ROLE OF IPR IN FRANCHISE BUSINESS

Intellectual property rights (IPRs) are extremely important business assets that not only contribute to overall business profitability but also the growth of each country's innovative and technical sectors. A franchise is a type of licensing agreement between a franchisee and a franchisor that grants the franchisee access to use the franchisor's proprietary knowledge, processes, technical know-how, and other intellectual property rights for the franchisee to trade in the franchisor's product or service under the franchisee's trade name. Several intellectual property rights are exploited in a franchise agreement since the transfer of such intangible rights appears to be the scourge of franchise agreements.

ROLE OF IPR IN FRANCHISE BUSINESS

INTRODUCTION

Intellectual property rights (IPRs) are extremely important business assets that not only contribute to overall business profitability but also the growth of each country's innovative and technical sectors. A franchise is a type of licensing agreement between a franchisee and a franchisor that grants the franchisee access to use the franchisor's proprietary knowledge, processes, technical know-how, and other intellectual property rights for the franchisee to trade in the franchisor's product or service under the franchisee's trade name. Several intellectual property rights are exploited in a franchise agreement since the transfer of such intangible rights appears to be the scourge of franchise agreements.

 

Trademarks, trade secrets, patents, copyrights, and other intellectual property rights are examples of these rights. A franchisor and franchisee often have a mutually beneficial relationship in which the franchisor seeks to expand its business and brand name beyond its territorial borders, while the franchisee seeks a profitable return by leveraging the franchisor's existing brand reputation while paying fees to the franchisor.

 

It is critical to take the appropriate procedures and measures to better safeguard and protect certain proprietary intangible rights from unauthorized uses and exploitation by franchisees when licensing and transferring intellectual property rights in a franchise agreement. The franchisor has a fundamental responsibility to maintain its franchise's brand reputation, particularly about the way the franchise business is operated, the use of its trademark, innovations, and private information, and the promotional materials used.

Intellectual property rights are important to any business, and many companies spend millions to protect their intellectual property. With IPR, you have the legal right to sue anybody who exploits your concept, logo, or other intellectual property without your permission. You may also franchise or assign your work's copyright to someone else and get income.

 

FRANCHISED BUSINESS CAN BE OF TWO TYPES:

  • Product and trade name franchising occurs when a franchisee sells the franchisor's products or services using the franchisor's trade name (including trademarks).
  • The franchisee uses the franchisor's whole company idea in business format franchising trademarks, goodwill, trade secrets, etc. To conclude, franchising is a method of disseminating a franchisor's products and services by methodically sharing the franchisor's intellectual property.

Nowadays, every nation recognizes the value of intellectual property rights, and virtually every country has laws governing it. The Patents Act 1970, The Trademarks Act 1999, The Copyright Act 1957, and other significant statutes in India address this issue. The requirements of these acts must be obeyed, and anybody who violates them can be fined or punished.

TRADEMARKS

Trademarks are an important intellectual property asset that may be licensed through a franchise agreement in a company operation or continuing concern. A trademark is a symbol that may be used to identify one company's goods and services from those of another. Logos, designs, drawings, symbols, taglines, numbers, three-dimensional features, or any combination of these are included. They are an important part of Intellectual Property since they serve as source identifiers, directing consumer's attention to the product's or service's origin and source. In a franchise agreement, the franchisor generally provides a franchisee license to use its trademark in exchange for a fee or royalty. Domino Pizza, Kentucky Fried Chicken (KFC), Naturals, and other prominent franchise businesses are examples.

The mode of use of a franchisor's trademark, on the other hand, should be stipulated in a franchise agreement because if the use of such trademark is not properly controlled, the franchise might suffer significant reputational damage. For example, a franchisee who acquires items carrying the franchisor's trademark from a counterfeit source and distributes them in his or her jurisdiction may damage the franchisor's reputation. Also, because trademark registrations are territorial, except for some regional registration authorities, the Franchisor must get legal protection for its franchise's trademark in the jurisdiction of the franchisee. Registration grants the franchisor exclusive rights to use and defend its trademark in the franchisee's jurisdiction.

There are situations when a franchisor's trademark is already in use in the franchisee's jurisdiction, and the owners of that mark may have registered it maliciously to take advantage of the franchise's goodwill and brand name, as well as to pre-empt a valid claim. When a few well-known franchise businesses, such as Burger King and Taco Bell, attempted to expand their brands into other territories, they had this terrible experience. In a franchise agreement, registration is critical since it prevents the unauthorized use of the franchisor's trademark.

COPYRIGHT

Another crucial intellectual property right that might be harmed by a franchise agreement and so has to be adequately protected. A copyright is a type of legal protection available to the authors and originators of works that are qualified for protection. It gives the creator of different forms of creative expressions, whether literary, musical, artistic, or cinematographic works or adaptations of any of the aforementioned works, an exclusive and assignable right. To get better protection or to ease enforcement procedures, franchisors should register or lodge their copyrighted materials in the depository of the specified organizations within the franchisee's jurisdiction.

PATENTS

A patent is an exclusive and assignable intellectual property right granted to an inventor for a specific length of time over his or her patented creation. To provide maximal protection over the patent, these rights must be registered in the various jurisdictions where the franchisees operate. To prevent illegal exploitations, franchise agreements should specify how the franchisee's patented innovations should be used. It should include explicit terms about ownership of inventions created during the franchise agreement, especially if the franchisee is empowered to engage in any innovative activity for the franchise's overall benefit.

CONCLUSION

Several components of IPR are engaged in the franchise business, including trademarks, copyright, ordinary and simple patents, industrial design, and trade secrets. While the most fundamental components of IPR in the world are franchise companies, name brands, and trade secrets, each sector of IPR has its character and forms of legal protection that vary from one another. The nature of a franchise puts the franchisor at significant risk of trade secret misappropriation, brand reputation, goodwill, and other intellectual property rights being misused. To guarantee that the franchisor's IPRs are effectively protected, certain clauses must be included in the franchise agreement.

 

REFERENCES

Franchise Intellectual Property | Product And Trade Name Franchising (sparkleminds.com)

Importance of IPR in Business World (legalservicesindia.com)

Protection Of Intellectual Property Rights In A Franchise Agreement - Intellectual Property - Nigeria (mondaq.com)

 

BY- SRIJA PURIMETLA