Trade Mark Registration Issues & Heading Overseas

This is often an issue we see with overseas franchisors coming to Australia when they have not registered their trade mark here and then find they cannot use their name and branding.

This happened recently with a client from Hong Kong who found they could not register their brand here despite a prominent overseas presence. Burger King is an example of this, having to change their name to ‘Hungry Jacks’ in the Australian market despite operating in over 70 countries due to the Burger King name already being registered here.

Australia operates a first to use system for trade mark registration which means that if you can prove you had used the name before registration by a third party you can continue to use that name despite the other party having registered it.

• First to use system – this system recognises common law rights so that an unregistered brand used as a trademark will have a right to use, ownership and right to register the TM even if a company later registers that TM.   Australia, USA, New Zealand, Canada, India and Singapore use this system which also allows a “prior user” to oppose an application (subject to proof of prior use). A company should aim to be the first user and file a TM application.

• First to register system – this system grants rights to the party who first filed a trademark application, (even where another party can show prior use of the trademark). Countries that use this system include the UK, China, European Union, France, Germany, Greece, Japan, and Russia.

If you are applying in a first to register country, you should apply well before granting any licence or franchise rights to avoid the risk of a Trade Mark Squatter who is a party that may have filed to register a trader mark in the country and then sit on it, and use that to extort a payment for transfer or cancellation of the name.

You can apply via the Madrid Protocol (which has 131 member countries) with one single application with IPO Australia. It is still an expensive and complex process but vital before entering another country. You must have already applied for a national or regional trademark registration with IPO. 

It is vital to also consider the right corporate structure for the expansion, one that protects the existing company operations from the business risk and one that is most tax effective in the country of entry.

This is part of preparing a business entry plan which should cover things such as cultural, social and commercial hurdles.

This generally requires local knowledge, agents and advisors who can advise you to limit your risk and ensure local compliance.

For a franchisor coming to Australia for example should you establish a subsidiary company appoint a master franchisor or area developer or offer the rights from the overseas franchise entity?

Joint venture, master franchising and area development arrangements are complex with many tricks and traps. Sanicki Lawyers can assist with the drafting and negotiation and advice on the commercial terms that should be included in these agreements.

Many countries do not have specific franchise laws but rely on their contract laws and many are unregulated as to disclosure obligations. Australia has a mandatory Franchise Code of Conduct and is one of the most regulated franchising countries around the world.

Other issues to consider are jurisdictional and dispute resolution issues, the cost to enforce your rights in an overseas country and how you receive the fees and royalties all of which need careful consideration in your agreements.

Heading offshore can be exciting, but it is fraught with risk and cost, and our Franchise Team can assist to limit risk and recommend reputable partners and advisors in most countries through our established International Franchise Lawyers Association (IFLA) and Global law Network.

Contact the Sanicki Lawyers Franchise License & Distribution Team

Robert Toth I Special Counsel I Accredited Commercial & Franchise law Specialist robert@sanickilawyers.com.au  mobile 0412 67 37 57