What's in a name?

In a decision this week (in which yours truly appeared for the franchisor*), a franchisor succeeded in obtaining an interim injunction from the High Court to restrain an embittered (ex) franchisee from copying (with slight adjustments) the franchisor’s trade name and trade mark.

Dream Doors operates an innovative and successful nationwide franchise system. It has a trademark, familiar to many of us, which depicts the lettering of its name in white font against a red background.
A disgruntled franchisee proceeded to adjust the name slightly, changing the font type, and adding words to the name. He continued to use his “new” name in the operation of an ongoing business, following the termination of his franchise. His boldness knew no bounds and he even used the name on an advertising publication in which the new local franchisee was advertising.
He simply refused to stop, claiming he had every legal right to do so. He claimed that his slight adjustments to the name and layout of his offending mark were sufficiently different.
The franchisor was not bothered about his continuing to operate in the industry, per se, because it felt his business was not a significant threat. However, the brazen use of the name was red rag to a bull. For the benefit of the system as a whole, legal action had to be taken.
In simple terms, under the Trademarks Act, once it can be shown that the infringing “mark” is identical to the trademark owner’s mark, then, so long as the competing goods are the same as the trademark category in which the trademark is registered, it is a simple matter of obtaining relief. Under trademark law, “identical” does not always mean exactly the same. A slight adjustment will not necessarily give the offending sign the required element of distinction.
Without trademark protection, a franchisor falls back on having to prove a breach of the Fair Trading Act or that a “passing off” has occurred. Each of these causes of action requires a claimant to provide likely confusion in the market, as well as a misrepresentation or misleading and deceptive conduct (which can of course include a misrepresentation). Passing off has an extra element, which is that damage needs to be proven. These causes of action carry extra elements that need to be established, over and above a trademark infringement. In turn, that can lead to greater expense and more pronged hearings. It is therefore always good to have, as a starting point, a trademark infringement scenario.
When the case came before the High Court, the Judge was readily satisfied that an arguable case had been established, and indicated, relatively quickly, that he was willing to grant an injunction. This led to the franchisee accepting the inevitable, but having learned potentially an expensive lesson along the way.
The case highlights the added protection that comes from having a trademark and also the legal nightmare that can ensue in the wake of a “disenfranchised franchisee”, intent on pursuing an ambition to cause pain and suffering to a franchise system.
For the franchisor, there was no joy in having to take an ex-franchisee to Court, but it was left with no choice. Happily the strength in its goodwill and brand were reinforced by its trademark and relief was swift.

*instructed by Sarah Pilcher, The Franchise Lawyer.

Feb, 28, 2014