Franchising, Licensing & Trademarks
Trademarks and brands are some of the most valuable assets of any business. Besides increasing brand awareness, good trademark and licensing strategies can lead to an increase in the income that a company generates. To come up with effective strategies, you need to understand the licensing, trademark, and franchising process. Our attorneys have decades of experience helping various businesses get the most from their business.
Headed by Attorney John R. Foley, our law firm has served the residents of Michigan since its formation in 1994. Our trademark attorneys work with clients to ensure they get the most out of their trademark and brands. We do this by drafting Trademark Licensing agreements that are well-structured.
If you are a business owner who needs to know more about licensing, or you want to franchise, get in touch with us.
Franchising: This is whereby the owner of a successful business offers a business opportunity to another person by giving them the right to use their ideas, expertise, and processes. The buyer of the business idea does not have to work hard to create awareness for their brand since they will be using a brand that has already been developed. One of the most successful companies that have significantly grown from franchising is McDonald’s. The person giving out their brand is known as the franchisor, while the one buying the brand is called a franchisee.
The franchisee gets the advantage of using the successful brand while the franchisor retains the control and licenses of the brand. The franchisee receives training from the franchisor as well as marketing and other necessary skills.
Licensing: This is an arrangement where a company allows another company to make the same product it makes for a specific payment. The owner of the Intellectual Property (IP) maintains ownership of their IP as they only permit usage of the idea by another company for a specific period.
In licensing, a trademark owner allows another business to use their trademark under particular conditions. The owner of the trademark is known as the Licensor while the person who gets permission to use the trademark or IP is known as the Licensee.
The terms of licensing vary. Our competent attorneys will help you through the process of licensing, so you do not have to worry.
Trademark: A trademark can range from a phrase to a word, symbol, or design that sets apart a particular brand from the other business brands. Logos are important because they distinguish goods and help identify the source of various products. We understand how crucial trademarks are, which is why our attorneys have dedicated their time in gathering knowledge in all matters regarding trademarks.
Licensing is a process where the entity that owns the trademark (the “Licensor”) gives another entity the power or authority to use the trademark under specified conditions (known as the “Licensee.”)
Conditions Necessary for a Franchise
For a franchise to be valid, the following characteristics must be present. If any of these conditions are missing, the franchise is not legitimate.
- The right to use the other company’s trademark to sell or offer products
- Significant support or assistance by the trademark’s owner
- Payment of the license fee
The right to use the Trademark
Even though the trademark license may not be present in the agreement, it still applies. In such a case, the right to the brand will be implied.
When an owner of a brand offers major support and assistance to the person using their trademark, the franchisor-franchisee relationship can be said to be “legit”. The brand owner may also exercise immense control over the franchisee. Assistance or control may include:
- Formal business training
- Restrictions on the business location
- Business operating hours
- The requirement to only sell products from the franchisor
- Design and display requirements
- Policies on personnel
Payment of the license fee
Finally, a franchisee must pay the franchisor a certain amount of money to bring about their relationship. This payment covers advertising assistance, training, promotional literature, and continuing royalties.
Sources of Trademarks
The fact that you have come up with your trademark does not automatically mean that you legally own it. To protect your brand legally, brand ownership has to come from the following sources.
- Common-law – Under common-law, you obtain trademark ownership and the rights to the trademark by actually using the trademark.
- United States Patent and Trademark Office (USPTO) Registration – This is a federal registration process. Trademark ownership obtained via USPTO registration is stronger than the one obtained via common-law.
Even if you obtain your ownership via common-law, you will still need to register your trademark with the USPTO. This is especially if you intend to grow your trademark through franchising. Trademark rights obtained via common-law are weak and may be difficult to defend in case you find another business using a trademark similar to yours.
To avoid trademark conflicts with other businesses in the future, it is best to register your trademark with USPTO. USPTO registration is a nationwide ad that protects you from other persons who may want to use a brand that is either identical or resembles yours.
If you are seeking to register your trademark, our attorneys will offer you the legal advice you need, so you avoid conflicts.
In the first stages of developing your franchise, you must conduct trademark searches. Trademark searches help you determine whether or not your trademark is protected and hence safe for franchising. Our experienced franchise attorneys will help you perform the trademark search.
If you find that another company already registered the same trademark as you, you will have to come up with another brand. This is because USPTO will not allow you to register your franchise in such circumstances. This can be cumbersome if you have already established your franchise. To avoid such a scenario, it is best to monitor your trademark registrations.
As a franchisor, you should know that your trademark rights may be inferior to that of another smaller business with the same trademark if the smaller company obtained the rights via common-law before you registered your trademark with USPTO. This happens if the other business was in operation before you registered your business with USPTO.
Therefore, before you begin sending cease-and-desist notices to the business you suspect of stealing your trademark, it is best to consult an attorney. The attorney will help you determine if the other company has any rights to the brand. This will help you prevent legal problems, especially if you intend to franchise in an area where another local business shares a strikingly similar trademark to yours. You risk facing trademark infringement claims if you give out your license to a franchisee in an area where there is another local business with superior rights to the trademark.
Common Legal Issues in Franchising, Licensing & Trademarks
False claims: A franchisor may face charges if they provide their franchisee with incorrect information concerning their company. In such a case, the franchisor will be violating both federal and state laws in case they lie to the franchisee.
Breach of contract: A franchisee will face breach of contract charges if they make false statements about their earnings. Under such circumstances, the franchisor has the right to file a case against the franchisee for breach of contract. The contract between the franchisee and the franchisor is known as a franchise agreement.
Before entering into the franchise relationship, both the franchisor and the franchisee should understand the franchise agreement to avoid any problems in the future. If you are a franchisor, our attorneys can help you draft a strong, easy to comprehend franchise agreement. Our attorneys also help franchisees understand this crucial document before they sign it. Most problems that arise later usually stem from the agreement.
Conflicts of interest: In addition to the terms and conditions, the franchise contract contains payment information. Since the franchisor receives a percentage of the revenue and the franchisee gets the profits, a conflict of interest may arise when the franchisee seeks to increase the profits but pay no attention to revenue. To increase the profit, franchisees may cut down on costs or using and tricks that increase their profits. In such cases, the profits will increase while the revenue might remain the same.
Numerous legal issues may arise in the relationship between a franchisor and a franchisee. You need a franchise agreement that covers all of these issues so you can charge the guilty party in case they violate the agreement.
Our experienced trademark attorneys will guide you through all the laws of trademark, franchise, and license so you can get into a franchise-franchisee relationship or, license out your business, with full knowledge of the law. If you find anything that seems out of the ordinary in the course of your relationship, be sure to consult our attorneys so you can get the legal support and guidance you need.