Khushbu Sundarji, Partner at Stewart Germann Law Office share her insight about how fundamental is the protection of the rights to the intellectual property to any franchised business.
The basis of goodwill and branding starts with the Franchisor’s intellectual property. The term “intellectual property” encompasses trade marks, registered designs, copyright and patents. The protection of the rights to intellectual property is fundamental to any franchised business.
In New Zealand Intellectual Property can be protected in various ways:
Trade Marks
A trade mark or service mark protection is the basis for any trading operation. There are 42 classes of goods and services in which trade mark protection can be obtained in New Zealand and of those classes 34 relate to goods and 8 to services. For example, there are 3 food classes and 2 classes covering products such as beer, alcoholic beverages, fruit juices and mineral water. There is also a service class to protect advertising and business services. The nature and extent of any trade mark protection needs to be considered for each particular case.
Trade marks may comprise any word, brand, label, symbol, device or logo which serves to distinguish the particular goods or services of one party from the goods or services of another party and the Trade Marks Act 2002 governs registration of all marks.
The principal function of a trade mark is to indicate the origin of goods and services. It is important to select a distinctive trade mark in order that the public will associate your goods and services with the unique brand.
Trade marks are protected by registration in the Intellectual Property Office of New Zealand (IPONZ). Once you have selected or designed your trade mark then as a precautionary move it is possible to obtain a search of the Trade Mark Register to ensure that it does not conflict with anyone else’s mark.
Assuming that the trade mark is available, its protection is afforded by filing an application and paying the requisite fee. This obtains a filing date and application number from the Trade Mark Office.
The benefits of registration are as follows:
(a) It can be used to prevent any competitor from using the same or similar mark on any goods or services in New Zealand.
(b) It serves as public notification of your rights in that trade or service mark.
(c) It can prevent registration of an identical or confusingly similar mark.
(d) Trade mark registration is a valuable business asset.
It is also possible to have common law rights in an unregistered mark which can be protected by the tortious action of Passing Off.
An important aspect of a trade mark registration is continuous use of that trade mark. The Lacoste case demonstrates how this works in practice.
Crocodile International PTE Ltd v Lacoste (NZ)
In 2008 Crocodile International applied to revoke the Lacoste trade mark, arguing that there had not been any genuine use for three years or more. The two brands had very similar logos involving a crocodile (although the crocodiles were facing in different directions). As many people know, the Lacoste brand has a crocodile in its brand.
Lacoste agreed that it had not been used but argued that it had used other logos that were similar that amounted to use in a different form but did not alter the distinctive character of the trade mark that Crocodile applied to have revoked, ie the crocodile and it had the ‘central message’ of the brand.
The Assistant Trade Marks commissioner disagreed with Lacoste. Lacoste appealed the case to the High Court and won. Crocodile appealed to the Court of Appeal which also agreed with Lacoste but allowed Crocodile to appeal to the Supreme Court. The Supreme Court agreed with Crocodile and revoked the registration from 1999. The Court said that Lacoste had not used the trade mark anywhere in the world and therefore there was no need to have that trade mark registered. Whether Crocodile, Lacoste or any other company could register a similar trade mark would depend on its application to IPONZ in due course.
Cadbury (Mondelez International) vs Nestle (UK)
Cadbury is known for its distinctive purple wrap for its various chocolate bars, known as Panetone 2865c. It already had a trade mark for the colour purple in relation to chocolate bars in tablet or bar form and wanted to extended this to its drinking chocolates and broader chocolate range. Nestle (who sold the Quality Streets products which had the colour purple in the branding) disputed that it had distinctive character and it was too broad for the range of goods it sought to protect. Although the Intellectual Property Office agreed with Cadbury, the UK Court of Appeal denied Cadbury the right to register the colour purple. Cadbury now uses an unregistered trade mark, although it does have longstanding goodwill and brand recognition in the colour purple.
Cadbury also fought a battle with Whittakers in New Zealand regarding the registration of Whittakers brand ‘berry forest’. Cadbury argued that it was too similar to its registered trade mark ‘black forest’ but IPONZ disagreed.
It is imperative for a franchisor to obtain formal trade mark or service mark protection as a basis for any trading operation.
This article is written by Khushbu Sundarji. If you have any queries on trade mark protection, please contact SGL
Khushbu is admitted as a Barrister and Solicitor in Auckland in 2010 and was admitted as a Barrister and Solicitor in Melbourne in 2011. She is experienced in the sale and purchase of property, sale and purchase of businesses and also has expertise in franchising and licensing and drafting commercial contracts. Khushbu worked in Melbourne prior to joining SGL in 2017.
Khushbu can be found on LinkedIn.
