-three (23) books on the legal and strategic aspects of business growth and capital formation as well as Road Rules Be the Truck. Not the Squirrel. which is an inspirational book published in the Fall of 2008. His twenty-third (23rd) book, Harvesting Intangible Assets, Uncover Hidden Revenue in Your Company's Intellectual Property, (AMACOM) is due out in the Fall of 2011. Mr. Sherman can be reached at 202-879-3686 or e-mail firstname.lastname@example.org.
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