Maintaining the integrity of your intellectual property can be achieved more effectively by enlisting the help of a qualified private investigator, says Ross D. Bulla
Consumer loyalty and brand confidence are critical factors for safeguarding a franchisor’s competitive advantage. Franchisors invest deeply in building brand value (goodwill) and reputation, in part, through enforcing trademark rights that identify and distinguish the source of their goods or services from those of another. For example, soda drinkers need only view their favorite brand’s iconic logo from a distance – and often at a glance – to differentiate it from its competitors. In the absence of “going viral”, creating brand awareness and market share requires years of marketing and significant expenses. Conversely, a single incident involving a franchisee can destroy consumer confidence in a brand, in just one news cycle. A professional investigator, particularly, an Intellectual Property (IP) investigator – used early and appropriately – can mitigate the liability and reputation risks to a brand owner.
A customer expects to find consistent quality, regardless of which franchise location they patronize. The pizza at one restaurant should have the same taste and qualities as any other within the franchise. The comfort and feel of the sheets at one hotel should be like those elsewhere within the brand. There are myriad instances where quality standards were compromised by franchisees or licensees that purchased ingredients, products, and equipment from unauthorized providers. A nationally known ice cream shop discovered that orders for its vanilla ice cream gradually decreased at several franchise stores. By purchasing and testing vanilla ice cream from scrutinized stores, the franchisor determined that the franchisees were buying less-expensive ice cream at local grocery stores and refilling the containers in their shops. It is highly likely that, at least, some consumers were dissatisfied with their knock-off substitutes.
Decreased revenues
The possibility exists that they no longer returned. Potentially, affected consumers shared their dissatisfaction with others, who reacted the same. Similar and adverse consequences can be anticipated when franchisees replace agricultural products, soda syrup, cleaning products, or high-thread-count sheets and plush towels, for example, with those that are less expensive, lower quality, or of lesser grades. Coupled with decreased revenues to the franchisor, there exists an increase in exposure to liability for failure to police and maintain system standards. Moreover, the use of a franchisor’s trademarks or copyrights on an unauthorized product might constitute infringement (civil) or counterfeiting (criminal). A worse outcome is possible from products and ingredients that are unsafe, dangerous, or substandard, thus, exposing employees and customers to health and safety risks.
Even if you have trustworthy staff in place at franchise locations, your vision, expectations, and business model are not necessarily theirs. Generally, “secret shoppers”, “mystery buyers”, and others who visit discretely and then report their findings, lack the critical thinking and skeptical mind of highly experienced and trained professional investigators. More importantly, some states regulate mystery shopping by requiring that service providers are licensed Private Investigators, and that shoppers hold state-issued occupational permits. Even without stringent licensing requirements, professional investigators are trained to elicit information without arousing suspicion, thus, causing franchisees’ employees to make remarks that are intended to influence and manipulate what is reported to the franchisors.
Civil claims
If, during the investigator’s visit, it is discovered that a franchisee’s actions or inactions might entitle a person to assert civil claims – and legal counsel subsequently instructs (to assert work-product immunity and protect communications from discovery by opposing counsel, your attorney must instruct investigators) – the immediate ability to logically, methodically, and lawfully gather and document information and evidence cannot be minimized. It might be the one and only opportunity to document and obtain such evidence.
Restaurant franchises, specifically, should periodically hire a professional investigator to purchase samples of their own products and those of their food and beverage services suppliers for testing by an accredited laboratory. (If sales volumes are significant, most suppliers will agree to participate and absorb the cost of testing their own products.) When undertaken without the franchisees’ knowledge, the investigator should observe and – where legal – discretely obtain evidentiary photographs of any signage, marketing collaterals, product packaging, and POS/POP displays advertising the products sold, particularly, those bearing the franchisors’ or vendors’ trademarks.
Due diligence
For example, a hamburger restaurant chain would instruct an investigator to purchase a specific sandwich, side, and beverage by name. For illustrative purposes only, if Coca-Cola products are sold, the investigator will be instructed to carefully and clearly state “Coca-Cola” to the cashier or server. The investigator should correctly recall and report the employee’s response, e.g., “That will be one Coke,” “I apologize, but is Pepsi alright?” or “We just have cola.” A copy of the register tape or receipt should be obtained and retained for evidence, and the samples, packaged and shipped according to the precise instructions of the laboratory or vendor.
IP investigators are valuable for policing industry trade shows (seeking knock-off products or infringing trademarks that are marketed business-to-business), investigating potential trade dress infringement (unique decoration or styling of products or stores), or conducting due diligence and background investigations on potential franchisees, investors, or joint ventures. A few investigation firms also specialize in preventing price-gouging and keeping secret marketing plans by negotiating and anonymously acquiring IP Rights, such as trademarks, domain names, and social media handles, from others who already own them.
If litigation is anticipated or likely, investigative methods must bear the scrutiny of judges and juries. The integrity of an investigation is determined by the reputation and character of the investigator. IP investigators must be licensed in the pertinent jurisdictions. (Not all states require licensure.) Franchisors or their attorneys should interview potential investigators, learning whether and how they previously approached similar assignments. Do not fail to verify credentials, licensure, and insurance coverage, and to ask for and question references. Often overlooked, but critical, is the importance of asking references about the investigator’s stature (air and aura), because the investigator you hire might be your testifying witness at trial.
ABOUT THE AUTHOR:
Ross D. Bulla is founder and president of The Treadstone Group, Inc., which investigates, enforces, and anonymously acquires intellectual property rights for clients operating in every sector of the economy and across nearly all industries. He is also a leading authority on preventing or mitigating terror, active-assailant, and weaponized vehicle attacks.
