THE ROLE OF IPRs IN A FRANCHISING AGREEMENT by Tan Tee Jim, S.C. Senior Partner, Head, IP & IT, Lee & Lee Kuala Lumpur, July 2008

Brief Outline Typical IP Rights in a Franchising Agreement Trade Marks Copyright Designs Patent Trade Secrets

Trade Marks  Registered trademarks  Unregistered trade marks/passing off

Role of Trade Marks  To give the consumer an assurance  Consistent quality, variety, cost  To make the franchisee stand out  thus immediately attracting consumers  more distinctive – higher protection  distinctiveness depends on the nature of the mark and the goods, length of use, etc.  Famous/well known mark

Issues relating to trade marks  Enforcement of rights in trade marks  Franchisor reserves sole discretion to take whatever course of action it sees fit against an alleged infringer.  In a number of jurisdictions, the franchisee may institute proceedings against an alleged infringer in his own name.

Issues relating to trade marks  Franchisee may wish to include a term requiring the franchisor to take action against an infringer upon the complaint of the franchisee or failing which to consent to the franchisee instituting such action in its own name  Undertaking by the franchisee not to do anything to prejudice the goodwill and reputation of the trade mark  Issue of damages

Issues relating to trade marks Case study National Aerated Water Co Pte Ltd v Monarch Co, Inc

Issues relating to trade marks Case study - Franchisees started selling “Kick”drinks together with the original “Kickapoo Joy Juice” - Franchisors successfully sued and won for trade mark infringement and passing-off

Issues relating to trade marks  Registration of trade mark licence  To record the licence of the trade mark to the franchisee if the regime allows it.  Indemnity against 3 rd party claims for use of trade mark not in accordance with the agreement

Copyright  Manuals  Website  Marketing/promotional materials  Recipes  Drawings Architectural drawings of stores Interior and exterior layout Menus Labels

Issues relating to copyright  The licence given to the franchisee to use the copyright material is only for use for the franchise business.  The franchisor will usually reserve to himself the copyright in all additions/alterations to the manual.  This will include any additions or translations of the manuals made by the franchisee

Issues relating to copyright  While copyright is automatic, in infringement proceedings, it will be necessary to prove that copyright protection vested in the plaintiff:  All original plans or drawings together with the details of the creator and the date of creation ought to be kept.  Documents showing the root of title of the copyright should be kept

Designs  Specially designed furniture e.g. the service counter at Subway’s

Designs  To produce a uniform eye appeal  Shape, configuration, surface pattern or ornamentation  Registration-based right  15-year protection  Must apply before publication in Singapore or elsewhere

Patents  Business method patents, examples include:  Amazon’s US Patent: “Method and system for placing a purchase order via a communications network”

 Importance of IPRs  Be aware of what these rights are  Enforcement of the rights Conclusion

Thank You Tan Tee Jim, S.C. Kuala Lumpur, July 2008