Intellectual Property

Trademark Licensing

If you are buying a franchise, make sure that you will be allowed to use the franchisor's trademark in operating your franchise. A trademark is any word, name, symbol, or device used by a person to identify and distinguish his or her goods from those manufactured or sold by others and to indicate the source of the goods. The use of a trademark is one of the main benefits of purchasing a franchise, and you should look for a well-known trademark in deciding which franchise to buy.

Trademark Registration

The trademark which you license when you buy a franchise should already be registered with the U.S. Patent and Trademark Office (USPTO) by the franchisor. Proper registration gives the owner and its licensees the right to use the trademark and the right to prevent anyone else from using it. Some states also have their own trademark registration laws, but state laws cannot require the alteration of a trademark already registered with the USPTO.

Registerable Marks

There are several kinds of marks that can be registered with the USPTO.

  • In General—To be registerable or otherwise recognized, a trademark must be distinctive. The Trademark Office and the courts recognize four levels of protection:

    Trademark Protection

    The right to a trademark is obtained through use. It is the trademark owner's responsibility to keep the trademark in constant use and to protect the quality of merchandise or services associated with the mark. So, if you license a trademark from a franchisor, you should expect that the franchisor will make sure that the quality of goods or services that you offer meets the franchisor's standards. Also, if you terminate the franchise relationship, you will no longer be allowed to use the trademark.

  • Generic terms, which denominate a type or category of goods, are not protected.
  • Descriptive terms, which merely describe the type of product, are protected only if, because of extensive advertising, the descriptive words become so associated with a particular business as to take on a secondary meaning.
  • Suggestive marks, which suggest a quality of the product, can be registered and protected.
  • Arbitrary or fanciful marks, which are the strongest types of trademarks, do not communicate any information about the product either directly or by suggestion and are fully registerable and protected. An arbitrary mark uses a common word in an unfamiliar way. A fanciful mark is not a real word, but is invented solely for the purpose of identifying a particular product.
  • Slogans, symbols, and color that meet the test of distinctiveness can be also protected as trademarks.
  • Trade Names—A trade name or a commercial name is any name used by a person to identify his or her business or vocation. A franchise agreement allows the franchisee to use the franchisor's trade name. The hallmark of the franchise relationship is the use of another's trade name in order to create a reasonable belief on the part of the consuming public that there is a connection between the trade name licensor and licensee by which the licensor essentially vouches for the licensee's activity.
  • Trade Dress—Trade dress is the non-functional physical detail and design of a product or its packaging which identifies the source of the product and distinguishes it from other products. Trade dress is a product's total image and overall appearance, and may include features such as size, shape, color, color combinations, texture, or graphics.
  • Service Marks—A service mark is a mark used in the sale or advertising of services to identify the services of one person and distinguish them from the services of others. The only difference between a trademark and a service mark is that a trademark identifies goods while a service mark identifies services.

    Questions for Your Attorney

  • What is a trademark?
  • Will I obtain the right to use a franchisor's trademark if I buy a franchise from him?
  • Who is supposed to register the trademark with the U.S. Patent and Trademark Office?
  • Should I confirm the validity of a franchisor's trademark or service mark before I enter into a franchise contract?
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