The recent dispute over the ownership of the D4hotels.com domain name and website shows why those in the hospitality sector should be aware of the importance of intellectual property, data protection, consumer law and technology in their businesses. We have highlighted the five key things that need to be considered.
1. Protecting Your Brand - Domain Names and Trade Marks
The D4hotel.com website was used to advertise and take bookings for the Berkeley Court Hotel and The Towers. These two hotels were managed by Cloud Nine Management Services Limited and Beechside Company Limited on behalf of MJBCG Limited. The management agreement terminated in February 2008, and a dispute arose as to who had the right to retain the domain name and website. The former hotel managers deny the plaintiff's claims, and insist that they own the intellectual property in question. Underlying this high-profile fall-out is the fact that there does not appear to have been a clear agreement between the parties regarding the ownership and the management of the domain name and site. The case is before the Commercial Court (a division of the High Court), and a final judgment is awaited.
Hotels, leisure groups, restaurants and public houses increasingly rely on domain names and brand recognition to maintain their market position. Those in the hospitality industry should be aware that the risk of 'brand hijacking' is very real when it comes to online brand promotion and that such abuse can have a severe effect on the value and image of a brand, with a consequent loss of revenue. For this reason, the owners of hotels and leisure groups should ensure that their intellectual property in all the important brand features of their establishments, such as the name, logo and domain name, are adequately protected.
The main purpose of having a domain name is to identify your company on the Internet. Obviously, if you have a domain name that is the same as your hotel, leisure group, restaurant or pub, this will help to establish an Internet presence. The simplest way of securing your domain name is through registration. If possible, this should be done at the same time as registering your business name as a trade mark. You should conduct some research before choosing a new brand and domain name because domain names are granted on a first-come, first-served basis and so it is common for conflicts with existing trade mark owners to arise. These disputes can be costly, contentious and time-consuming to resolve.
Trade marks are another valuable commercial asset in the hospitality industry. They give your business a unique brand that is readily identifiable by consumers. The only way to be sure that you have exclusive rights to that identity or brand is by means of a trade mark registration. People often assume that once they have registered their business or company name or domain name, only they have the right to use them, but this is not the case and this can be a costly mistake to make! Failure to have adequate trade mark protection in place brings with it the risk that your brand name could be copied or used by a third party, including a competitor, so every business in the hospitality industry should make protection of their trade marks a priority.
2. Protection of IT Assets
Leading on from the protection of domain names and trade marks is the wider issue of the protection of IT assets such as website applications, software and booking engines used in the course of business. To illustrate the point, consider a situation where a hotel outsources the development of its website to an external specialised company or contractor. Just because the hotel has paid this contractor to design its software to its specifications, this does not automatically make it the owner of the software. There may only be a licence in place, which does not give our hypothetical hotel any ownership rights in the commissioned product. Carefully drafted agreements are essential.
A written assignment of the software from the creator to the hotel is necessary if ownership of the software is to pass to the hotel. Therefore, the written agreement in place between the creator of intellectual property and the entity commissioning its creation should be precise and clear in specifying the particulars of the software in question, the ownership of all intellectual property rights in the software and each party's entitlements and obligations in relation to its use.
3. Data Protection Issues
Part of the business of the hospitality industry involves accepting customer bookings, and taking bookings obviously involves obtaining and processing personal data. When a business collects, stores or processes personal data, whether on a computer or in a structured filing system, it is subject to certain obligations under the Data Protection Acts, 1988 and 2003 as a data controller. Personal data means any information that relates to an identifiable living individual. Those involved in the hospitality industry should ensure that they are aware of their data protection obligations and train their staff to be aware of their responsibilities also. Failure to do so may result in prosecution by the Data Protection Commissioner, who can impose fines of up to €100,000.
4. Consumer Rights and Advertising
The Consumer Protection Act 2007 was designed to protect consumers from misleading advertising and to ensure fair trade. The Act makes it an offence to make false claims about goods, services or prices and it applies equally to online advertising. The Act also bans practices that are unfair, aggressive or misleading or that would be likely to impair consumers' choices.
Those advertising in the hospitality industry should note that in Ireland there are also legal restrictions on unsolicited direct marketing, whether by telephone, fax, automated calling systems or email, and that spam emails originating within the EU must be identifiable as advertisements.
Care should be taken with comparative advertising. A recent ruling given of the European Court of Justice clarifies the boundaries that should be respected when a business compares itself with a competitor. This case confirms that an action for trade mark infringement may be taken where the use of a person's trade mark in the comparative advertisement gives rise to the likelihood of confusion between the advertised service or product and that of the trade mark holder. The law also regulates misleading and comparative advertising in Ireland and protects traders against the unfair consequences of misleading marketing communications and certain comparative marketing practices.
Regulations implementing laws on distance selling protect consumers entering into distance contracts. These Regulations apply where a contract for the supply of services or goods to a consumer is made exclusively by means of distance communication, i.e. without the simultaneous physical presence of the supplier and the consumer. An example of such a contract would be booking a hotel room over the Internet. Key mandatory provisions include information which a consumer must be given before entering into a contract and a cooling-off period within which the consumer may cancel the contract.
5. Good Franchising Relationships
Franchising provides owners of hospitality businesses with a commercially-attractive opportunity to exploit their brand and to generate income through the franchise fees payable by the franchisee. In the hospitality industry, the franchising relationship can be critical from a commercial point of view. Notwithstanding the inherent benefits involved, the consequences of entering into a franchise agreement must be carefully considered and evaluated by the prospective franchisee or franchisor before any agreement is reached. Franchising is an expensive process and the franchisee necessarily surrenders quite an amount of autonomy in order to comply with the franchisor's rules and systems. On the other hand, the franchisor has a valuable brand and reputation to be protected. It is of paramount importance that both the franchisee and the franchisor understand their respective obligations before entering the agreement.
The D4hotels.com dispute has yet to finish making its way through the Irish courts. It certainly serves to emphasise the fact that with the growth of the internet, no modern hospitality or leisure business can afford to ignore these five core areas. So be protected: take appropriate steps to properly manage your online business - otherwise you may end up facing the consequences.