In the past, a trading business was known as doing business without having any production unit. The business houses were engaged in manufacturing the products without having any marketing network and used to complete the sales to the consumers through third party termed as traders or stockiest. The business module in FMCG products, durable products and even service providing industries have changed drastically for limitless growth. Franchise or licensing business is the most lucrative prospect for the business skyline with any manufacturing venture. In the franchising business, the franchisor assign the rights of their house marks, trademarks,trade dresses or other forms of intellectual property rights for conducting business through the third party retail outlets, owned by independent business house or third party operator, called franchisee. Franchising is an easy way of doing business without any business complicacy or technical know-how.The franchising network helps the manufacturing business to grow fast and beyond any geographical boundary. For example,McDonalds,Subway, Starbucks, Pizza Hut, KFC and many other international brands are popular in the Indian territory.
Intellectual property is the only asset of any franchising business. In real sense, the intellectual property is the most important to virtually all businesses. It is a valuable asset for business move.
Intellectual property falls into four categories – trademarks, copyrights, patents and trade secrets. A trademark is a name by which the product is known in the consumer market. It can be words or designs that identify the company products or the origin when it sells in the market. Trademark protection can last as long as the company exists. One very important thing for intellectual property utilization in the business is trade mark. For any company, choosing a strong brand name for the products or services to render is extremely important. In lack of that, the company can face the back drop when there is any legal issue from the competitors or registration authority. Trade Mark is the only instrument which accelerates the business forward through franchising or licensing. A lack of proper and legally protected brand name, the prospective business can lead to expensive problems such as, rebranding the products services when the particular trademark infringes the fundamentals of a prior owner. Furthermore, the trade mark cannot be registered or protectable if it is descriptive in nature or it may qualify for protection, but so similar to the pre-existing marks that its scope of protection will be narrow.
Copyright law protects the various artistic works, literary works etc. involved in the business. The various artistic works related to trademarks or the literary works related to company advertisements, website contents or the operation manuals can be protected by copyright laws. Copyrights protect creative works. In business, copyrights protect works such as advertising materials, manuals and photographs. Copyrights also protect computer software and databases. Copyright law always protects the expression never the idea behind it. It protects against copying the code as a whole but not the function of computer code or the thought behind written code. Copyright is important to franchisors, but not nearly as central to the business as trademarks and trade secrets.
Patent law protects invention, if there is any developed by the respective company. Patents always ensure the protection of any invention, if it is new and novel. A company can infringe patent rights without even knowing that the patent is in existence. Copying is not necessary to infringe. Most of the franchisors do not have the patents or patentable inventions. But the companies those who use the patented technology, shall enjoy the exclusive rights in the commercial markets before the patent expires. The term of a patent is generally for 20 years from the date of application and it becomes public property after expiry.
Trade Secretes can be protected by signing the Non-Disclosure Agreement between the franchisor and franchisee. Any Confidential information related to business is required to be protected. The trade secrets can be protected as long as the company takes the steps necessary to protect the confidential nature of its trade secrets. This can be really forever. Example is the Coke formula. A trade secret is information that the company protects against disclosure and that has commercial value for the company. Trade secrets are fundamentals in franchising business. In reality, every franchisor talks about the confidential operations of the business or the methods which is involved with the production.