What is Intellectual Property?
Intellectual property (IP) refers to intangible assets created through innovation, creativity and business activity. Intellectual property can include trade marks, copyright, designs, patents, trade secrets, confidential information and business know-how.
It is described as property because it can be owned, sold, transferred or given away.
For a franchisor, intellectual property is particularly important because it includes many of the assets that make the franchise system identifiable and replicable - including the franchise brand, trade marks, operating manuals, systems and confidential know-how.
If you want to franchise your business or licence your business you give franchisees or licensees the right to use some of your intellectual property. Protecting that property is consequently an important part of establishing and protecting a franchise or licence system.
In this resource:
Why is intellectual property important in franchising?
Trade marks - Protecting your brand
Your Documents and Software
Trade Secrets and Confidential Information
Patents
Protecting intellectual property in franchising
Difference between Copyright and Trademark
Why is intellectual property important in franchising?
When you franchise your business, you give a franchisee the right to use your trade mark, trading name and established business systems, so that a franchisee can operate a replica of your business.
The franchisee will generally be given the right to use:
- the brand and trade marks,
- the operations manuals and training manuals,
- marketing materials,
- software and technology,
- processes or techniques,
- confidential information, and
- business know-how and trade secrets.
If these assets aren't properly owned, documented and protected before the business is franchised, problems can arise when you grant a franchisee the right to use them.
A trade mark is often one of the most important Intellectual Property assets in a franchise or licence system because multiple independently owned businesses will trade under the same brand.
Your ability to prevent unlicensed third parties from trading off your name and logo rely on your ability to protect them.
There are 2 ways that you can protect your name and logo.
- Trademark Registration - register your name and/or your logo as a trade mark.
If you do this and someone improperly uses your name/logo, you can take action against them for infringement of your trade mark. A registered trade mark will protect you across Australia in the categories in which your trade mark is registered.
Registration of a company name, a business name or a domain name does not give you any protection for the registered name. Registration of a trade mark is the best way of protecting your name/logo. - Trading - trade under and promote your name/logo.
The extent to which you can protect your name/logo by trading under and promoting your name/logo will depend on the amount and extent to which your name/logo is known.
In some circumstances where a business is not known well enough to obtain trade mark registration, the business (including licensees and franchisees) may trade first to establish greater awareness of the brand.
Your original documents and software are also your Intellectual Property. This includes any original letters, e-mails, articles, manuals timetables, databases and computer programs as well as any original videos.
Except in certain circumstances, copyright protects this Intellectual Property.
Copyright does not need to be registered to protect you.
A franchisor's copyright material may include:
-
the operations manual,
-
training materials,
-
policies and procedures,
- website content,
- databases,
- marketing materials,
- other original business documents.
Copyright only protects the actual document, video, computer program etc. It does not protect ideas, information or concepts. An idea, concept or information can still be copied unless it is protected in some other way.
Your Intellectual Property also includes trade secrets and confidential information.
Examples of confidential information in a franchise system include:
-
recipes,
- supplier information,
- customer information,
- operational processes,
- training methods, and
- other information that gives the franchise system an advantage.
You cannot register this Intellectual Property and unfortunately you can only protect this Intellectual Property by keeping it secret. The most common way to do this is by entering into a confidentiality agreement with people who have access to the information.
For more detailed information about confidentiality agreements, read our article Confidentiality Agreements - A Comprehensive Guide.
In addition it is desirable that people who have access to your trade secrets and confidential information, enter into an agreement not to compete with you or to work with anyone that competes with you.
For more detailed information about non-compete agreements, read our article Restraint of Trade Agreements.
Confidentiality agreements and non compete agreements are not always enforceable.
Consequently, considerable thought should be given to drafting these agreements.
For more detailed information about protection of trade secrets in general, read our article Protection of Trade Secrets.
A patent is an enforceable right to commercially exploit an invention for the life of a patent.
If there are any devices, substances, methods or processes which are unique to you and important to your business then you should, if possible, register these as a patent.
You will then have the exclusive right to use and licence others to use the patented device, substance, method or process.
How is Intellectual Property protected in a franchise system?
The franchise agreement itself plays an important role in protecting the Intellectual Property in a franchise system.
The franchise agreement will set out what intellectual property the franchisee is permitted to use, the conditions applying to the use of the Intellectual Property and the conditions on termination of the franchise agreement.
Often termination of the franchise agreement poses the highest risk to a franchisor as the franchisee may set up in competition with the franchisor using the franchisor's Intellectual Property.
We have set out in the table below the different types of intellectual property assets and their possible protection.
For a more detailed review of intellectual property agreements, see our article Different types of Intellectual Property Agreements Explained.
| Franchise asset | Possible Protection |
|
Name/logo |
Trade mark registration |
|
Operations manual |
Copyright and franchise agreement |
|
Marketing material |
Copyright and franchise agreement |
|
Software |
Copyright and franchise agreement |
|
Confidential know-how |
Confidentiality/NDA/franchise agreement |
|
Trade secrets |
Confidentiality/NDA/franchise agreement and access controls |
|
Proprietary invention |
Patent where applicable |
What is the difference between Copyright and a Trademark?
An example of the difference between copyright and a trade mark in franchising is that the franchise brand may be protected by a registered trade mark, while the original content in the franchise operations manual may be protected by copyright.
In the table below we have set out the difference between copyright and a trademark.
| Type of Intellectual Property | Definition | Protection | Scope |
| Copyright |
Copyright is a form of Intellectual Property that grants exclusive rights to creators of original works, as well as software and other intellectual creations. |
Copyright protects the expressions of ideas once they are in a tangible medium (eg written down, recorded or saved digitally). Copyright is not registered. |
Copyright covers the rights to reproduce, distribute, perform, display and create derivative works from the original work. |
| Trademark |
A trademark is a word or a symbol or design, used to distinguish goods and services. |
A trademark is registered, and protects the use of the work, symbol or design in the place that the trademark is registered. |
A registered trademark protects the registered owner of the trademark from unauthorised use of the trademark by other people (in the class in which the trademark is registered). |
Disclaimer
The information in this article is general in nature and is not intended to address the circumstances of any person or other entity. Although we do our best to provide timely and accurate information, we do not guarantee that the information in this article is accurate or that it will continue to be accurate in the future.