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Oct. 15, 2014: Franchising and Trademarks

For anyone looking at franchising their business, the first step before you sell your first Franchise is to trademark a logo, symbol or words, or a combination. The intellectual property in the Trademark is what you are licensing the Franchisee to use. Consistent use of trademarks across franchises establishes brand value, and protection of these trademarks prevents other businesses from taking advantage of your franchise’s reputation. While it is common for franchises in Australia to register trademarks in words, logos, and symbols, as of yet there has been no attempt to register store layouts as trademarks.

A recent landmark ruling in the Court of Justice of the European Union (The ‘ECJ’) indicates that this may change. The ECJ held that Apple was allowed to register the layout of their retail stores as a trademark according to the law of the European Union. In its judgment, the ECJ stated that the representation or design of the layout, depicted by an integral collection of lines, curves and shapes, may constitute a trademark provided that it is capable of distinguishing the goods or services of one undertaking from those of other undertakings. In addition to the requirement of distinctiveness, the ECJ further held that whether or not the layout departed significantly from the norms or customs of the economic sector concerned was a relevant factor in the determination. Notably, the decision of the ECJ falls in line with trademark law in the US, which already provides protection for store layout designs.

However, there are a few hurdles to the same protections being introduced under Australian trademark law. Most importantly, the definition of a trademark under European Directives is different to the definition under the Australian Trademarks Act 1995 (Cth) (the ‘Act’). In Europe the definition includes ‘design’, and this was a focal point of the ECJ’s decision. The ECJ classified a store layout as a ‘design’ under the European definition. In Australia the definition of a trademark under s 17 of the Act is a ‘sign’, and ‘design’ is not included within the definition of a sign in s 6. ‘Aspect of packaging’ or ‘shape’ are probably the closest definitions under the Act. Unfortunately, persuading a court that a store layout falls under either of these may be difficult. Furthermore, an Australian court would need to be persuaded that the layout is capable of distinguishing the retailer’s goods and services from those of its competitors under s 41 of the Act.

Nevertheless, despite these predicted difficulties there are some encouraging signs. Trademark law in Australia is continually evolving, and more and more aspects of a business’s brand have been trademarked in recent years. Given the developing consensus in the EU and the US that store layouts are capable of trademarking, it is not unreasonable to forecast that similar developments may occur in Australia sometime in the near future.

If you would like to talk to us about Trademarking, please feel to call us on 1300 798 501.