Protecting the Business Brand and Employment Issues

All modern businesses invest a lot of time and money in creating a brand which will appeal to their customers and set their services apart from competitors.  As a business becomes successful, brand imitation becomes attractive to competitors. 

In order to avoid brand exploitation, most organisations take steps such as registering trade marks.  Professional services firms are particularly vulnerable to plundering of client lists and know-how by departing employees and most monitor the conduct of present employees and seek to restrict the activities of past employees.

Is the brand protected? 

The brand of a business is an example of intellectual property, and can be one of its most valuable assets.  It is therefore important to secure the rights to the brand, and the confidential information which feeds the brand.

The law provides legislated and common law protection for some types of intellectual property.  Protection of intellectual property takes several forms including -

• Trade marks
• Copyright
• Restraint of trade
• Confidential information

In addition, employment contracts can extend brand protection measures by imposing restraints on employees to prevent them from using sensitive business information in future employment. 

The recruitment services industry is showing a trend toward registration of trade marks to protect business names.  Trade mark registration is optional, and is different to compulsory state government business name registration, but is the strongest form of protection for a brand. 

In addition to trade mark protection which is available under the Trade Marks Act 1995 (Cth) protective measures are available under the Copyright Act 1968 (Cth). The Copyright Act protects original written works including webpage design, articles, even job advertisements in some circumstances.  As soon as the 'work' is fixed in material form, i.e., written down, the right to enforce copyright arises automatically without the need for registration of any kind.  A copyright notice is not required but is a useful attribution of copyright ownership and a warning to potential infringers.

In addition to statutory protection, a breach of confidence action may be available to protect trade secrets and confidential information from being exploited outside the business.  However, it is limited to information that is genuinely "confidential" or "secret", such as client proposals, customer and price lists, and marketing strategies.  It does not extend to know-how that an employee may develop in the course of employment.  For that reason, it is useful to include express provisions in the contract of employment identifying and dealing with confidential information. 

Can employees take it with them?

Conducting an audit of what intellectual property the business relies upon is a significant first step in ensuring it is protected.  An IP audit is a systematic review of the IP created, owned, used or acquired by a company.  When undertaking an audit a number of issues should be addressed including identifying  IP and  understanding the ownership and licensing arrangements in place. 

An audit will provide an assessment of the type of IP education staff require and the type of information which may need additional protection through  employment contracts.  

A restraint of trade agreement with  employees can limit their freedom to work for a competitor or prevent them from setting up a competing business.  However, care must be taken to ensure that the restraint is within reason and is only sufficiently wide enough to protect  legitimate business interests.

Restrictions on employees working in competition with their employer during the period of their employment are almost always enforceable.  However an employee is free to lawfully leave their present employment and accept work with a competitor or establish a business in a competitor.  Particularly in the case of specially skilled or trained managerial or technical staff, employers often seek to restrict competition after the conclusion of employment. 

The enforceability of such a restraint depends on whether it meets the test of "reasonableness" in protecting the employer's legitimate business interests.  In assessing this, the court will consider:

•  The geographical area of the restraint;
•  The time period of the restraint;
•  The scope of activities which are restrained.

Thinking of franchising the brand?

Franchising in Australia represents around 14% of the national GDP, and growing.  In order to create a successful franchise system in the recruitment services industry, the identification and protection of all forms of branding in the business is essential.

Is the brand name distinctive and is it consistently portrayed?  To be marketable, the franchisor must be able to demonstrate an established, enforceable brand, which includes all aspects of trade marks, employment contracts and a business model. 

In conclusion, the value of a business is closely connected to the brand.  Brand misrepresentation or theft of confidential information can be avoided by developing branding and employment strategies to protect  market share and clients and provide opportunities for expansion through licensing and franchising.

For further information please contact Rachel Drew

T  (07) 3292 9717

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