Steps to Select and Protect a Valuable Trademark
My previous post on this site discussed considerations for developing a franchise system, which included establishing a strong brand identity. This article discusses some key considerations for developing a valuable brand from a legal perspective, including: selecting a protectable trademark, making sure the trademark is available, and registering and enforcing your trademark rights.
Selecting a Protectable Trademark
The first thing to keep in mind when selecting a trademark is that not all words and names are capable of being protected as trademarks. No one business owner can claim exclusive rights in generic terms and logos, because all business owners need to be able to use these in order to identify their goods or services. Thus, a residential painting franchise likely could not claim exclusive rights in the name “Painting Pros”, because this is simply a generic description of the services that the business offers.
There is actually a scale for types of trademarks and the levels of protection they can obtain:
- Generic – not subject to trademark protection
- Descriptive (describes the goods/services as opposed to merely stating what they are) – protectable as a trademark only after acquiring “secondary meaning” (recognition) in the relevant marketplace
- Suggestive (slightly more cerebral than descriptive, but still identifies the goods/services on its face—think Facebook) – protectable
- Arbitrary (think Apple for computers) – protectable, and subject to a greater scope of protection than suggestive marks
- Fanciful (made up words) – afforded the greatest scope of protection
The trend these days seems to be to tend more toward suggestive trademarks, as they provide exclusivity while also identifying the nature of the business. However, many franchise companies have found great success with arbitrary and fanciful trademarks, and these types of brand names are often more memorable once consumers become aware of the brand.
Making Sure Your Trademark Is Available
After coming up with an idea for a protectable trademark, the next step is to make sure that the trademark is available for use. This is a time-intensive, research-intensive process that is best left to the professionals. In certain circumstances this “clearance” research will conclusively establish that another business has already acquired exclusive rights in your proposed trademark; in others, it will establish with a reasonable degree of confidence that the mark is available for adoption; and, in others still, it will result in a level of uncertainty that requires a strategic decision on whether or not to pursue the desired trademark.
The basic principle underlying the need to conduct trademark clearance research is that, under U.S. law, brand owners have the ability to acquire exclusive rights in the trademarks they adopt to identify their goods or services in the marketplace. If ABC, Inc. is using your proposed trademark for its custom blind franchise, you will (making certain assumptions about the nature of the mark and the status of ABC, Inc.’s ownership) be prohibited from adopting the same trademark for your blind installation franchise concept.
Another important issue relates to the fact that brand owners can obtain geographically-limited “common law” rights even if they do not apply for federal registration with the United States Patent and Trademark Office (“USPTO”). This issue is of particular concern for franchisors seeking to expand on a regional or national scale. These common law rights preempt the exclusive rights obtained through any subsequent federal registration. Thus, if a five-store restaurant chain in California is already using your proposed trademark, even if you obtain a federal registration, that restaurant chain may still be able to prevent you from selling franchises in California under your new trademark.
Applying for Trademark Registration
Once you determine that your trademark is available, as suggested above, the next step is to apply for registration with the USPTO. Subject to any pre- existing common law rights, registration with the USPTO provides the trademark owner with exclusive rights nationwide to make use of the mark. Readers familiar with the Franchise Disclosure Document (“FDD”) will recall that Item 12 of the FDD requires specific disclosures relating to the registration status of the franchisor’s trademarks. If the franchisor’s trademark is not yet registered, this must be disclosed in the FDD, and this can be a key factor for prospective franchisees who are trying to decide between competing franchise opportunities. Thus, companies considering franchising would be well advised to seek registration for their trademarks early in the process, if not sooner for their own internal business purposes.
Enforcing Your Trademark Rights
Finally, once registration is obtained, franchisors and other trademark owners need to take steps to proactively monitor and enforce their trademark rights. This can include regular monitoring of social media sites and online databases, franchisee audits, and other tasks to spot infringement and correct improper uses. Like clearance research, trademark monitoring is a task best left to the pros. If an infringer is discovered, swift action should be taken to enforce the franchisor’s exclusive rights. Failure to enforce trademark rights can lead to abandonment, and then the business is back to square one.
By following these general guidelines, business owners can help maximize the value and leveragability of their trademarks. This is of particular interest for aspiring franchisors, as a strong trademark can help make or break a new franchise concept. In the long run, the relatively modest expenses of selecting and protecting a valuable trademark will be far surpassed by the benefits that a strong trademark can provide.
Jeff Fabian is the owner of Fabian, LLC, a boutique intellectual property and business law firm serving new and established franchisors and franchisees. Contact the firm directly at 410.908.0883 or email@example.com. You can also follow Jeff on Twitter @jsfabian.
This article is provided for informational purposes only, and does not constitute legal advice. Always consult an attorney before taking any action that may affect your legal rights or liabilities.
Franchise Disclosure Document for Dummies – Part 7
In Item 17 of the FDD, franchisors are required to provide summaries and cross-references for 23 key provisions in the franchise agreement. A careful franchise prospect will have the entire franchise agreement reviewed in-depth by an experienced franchise attorney, but the Item 17 disclosures can provide a quick guide to use in a preliminary analysis of the franchise opportunity.
Choosing Between a Product and a Service Franchise
There are basically two types of businesses that can be offered by an individual. They can offer Products to their customers which are tangible goods meant for the customer's consumption or they can offer them Services which are intangible and work to make the life of the consumer easier and more convenient. With technologies advancing rapidly and the global demands of consumers changing there is a very thin line dividing the service and product segment of the consumers demands. An example of this can be the purchase of a car from an auto dealer. The dealer not only offers the vehicle at a competitive rate but now has to offer different services as well, such as financing options, after-sales services, ready documentation and other non- tangible services. This kind of merging has made it very difficult to draw a clear line as to the service and product industry but for the sake of argument we will consider a theoretical perspective where you have to choose a traditional product franchise or a service franchise.
The first point I made ties into this, but you need to make sure you’ve done your research before you go ahead and sign a franchising agreement. And that doesn’t just mean from a financial perspective. There are so many other aspects in running a franchise that you need to understand before you get started. Most of this information can be found in the Franchise Disclosure Documents. Some of the most important things you should take a look at would be any legal issues the franchisor might have and the churn rate of franchises. Both of those could potentially be pretty significant red flags that might make you want to reconsider whether or not you want to open that franchise.