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The importance of brands: Intellectual property rights and what they mean

The importance of brands: Intellectual property rights and what they mean

In the lawsuit Family Suites Resorts v. Viacom International d/b/a MTV Networks, Family Suites operates a Nickelodeon-themed hotel and claims its licensing rights were breached when Viacom entered into an agreement with Marriott to franchise the Nickelodeon brand. According to the complaint, Family Suites Resorts spent US$168 million on its Nickelodeon-themed property — money it would not have spent if guests could get the Nickelodeon hotel experience elsewhere. So what happened?

This is an industry that relies on intellectual property — that’s what brands are. Hotel owners spend considerable time and resources selecting the best brand to operate their hotels. And owners and operators can spend considerable time and resources entering into licensing agreements that make their brand unique. It is the license agreement, in this case, that makes the Family Suites Resorts hotel unique. 

For a hotel owner or operator, locking down essential agreements like the hotel management agreement, the franchise agreement and licensing agreement are critical to the success of a hotel. It takes experience and expertise to structure good agreements, and often hotels don’t know their agreements are flawed until something goes wrong. (Then it is too late!)

It is likely that the license agreement between Family Suites Resorts and Viacom will spell out exactly how exclusive the Nickelodeon license is. Hotel owners and operators will be very interested to see how this case is resolved, as intellectual property rights — which should be spelled out in the licensing agreement — are critical to profitability.

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