Legal Matters

by Simon Lord

last updated 25/07/2009

Simon Lord is Editor of Franchise New Zealand magazine & website

Ice Cream Case Demonstrates Need for Trademark Protection

by Simon Lord

last updated 25/07/2009

Simon Lord is Editor of Franchise New Zealand magazine & website
The story of the Mr Whippy who wasn’t reinforces the need to protect your franchise at all times.

Mr Whippy franchisees in Christchurch had a problem. Half an hour before the popular ice cream vans travelled around their regular routes, another van would beat them to it. As the Christchurch Press put it, ‘he sounded like Mr Whippy. He looked like Mr Whippy. But Mr Whippy he was not.'
Instead, he was independent ice cream seller Michael LeRoy, and he was soon to find himself on the wrong end of a legal action from Mr Whippy New Zealand Ltd. Franchisor Chris Woodhams takes up the story.

‘This guy had his van decked out in the same colours as ours, he used the same Greensleeves theme tune and everything. His trading name was "Mr Delites" but it was pretty hard to read it on the van anywhere, and he would go round our franchisees' runs half an hour before our vans. Our five Christchurch franchisees were very upset - they felt he was using the brand they had paid for to steal their trade. Something had to be done.'

Mr Whippy is one of the best-known brands in New Zealand and, with a 40-year history, is arguably the country's oldest franchise. Chris Woodhams and his father Peter bought the Mr Whippy franchise from the previous owners, NZ Milk Products, in 2003. The pair have put a great deal of effort into updating the system and realising the potential of the brand, which now has mall kiosks as well as the traditional vans.

‘The Christchurch copier was damaging that potential. We needed to protect our investment and we also needed to show the franchisees that we were protecting the investments they had made in the brand too.'

Two Tunes

Chris Woodhams says that the company tried to resolve the problem amicably for 12 months before going to court but to no effect. ‘To some extent, because the previous owners of Mr Whippy hadn't protected the trade mark very aggressively, I think there was an assumption that we weren't serious either.

‘At one point Michael LeRoy told us through a lawyer's letter that he'd had his tune changed so it wasn't the same as ours and invited us to come and hear it. Sure enough, it was different, but our franchisees maintained that he was still using Greensleeves when he was out on the road. It turned out he'd had two tunes installed - one to play to us and another to use when he was actually trading! It couldn't go on.'

After much agonising, the Woodhams decided a court action was the only solution and briefed David O'Neill of Hamilton. David has specialised in trademark law and intellectual property litigation for over 20 years. His past successes have included action on behalf of Oakley and its New Zealand distributor against the importer of Oakley look-alike sunglasses, something which virtually shut down the import of all Oakley copies. He has also worked on behalf of franchisor Jennian Homes and its franchisees to protect them against builders copying the design of their kit-set homes.

Drop A Big Rock

‘Most people in business regard litigation as something they need like a hole in the head,' says David disarmingly. ‘Unfortunately, there are situations where litigation is essential. Where a franchisor has its intellectual property infringed, or where rogue traders are engaging in misleading conduct or passing themselves off as part of the franchise, the franchisor must make an example of them.

‘It's that down-stream effect you are looking for. If you pick your target carefully and drop a big enough rock on it, the ripples will spread. You need the rogue trader to squeal as loudly as possible about how nasty you have been to him so that other potential infringers will think twice about intruding upon your property.'

The Mr Whippy case was prepared carefully. Material was painstakingly gathered and a private detective was hired to gather evidence. ‘It was expensive - very expensive for a small company like us,' admits Chris Woodhams. ‘But it was worth it. As David says, it's the sort of thing you only want to do once and you want to make sure you win so that everyone sees the lessons. The law is a slow wheel to turn, and if you don't follow the right process you'll lose in the end.'

But Mr Whippy didn't lose. An injunction in June 2004 stopped LeRoy selling from his van until Mr Whippy's complaint was dealt with, and the dispute was settled in Court in September. Details of the settlement remain confidential but both the Mr Whippy franchisors and the franchisees are delighted with the outcome.

‘Our franchisees are very happy as a result of the case - it's a huge relief,' says Chris. ‘They won't have to put up with a fake Mr Whippy stealing trade any longer, and they know the lengths we will go to to protect our brand and our franchisees. We also have something to point to should anyone else try the same trick.'

Great Publicity

Michael LeRoy is back on the road again in a van which now looks and sounds very different. ‘That's OK - that's fair competition,' Chris Woodhams comments. ‘That's all we ever wanted.'

However, the Mr Whippy franchise received considerably more benefit. ‘We've had great publicity too. Mr LeRoy got annoyed with the Christchurch Press photographer and pushed his camera in his face as he left the court. The photo - and the whole story - became front page news in the Christchurch Press and all the other Fairfax papers carried it too. Franchisees report their sales increased noticeably in Christchurch that weekend! You can't buy publicity like that,' he laughs.

And David O'Neill agrees. ‘This sort of litigation is an investment for the future. If you are perceived as having the reputation of taking immediate action against those who wish to trade off your success, then you will ultimately find instances of infringing and deceptive behaviour will decrease, if not disappear altogether.

‘In this instance, Mr Whippy were very lucky with the coverage thanks to an ill-considered action by the other party. In situations where you feel that little impact will be made because the rogue trader will not make any noise, a good public relations adviser can enhance the value of the exercise. I have found that a lot of mileage can be gained for the investment of a reasonable amount of money on PR.'

As for the franchisees, they've definitely got the message that Mr Whippy means business - in every sense of the phrase. And the aggressive action taken to protect the brand they all share is certain to pay off when re-sale time comes because, as the court has shown, there's only one Mr Whippy.

This article was first published in Franchise New Zealand magazine Volume 13 Issue 4

Simon Lord is Editor of Franchise New Zealand magazine & website
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