Navigating Intellectual Property Rights in Franchise Agreements: Insights for Delhi Entrepreneurs
Franchise Lawyer in Delhi | Franchise Lawyer in Gurugram | Franchise Lawyer in Noida | Franchise Lawyer in Delhi NCR | Corporate Lawyer in Delhi | Corporate Lawyer in Delhi NCR | Corporate Lawyer in Gurugram | Corporate Lawyer in Noida | IP Law & Franchise Agreements | Intellectual Properties & Franchise Agreements | IP Law & Franchise Contracts | IP in Franchise | How to Protect Intellectual Properties in Franchise Agreements | How to Protect Intellectual Properties in Franchise Contracts | How to Protect Intellectual Properties in Franchise Business in Delhi | How to Protect Intellectual Properties in Franchise Business in Gurugram | IP Rights for Franchisees in Delhi | IP Rights for Franchisees in Delhi NCR | IP Rights for Franchisees in Gurugram | IP Rights for Franchisees in Chandigarh | Corporate Lawyer in Chandigarh | Franchise Lawyer in Chandigarh |
Just as physical assets are important for the operation of a business, the intellectual property holds equal importance and can potentially be even more valuable in certain scenarios. In a franchise business model as well, the franchisor has certain rights and property which he transfers to the franchisee in return for a consideration. The intellectual property in such agreements includes trademarks, copyrights, trade secrets, patents, etc.
Each intellectual property has a unique set of importance in its own, which is discussed in detail below:
• It is through the “trademark” only that helps to distinguish a common man between a popular franchise and any common business outlet. Example: any person can open a burger outlet, but it is the ‘Golden Arches logo’ trademark alone that distinguishes McDonald’s from any ordinary burger joint. In the absence of registration of this trademark by the franchise, the goodwill of the franchise could be hampered, as anyone would run such a business under the disguise of authentic business. Thus, whenever a franchise agreement is made, one of the most important obligations of the franchisor is to transfer his right to use its trademark to the franchisee. This is the trademark only, which helps to ensure uniformity and consistency across all the franchises and, in long run, helps to build brand value and customer trust.
• Similar to the trademark IP is “copyright” which helps businesses, including franchises, by ensuring that their products and/or services are not used or copied by anyone else without their permission. The symbol © ensures that the property has secured copyright registration. Under franchise agreements specifically, it can include training manuals, marketing materials, software, and many more. Example: the ‘Subway Operations Manual’, which helps to secure standardization in the preparation and serving of the sandwiches, is copyrighted by Subway, and no one else can use that manual without taking its franchise. The importance of copyrights is very much similar to that of trademarks, i.e., they are crucial in preserving the distinctiveness of the franchisor’s business model and operational processes, and through this IP, the franchisee gets assurance that the franchise is authentic.
• Another important IP which is very crucial in the franchise business model is “trade secrets”. This form of IP, specifically in franchise agreements, helps in maintaining the confidentiality of the recipes, ingredients, processes, etc. which are secret, and apart from a few individuals in the business, no one else knows about those secret items, which makes their product and/or service different from others. The most important aspect of this IP is that it must have some commercial value. Example: the special blend of ingredients which brings the unique taste of Coca-Cola is a trade secret that, apart from this company, is known to none.
After discussing the importance of different IPs under the ambit of franchise agreements, it is important to know the process through which these IPs can be registered. The steps the franchisors must follow to register and enforce their IP rights are as follows:
• In India, the “trademarks” are registered and governed under the Trade Marks Act, 1999. Firstly, a thorough search is to be made so as to check whether the trademark is unique in general as well as in its respective class. This can be done through websites available online, such as https://ipindia.gov.in/trade-marks.htm. Then a TM-P form and an application for registration of trademark(s) are to be filled out, which can be done online through https://ipindiaonline.gov.in/trademarkefiling/user/frmNewRegis or by physically visiting the Trademark Registrar’s Office along with the requisite fee. The Registrar examines the trademark and ensures that the rules and regulations are followed properly. Then, if no objections are raised at any stage, the trademark gets registered and a certificate it is issued. Also, a Digital Signature Certificate (DSC) can be used during this process of registration. The franchise agreement shall clearly mention the extent to which a franchisee can use the franchisor’s trademark.
• In India, the “copyrights” are governed by the Copyright Act, 1957. The thing for which copyright is to be taken must be complete and original. The originality can be checked on online websites such as https://ipindia.gov.in/copyright.htm. An application for the registration of copyright is to be filed along with required documents and prescribed fees. This can be done both in online mode through the website https://copyright.gov.in/ or by physically visiting the Copyright Office. After this, the application will be acknowledged and examined by the Office, and if no objections are raised, the copyright will be registered and published in the official gazette, and a certificate of registration will be provided for the same.
• Currently, there’s no legislation in India which directly governs the “trade secrets,” and thus, the franchisors are to rely on confidentiality agreements and internal policies to maintain secrecy. No registration is essential for the trade secrets, but to prevent their misuse, the franchisor can make non-disclosure or non-compete agreements (NDA/NCA) with their partners and franchisees. Apart from this, high security and surveillance system be installed, strong passwords and firewalls be built into systems, regular training be provided to employees on its importance, and mention penalties in the agreements in case of a violation or any breach.
After ensuring that the IPs are property registered, regular monitoring of the franchisees and market is to be done to find any potential infringement on these IPs. This would ensure proper enforcement of these IPs. If any infringement is found, legal action be taken against it.
Some real-life examples of IP-related disputes in franchising and how they were resolved are as follows:
• Starbucks Coffee v. Sardarbuksh Coffee is a trademark infringement case in which the latter named its business with a similar name and logo as that of the former, which has already registered its name and logo in India. The court held that whether a trademark is similar or not is to be viewed by steeping into the shoes of the customer, i.e., whether a customer feels any confusion in both names and logos or not. Thus, on the basis of this, the court directed the latter to change its name to something different from the former brand. Other ways to address dispute can be to opt for mediation and arbitration to resolve them amicably.
• Hawkins Cooker Ltd. v. Magicook Appliances is a copyright infringement case in which the former filed a suit against Magicook Appliances, alleging that the latter used the label of the former which was registered under the Copyright Act, 1957. The Court delivered its verdict in favour of Hawkins Cooker Ltd. and ordered the latter to pay damages to the former for doing copyright violation. Apart from this, general measures to resolve such disputes are to issue a cease-and-desist notice or go for negotiations and other ADR methods.
• In 2006, an employee of Coca-Cola attempted to sell some confidential documents and a sample of its product to PepsiCo. However, PepsiCo under ethical business practices, informed Coca-Cola about this offer and later also cooperated to catch the perpetrator, which led to successful protection of the trade secret of the Coca-Cola ingredients.
Thus, with IP being an important asset of the franchise, every effort shall be made to preserve it so that the goodwill, brand value and uniformity are maintained across all the franchises and both the franchisor and franchisee can focus on other aspects of their business.
Authored by: Adv. Anant Sharma & Sahil Arora
#IntellectualProperty #FranchiseLaw #DelhiLawyers #IPRights #FranchiseAgreements #DelhiBusiness #IPProtection #DelhiNCRUpdates #ChandigarhBuzz #IndiaBusiness #DelhiLife #GurgaonBusiness #ChandigarhMoments #IndiaBiz #NCRUpdates