Franchisor Concept Protection

Bmany of our customers would like it. Fortunately no, ideas are free of course, which still preserves creativity, competition and allows renewal des concepts All this is to the good of the consumer. So the idea is not protectable.

Franchisor’s Business Concept is a key part of identifying the distribution network the clients. 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 stems from the fact that a business 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 business 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.

It is first necessary to identify the main components of the business 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 website of the franchisor’s if applicable; specifics of the layout of the points of sale of the franchise network : architectural characteristics of outlets, definition of network-specific furniture, which can be designed specifically by or for the franchise network, specific layouts; software(s) created specifically for Franchise network ; databases; all 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 constituent elements 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 elements of the business 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 business concept, and then verify, 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 instance:

• 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 point of sale layout, photographs, content expressing the know-how of the franchisor, to software, and more generally to all works of the mind as soon 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; so like that, we can end up with a monopoly of exploitation, as we would obtain by filing trademarks for the identity markers of the concept, so it is a technique that protects a number of distinctive elements.

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 commercial concept, or that 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 on the elements of the commercial concept are owned 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 assignments /trademark 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 thefranchisor’s
business concept were created specifically by employees of the
franchisor. In this case, the copyright owner is not the franchisor, 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 total of the future works is prohibited, a simple mention in the employee’s employment contract will not be enough to take away the assignment of the copyrights 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, the name of the products, the 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 restaurant chain, 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-howmanual
, certain commercial documents, or the franchisor’s contractual documents. 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 intangible property right exclusive and 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.

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 appropriate 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 appropriate to organize Franchisor protection as part of the franchise agreement against infringements of its intellectual and industrial property rights by franchisees and former franchisees by the franchise agreement.

In particular, it will be necessary to
• 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 comply with them;
• to strictly regulate the use of the brand (use as a brand, strict framework for the operation of the point of sale, centralization of counterfeit actions in the hands of the franchisor, clauses governing the use of the trademark on the Internet, etc.);
• to specify in a limiting way 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 franchisor).

It will also be necessary to provide for the following clauses, which will produce their effects after the cessation of the effects of the franchise agreement:
• 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 offer of franchisor 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 rights of the franchisor:

• 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.