Franchise trademarks: Is it time to revisit your intellectual property cornerstones?
By Mike Drumm, CFE
Imagine you are going to an auction and can only bid on one of two items. Auction One is for the rights to make a hamburger with two beef patties, three pieces of bread and Thousand Island dressing, and Auction Two is for the rights to sell a hamburger under the trademark Big Mac®? Which would you bid on?
Chances are you would opt to capitalize on the ability to call something a Big Mac. This example highlights the value of intellectual property. While products and services can be duplicated, trademarked brands cannot.
Cornerstone of franchising
Trademarks are so important that they have their own item – No. 13 – in the franchise disclosure document. They are even part of the legal definition of a franchise in the U.S., which is defined as an ongoing commercial relationship in which the franchisee “will obtain the right to operate a business that is identified or associated with the franchisor’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor’s trademark.”
We know that trademarks are critical to franchising; we need to understand which trademarks, in particular, a franchise company should protect.
In the U.S., trademarks are protected by federal law under the Lanham Act, (15 U.S.C. § 1051). This article will not provide a legal dissertation on trademark law. Instead, it will give some practical pointers on fundamental trademarks that franchisors should protect. Some of the concepts are simplified to provide a general overview.
This article will cover both standard character marks and design marks (or logos). While standard character trademarks protect the word itself, regardless of the language it is in or how it is spelled, design marks protect the visual elements of the trademark (think the word McDonald’s vs. the actual image of the Golden Arches).
“While products and services can be duplicated, trademarked brands cannot.”
Priority No. 1
Franchisors’ top priority should be to protect the trademarks that their franchisees use in their franchised business. This generally involves protecting both the services and products offered by the franchised locations. Consider the fictional restaurant from the movie Coming to America, McDowell’s. We have identified six fundamental trademarks for the McDowell’s franchise company.
First, let’s start with the services offered by McDowell’s franchisees. McDowell’s is a restaurant chain that primarily offers hamburgers. Trademark One for the McDowell’s franchise company is the standard character mark for the word “McDowell’s.” This trademark would be filed under “restaurant services.”
McDowell’s restaurants are known for their “Golden Arcs.” The Golden Arcs appear on the exterior and interior signs of the restaurants, on the menu, and on product packaging. Given the importance of the Golden Arcs, Trademark Two for the McDowell’s franchise company is a design trademark for the Golden Arc image. This trademark would be filed under “restaurant services.”
Now it’s time to turn our attention to the products offered by McDowell’s franchisees. Separate trademarks are required (or a multi-class trademark with additional filing fees) for each product or service. Because all products offered by McDowell’s restaurants have the McDowell’s name on the packaging, Trademark Three for the McDowell’s franchise company is another standard character mark for the word “McDowell’s.” This trademark would be filed under “hamburgers.” Notice that it is different from Trademark One, which is the same word, but filed under a different category.
Practice tip: Less is more
Some trademark attorneys will take a kitchen sink approach and list every available item that they can for a product or service. This approach could put your trademark registration at risk. When selecting the goods or services on a trademark application, the “less is more” approach should be taken. List only those specific goods or services that are being offered on the trademark application.
“When selecting the goods or services on a trademark application, the ‘less is more’ approach should be taken.”
File under Big Mick?
I’m sure you haven’t forgotten about those Golden Arcs that appear on McDowell’s menu boards and product packaging. Just as you guessed, Trademark Four for the McDowell’s franchise company is a design trademark for the Golden Arc image. This trademark would be filed under “hamburgers.”
McDowell’s restaurants are known for their “Big Mick” hamburgers. It contains two all-beef patties, special sauce, lettuce, cheese, pickles and onions on a “sesame seedless” bun. Trademark Five is a standard character mark for the words “Big Mick” for this iconic hamburger. This trademark would be filed under “hamburgers.”
Similar trademarks can co-exist if…
Our McDowell’s franchise company trademark journey concludes with a trademark that is forgotten by many franchise companies. Think of it as a tale of two franchisors. Similar trademarks can co-exist, provided that the goods and services offered under each are different enough to not cause confusion (think of Delta the faucet company and Delta the airline company).
You are already familiar the fictional McDowell’s franchise company, known for franchising the McDowell’s restaurants. McDowell’s franchise company sells franchise services to prospective franchisees. Now imagine a second company, a franchised automotive repair center that operates under the McDowell’s name. Consumers may not confuse automotive repair centers for restaurants at the franchisee level.
But what about consumers looking to purchase a franchise? Which McDowell’s franchising is at the franchise expo? Which McDowell’s franchise shows up first on an internet search?
This brings us to our final trademark, No. Six. This trademark is another standard character mark for the word “McDowell’s.” But unlike the previous two McDowell’s trademarks, this protects the franchisor and not the franchisees. This trademark would be filed under “franchising services.”
Hopefully, this article will inspire you to revisit your franchise trademarks or, at the very least, inspire you to visit Youtube.com and watch some clips from Coming to America and see the McDowell’s restaurant in all its trademark attorney’s nightmarish glory.
Mike Drumm, CFE, is founder of Drumm Law. He is a member of the American Bar Association Forum on Franchising and serves on the Technology Committee. Find out more about Drumm Law at www.franchise.org/drumm-law-llc-supplier.