Top 5 Trademark Issues to Consider While Franchising Your Brand

Frank Isaac Schechter, the influential author of ‘The Rational Basis of Trademark Protection’, had asserted that the value of a trademark lies in its selling power. Franchising is one of the popular business models that shows the selling power of trademarks in its true sense because franchising is considered as the most efficient way to exploit the intellectual property assets.

Related: An Insight into Franchise Agreements & Trademark Licensing in the UAE

While franchising a business, the franchisor is, in fact, granting a license to the franchisee to use the trademark of the business apart from giving the right to replicate the business model. Big automotive companies and other iconic brands like McDonald’s have created success across the territories through the franchise business model. And it is highly evident that how the trademarks played a huge role in asserting the value of the brand across the territories while franchising.

Trademarks convey to consumers the source of origin and quality of the products or services. This is because the trademarks make the brand immediately recognizable to the consumers. And this forces the businesses to focus on trademarks while franchising and they must give due considerations to the trademark issues that play a decisive role while franchising out. Following are the top 5 Trademark issues to consider while franchising your brand:

1. License to Use the Trademarks

The primary step in the process of franchising is granting the license to use the trademarks to a franchisee. The franchise agreement should mention this right as well as the manner in which the franchisee can exploit the trademarks for selling the brand’s products.

2. Protection of Brand through Trademark Registration

A key problem that may dog the franchisors and franchisees is related to the protection of the trademarks. The franchisors should ensure that their trademarks are protected through trademark registration. If the franchisor has already performed the process of trademark registration, then the franchisee can proceed with the assurance that the trademarks they are planning to license are protected from competitors.

Related: How to register a trademark in Dubai?

3. The Risk of Cancellation of Trademarks due to Non-use

The franchisee should ensure that the trademarks they are going to license do not run the risk of cancellation. in case of the UAE, as per the Trademark Law (Federal Law No. 37/1992) and its amendments by Federal Law No. 8/2002 of “Trademark Law, third parties can request the Trademark Office to cancel the trademarks that have not been in active use for five straight years since its registration in the UAE. Therefore, apart from ensuring that the franchisor has protected the IP assets through trademark registration in the UAE, the franchisees should also ensure that the trademarks are free from the risk of cancellation due to non-use.

4. The Issue of Maintaining the Reputation of the Brand

While licensing the trademarks to the franchisee, the franchisor should clearly outline the clauses on the rules to be followed to maintain the value of the brand. The franchisor should state how the franchisee can comply with the rules to preserve the value of the trademarks as well as to deliver the desired business results.

5. Protection of Trademarks after Termination of Agreement

In most cases, once the franchise agreement is terminated the franchisee’s license to use the trademarks also get cancelled unless otherwise specified. The reason for this is that the franchisee was granted only the license to use the trademarks and no transfer of ownership was involved in the process. If the franchisee continues to use the trademark after the termination of the agreement, it would be considered as trademark infringement since the franchisor had protected the IP asset through trademark registration.

The franchisee must ensure that his new business is distinguishable from that of the former franchise or else it would be considered as an attempt to deceive the consumers into believing that he is still the franchisee of the former franchise. In such a situation the former franchisee could be sued for damages. If the franchisor encounters trademark infringement in such situations, they should consult reputed trademark agents in Dubai who could provide all the legal assistance.

Seek Help From IP Firms

Trademarks are the most integral part of the franchise business because granting the license to use the trademarks is the primary legal right a brand owner awards to a franchise in the process. The franchisee, in turn, will emulate the business model of the franchisor and also exploit the brand value of its trademarks. The protection of trademarks is the most important aspect the brand owner has to ensure while deciding to franchise his business.

To protect the IP assets, the franchisor needs to ensure that he has performed the trademark registration. A registered trademark gives adequate protection from potential trademark infringements. To ensure the trademarks are protected from infringement by competitors, the franchisors can consult a reputed Intellectual Property firm such as Jitendra Intellectual Property (JIP). JIP has a team of highly qualified trademark agents who are well-versed in the UAE Trademark Law. JIP has helped thousands of brands and individuals to register their trademarks. JIP ensures that the trademarks of the businesses remain protected in the UAE as well as other GCC countries.