business concept protection
Protecting the Franchisor's Concept: Is an Idea Protectable?
Is my concept protectable?
The franchisor’s business concept is a key part of the customer’s identification of the distribution network. The preservation of its specificity therefore constitutes a strategic issue: it is up to the work franchisor to protect its concept so that it is not trivialized.
The difficulty arises from the fact that a commercial concept is not protectable as such, as a whole, under industrial property or intellectual property. On the other hand, the identity elements that characterize the commercial concept may be the subject, individually, of protection under industrial property or intellectual property.
It is therefore necessary to first define the markers of the identity of the concept, then for each of them, to verify by which technique of industrial or intellectual property they can be protected. Finally, this protection should be supplemented by contractual stipulations applicable to franchisees.
Identify elements of concept identity and rights holders
First of all, it is necessary to identify the main components of the commercial concept (distinctive signs: sign, logo, slogan, graphic charter, etc.; communication media, used in the context of the promotion of the franchisor and the franchise network, as well as the franchisor’s website if applicable; specificities of the layout of the points of sale of the franchise network: architectural characteristics of the points of sale, definition of the network-specific furniture, which can be designed specifically by or for the franchise network, the specific layouts; the software(s) created especially for the franchise network; the databases; all the documents formalizing its commercial concept, in particular the graphic charter and the architectural charter of the network).
It is then necessary to identify the natural or legal persons creating the various elements constituting the franchisor’s business concept (founding partners of the concept, employees of the franchisor, external service providers, etc.).
Finally, it is necessary to identify the existence of rights over all the elements of the commercial concept, in particular with regard to copyrights or industrial property rights (trademarks, designs and models) as well as the holders of these rights. To do this, all the documents relating to the creation of each element of the commercial concept must be communicated to each other, and then check, for each element, whether it is eligible for protection under a trademark, a design, a patent, a copyright or a related right, such as the right of the database producer.
So, for example:
• the sign may be protected as a trademark, as may the logos or graphic representations associated with the trademark;
• furniture may be subject to protection under designs;
• copyright will apply to the architectural concept of the layout of the points of sale, photographs, content expressing the know-how of the franchisor, software, and more generally to all works of the mind as long as they are original.
So what makes your concept recognizable? Are they its colors, its typology of furniture… and we will be able to look for each element of identification of this concept if intellectual property law provides techniques such as trademark law, design law, copyright, patent rights, possibly to protect each element that will be a marker of the identity of your commercial concept; thus, we can end up with a monopoly of exploitation, as would be obtained by filing trademarks for the identity markers of the concept, so it is a technique that protects a number of distinctive elements.
Protection of franchisor's rights on the basis of intellectual and industrial property law
In the event that the franchisor is the holder of the existing rights to one or more elements of the commercial concept, no action is required (subject to the provision of proof of copyright, see below).
It is only when the franchisor does not have rights to the elements of its business concept, or if they are not subject to any protection, that it is appropriate to organize the acquisition of rights by the franchisor, and the protection of rights.
1. Franchisor’s acquisition of rights held by third parties
Since the rights to the elements of the business concept are held by a third party, the franchisor must either acquire property rights or be granted a right of enjoyment.
The preservation of the distinctive character of the concept requires that this right of enjoyment be accompanied by exclusivity. Assignment is generally preferable to ensure the security of the operating monopoly enjoyed by the holder of the industrial / intellectual property rights.
The franchisor could, for example, assign the brand under which its brand is operated or the copyright on the key elements of its concept (logo, slogan, website, graphic, architectural, software, etc.).
In terms of trademarks, the publication of trademark assignments / licenses in the registers kept by the INPI is essential to ensure the enforceability against third parties of the industrial property rights that the franchisor has acquired.
Caution: It may happen that some elements of the franchisor‘s business concept have been created specifically by employees of the franchisor. In this case, the copyright holder is not the franchisor, the employer, but the employee, even if the latter is subordinate to the franchisor under an employment contract, provided, where applicable, that the intervention of the employee is not part of a collective work, carried out under the direction of the employer.
As the assignment of the global of future works is prohibited, a simple mention in the employee’s employment contract will not suffice to take away the assignment of the copyright of which the employee would be the holder on the elements that he will have created as part of his employment contract. A specific contract must be signed between the franchisor and its employee for each element. However, this clarification does not apply to software for which, unless otherwise agreed, the copyright belongs to the employer.
2. Franchisor protection of rights not held by third parties
The franchisor may use various tools of intellectual and industrial property law to protect rights that are not held by third parties, provided that the elements concerned are eligible for the protection sought.
Trademark law may for example be used to ensure the protection of the brand, product names, graphic representations of the brand or the architectural concept.
The franchisor may also protect, on the basis of design law, graphic drawings or figures, integrated into defined communication media (cards, flyers, signs, flyers, loyalty cards, copyrights eligible for protection, presentation of menus in a catering brand, etc.).
Finally, the franchisor may use copyright to ensure the protection of the graphic charter and the architectural charter of the franchisor, logos, slogans but also the know-how manual, certain commercial documents, or the contractual documents of the franchisor. The scope of copyright is therefore broad and many elements of the franchisor ‘s business concept are eligible for this protection, provided they are original.
It should be noted on this point that, unlike trademark law and design law, no specific approach is necessary to benefit from copyright protection since “The author of a work of the mind enjoys over this work, by the sole fact of its creation, an exclusive intangible property right enforceable against all. “(CPI, art. L. 111-1).
However, anyone who intends to claim copyright in a work must be able to prove the creation of the work and the date of acquisition of the rights to it: the originality of the work must be proven.
Protection of Franchisor Rights under Franchise Agreement
The protection of the concept can be improved because some of the counterfeiters in fact are franchisees or former franchisees; franchisees who, during the course of the contract, violate the non-competition clause or do not go to the end of the contract, stop executing it or at the end of the contract, finally, develop their business independently under a competing concept.
The idea is that the contract can perfectly prevent the usurpation of your commercial concept by adapted clauses. Clauses of the franchise agreement thus supplement intellectual property law, organizing protection that this intellectual property law does not allow to obtain. We’ll plug all the holes with these clauses. For example, in a case law decision concerning the Elephant Bleu car cleaning network, a clause in the contract prescribed the cessation of the use of the colours white and blue. They may be colors with a certain banality in cleanliness but the clause of the contract prescribed the cessation of the use of these colors at the end of the contract. This clause was finally deemed lawful by the Court of Cassation. It makes it possible to obtain very quickly before an interim relief judge an effective cessation of the identity of the commercial concept. So do not hesitate to use contractual techniques to detail what is part of the concept.
It is necessary to organize the protection of the franchisor under the franchise agreement against the infringements of its intellectual and industrial property rights by the franchisees and former franchisees under the franchise agreement.
This should include:
• to contractually define the concept so that it can be opposed to the franchisee, as well as the main markers of the identity of the concept;
• to contractually define the industrial / intellectual property rights of the franchisor, and to provide an obligation for the franchisee to respect them;
• to strictly regulate the use of the trademark (use as a sign, strict framework for the operation of the point of sale, centralization of infringement actions in the hands of the franchisor, clauses governing the use of the trademark on the Internet, etc.);
• to specify in a limiting manner the use of the elements of the concept (condition of use of the graphic charter and all elements of visual identity, implementation of the architectural charter, controls by the franchisor).
It will also be necessary to provide for the following clauses, which will produce their effects after the termination of the effects of the franchise contract:
• a general clause that will require the franchisee to cease use of the business concept;
• an application clause that will detail the elements of the concept markers of its identity to be modified or deleted to prevent the assimilation of the former franchisee’s point of sale with the franchisor’s concept;
• an application clause that will detail the non-visual elements of the franchisor’s offer that are also elements of identification of its offer (e.g. a specific product, a specific method) that the former franchisee will refrain from using thereafter;
• a clause on the determination of loss in the event of a breach of these post-contractual obligations;
These various clauses may be accompanied by a penalty payment to enhance their effectiveness, and may be supplemented by a non-competition clause and a confidentiality clause.
In the absence of contractual stipulations, the franchisor, in the event of unlawful use of its intellectual and industrial property rights by its franchisees and / or former franchisees, must act on the basis of:
• its intellectual and industrial property rights, at the risk of having the validity of its rights challenged by the franchisee, and / or
• on the basis of tort (unfair competition and parasitism), which requires proof of a risk of confusion between the signs used, prejudice and finally a causal link, which may be difficult to demonstrate in practice.
On the contrary, the stipulation of contractual clauses makes it possible to ensure better protection of the franchisor’s rights:
• the judge will simply have to find the continued use of the distinctive signs referred to in the contractual clause to convict a former franchisee, whereas the practice may not be at fault in the field of tort.
• the judge will apply the contractual clause on the damage.
Protection du concept du franchiseur
