Trademarks comprise a fundamental component to all franchise systems. So much so, that FDD "Item 13" is exclusively devoted to disclosures respecting the existence, registration, maintenance and defense of a franchisor's trademarks. Franchisors that are serious about their "systems" must also also be serious about the protection of their trademarks.
So, what are some of the factors and steps that serious franchisors (both start-up and established) understand about their trademarks? Here are a few:
- Trademark Registration is Critical. This point relates to start-up franchisors and comes down to a basic point: "don't sell a franchise until you register your primary trademarks with the United States Patent and Trademark Office ("USPTO")". Selling your first franchise without first securing USPTO registration will invite unnecessary "litigation risk" should your registration application be rejected or your mark challenged.
- USPTO Registration does Not Insure a Strong Trademark. The "legal value", strength and enforceability of your trademark will be influenced by a number of factors irrespective of your registration status. Although USPTO registration is an important factor, by itself, it may not be enough. Additional factors that you must consider and evaluate relate to the "legitimate" use of similar marks by third parties and whether or not your mark is comprised of "descriptive" terms. Generally, registered trademarks that are comprised of descriptive terms (i.e., such as "bakery", "store", "spa", "rapid", and other terms that "describe" your goods or services) will be afforded less protection than trademarks that are comprised of terms that are "arbitrary" (i.e., words that have no relation to the goods or services of your business).
- Periodic Evaluate your Marks and Registrations. As systems and business develops, typically, so do trademarks. Over time, franchisors modify existing marks, develop new marks, expand usage of a particular mark (i.e. to a new business category) and, in certain instances, discontinue the use of a mark. It is critical to insure that your trademark registrations remain current and reflect your "current" usage of your marks. This "evaluation process" need not be complex nor expensive an open line of communication between management and franchise counsel.
As your franchise develops and expands the value of your system, brand and owner equity will become more and more dependent on the strength and enforceability of your intellectual property assets. Trademarks are a big part of your "IP" asset structure and they require serious attention. Strong trademarks are a big part of strong franchise systems.