Imagine you are going to an auction and can only bid on one of two items. Auction One is for the rights to make a hamburger with two beef patties, three pieces of bread and Thousand Island dressing, and Auction Two is for the rights to sell a hamburger under the trademark Big Mac[R]? Which would you bid on?
Chances are you would opt to capitalize on the ability to call something a Big Mac. This example highlights the value of intellectual property. While products and services can be duplicated, trademarked brands cannot.
Trademarks are so important that they have their own item - No. 13 - in the franchise disclosure document. They are even part of the legal definition of a franchise in the U.S., which is defined as an ongoing commercial relationship in which the franchisee "will obtain the right to operate a business that is identified or associated with the franchisor's trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor's trademark."
We know that trademarks are critical to franchising; we need to understand which trademarks, in particular, a franchise company should protect.
In the U.S., trademarks are protected by federal law under the Lanham Act, (15 U.S.C. [section] 1051). This article will not provide a legal dissertation on trademark law. Instead, it will give some practical pointers on fundamental trademarks that franchisors should protect. Some of the concepts are simplified to provide a general overview.
This article will cover both standard character marks and design marks (or logos). While standard character trademarks protect the word itself, regardless of the language it is in or how it is spelled, design marks protect the visual elements of the trademark (think the word McDonald's vs. the actual image of the Golden Arches).
PRIORITY NO. 1
Franchisors' top priority should be to protect the trademarks that their franchisees use in their franchised business. This generally involves protecting both the services and products offered by the franchised locations. Consider the fictional restaurant from the movie "Coming to America," McDowell's. We have identified six fundamental trademarks for the McDowell's franchise company.
First, let's start with the services offered by McDowell's franchisees. McDowell's is a restaurant chain that primarily offers hamburgers. Trademark One for the McDowell's franchise company is the standard character mark...