Protecting Your Brand Before Franchising Your Business

Before allowing another business owner to use your business name and logo, make sure you have the necessary rights to do so. Across a franchise network, a trade mark problem can affect the signage, packaging and identity of many outlets. Having used a name for years is not enough: you need to check ownership, the scope of protection and permissions before taking on a new franchisee.

1. Distinguish a business name from a registered trade mark

Registering a business name with the Department of Trade and Industry (DTI), or a company with the Securities and Exchange Commission (SEC), is different from registering a trade mark with the Intellectual Property Office of the Philippines (IPOPHL). Business registration documents, local government permits or the name of an online page do not automatically confer registered trade mark rights.

The main legislation governing trade marks is Republic Act No. 8293, or the Intellectual Property Code, as amended. Under this law, rights in a mark are acquired through valid registration. Other protections may also apply, including protection for trade names and against unfair competition, so registration is not the only factor to consider when assessing risk.

The Philippines has no single comprehensive law covering every aspect of franchising. There are, however, specific rules: Executive Order No. 169, series of 2022, sets minimum content requirements and requires DTI registration for franchise agreements within its scope involving micro, small and medium-sized enterprises as franchisees. Registering an agreement is not a substitute for registering a trade mark. The Civil Code also applies to contracts.

2. Check who has the right to authorise use

Make an inventory of all the brand identifiers you intend to license: the name, logo, distinctive product names and other marks important to the business. For each one, record the applicant or registered owner, application status, goods or services covered, and supporting documents.

Key questions include:

• Is the trade mark in the founder’s name, while a company will act as the franchisor?
• Is a former business partner named on the application or registration?
• Is there a written agreement covering rights to a logo created by an external designer?
• If you only have permission from another owner, are you allowed to grant sublicences to franchisees?

For example, do not assume that a trade mark registered personally to the founder has automatically transferred to a newly formed company. A valid assignment or licence may be needed, along with appropriate recordal.

Ask a lawyer with intellectual property expertise to review any gaps. It is easier to clarify ownership before a franchisee spends money on signage and packaging.

3. Make sure protection matches the business

Search trade mark records before expanding. The absence of an identically spelt name is not enough: similarities in sound, appearance or overall impression can cause problems where related goods and services are involved.

Also check that the application or registration matches what the business actually offers. For example, the protection needed for a restaurant and for packaged products sold in other shops should be considered separately. One registration does not automatically cover every potential source of revenue associated with a brand.

A pending application is not yet a registered trade mark. Describe its status accurately to prospective franchisees. Do not promise that approval is certain or that no one can challenge the mark.

Assign someone to monitor deadlines for responding to IPOPHL, filing the required declarations of actual use and renewing registrations. Keep suitable evidence of use, such as photographs of products and packaging, and relevant sales records. Have the current requirements and deadlines confirmed before filing.

4. Grant clear permission with effective controls

Specify in the agreement which marks may be used, where, for how long and for what purposes. Make clear who will approve signage, packaging, advertisements and online pages using the brand name.

Under the Intellectual Property Code, a trade mark licence must provide for effective control by the licensor over the quality of the goods or services, and that control must actually be exercised. A signature alone is therefore not enough: practical checks and corrective action for misuse are needed.

Also set out how imitation by other businesses will be reported, who will decide on legal action, and how use of the trade mark must cease when permission ends. Do not allow a franchisee to register the mark in their own name without a clear legal basis.

Practical takeaway: Before offering a franchise, compile a trade mark register documenting ownership, protection status and a clear right to authorise use. Resolve any gaps before a new franchisee commits money.