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Trademark Infringement Headlines Offer Franchisors Important Lessons

This past week has seen several headlines about significant trademark infringement lawsuits. Many franchisors live and die by their trademarks, and their executives need to understand the value of strategic trademark protection and the importance of swift trademark enforcement.

This article takes a look at what franchisors need to be taking away from two recent (mostly) successful trademark infringement lawsuits.

"Griller" Fast Food Chain Defeats "The Original Griller," But Loses to Others

The owner of the Griller fast food franchise chain sued three different restaurant operators operating under the trademarks The Original Griller, Griller King and The Griller Hut, respectively. The Griller franchise owned two registered trademarks covering, among other things, food and restaurant services.

The Griller franchise prevailed in its trademark infringement suit against The Original Griller. This was due, in part, to the fact that The Original Griller’s logo featured the word “Griller” more prominently than the other included words.

However, Griller lost on its trademark infringement claims against the other operators. This was due to the fact that the court considered “Griller” to be largely “descriptive” of the service and products that Griller restaurants sell—preparing and selling grilled chicken.

The Lesson: Context is important when choosing a trademark. First, the strength of a trademark must be determined in the context of the products and services for which it is used. Descriptive trademarks (even registered ones) are generally going to have a much narrower scope of protection, whereas suggestive, arbitrary and creative (fanciful) trademarks are going to have wider enforceability. Second, the overall makeup of a trademark can determine whether the trademark is infringing. The ‘The Original Griller’ trademark was found to be infringing because the owner emphasized the ‘Griller’ term (and this trademark also seems much more descriptive as a whole), whereas ‘Griller King’ and ‘The Griller Hut’ incorporate a descriptive term into a trademark that creates a more unique and distinctive commercial impression.

$6.1 Million Verdict Upheld in Trademark Lawsuit Between Skydiving Service Competitors

In another case, Skydive Arizona, one of the nation’s largest skydiving centers, won a $6.1M trademark infringement verdict against Skyride, a service that connects skydivers to skydiving centers around the country. Skyride’s marketing strategy apparently included hosting several Arizona skydiving- related websites, including one located at the domain name, skydivearizona.net.

Skydive Arizona actually won its lawsuit on a number of bases, including false advertising, unfair competition, cybersquatting, and of course trademark infringement. The company’s success was based, in part, on the fact that some consumers had purchased certificates from Skyride thinking that they could redeem them with Skydive Arizona—which wasn’t the case.

On appeal, the 9th Circuit Court of Appeals affirmed the $6.1M award.

The Lesson: Trademarks are big business, and misleading consumers and causing confusion can give rise to substantial liability. Intentionally misleading consumers and trying to benefit from someone else’s goodwill will only make matters worse. Here, too, the plaintiff’s trademark (Skydive Arizona) seems fairly descriptive, but the company was nonetheless able to obtain a substantial verdict due to the defendant’s apparent willful conduct.

Jeff Fabian assists business owners in protecting their brands so that they can stay focused on running their businesses. Follow Jeff on Twitter @FabianOnIP.

This article is provided for informational purposes only, and does not constitute legal advice.

Strategic and Structural Alternatives to Franchising

These are difficult decisions. The solutions are not clear cut from a business or from a legal perspective. It is critical that a company in this position work with qualified counsel to identify an alternative that will have a reasonable basis for an exemption and still make sense from a strategic perspective. The balance of this chapter will look at the many alternatives currently being tested by many U.S. and oversees companies. As you can see, the lines of demarcation are not always clear. The differences between many of these alternatives may in fact be in name only. Some of these concepts are truly innovative and have not been truly tested by the courts or the regulators. In these borderline cases, a regulatory “no-action” letter procedure is strongly recommended. Other concepts are not very innovative at all and merely borrow from long-recognized and analogous legal relationships such as chapter affiliation agreements in the non-profit arena or network affiliation agreements in radio and television broadcasting.

Franchise Fridays for June 10, 2011: Top Franchise and Small Business News of the Week

Even though he credits some of Five Guys’ success to a west coast rival, Murrell knows his fast-growing chain is doing just fine on its own. Since it began franchising in 2002,Five Guys has exploded to more than 800 stores and has sold out all of its U.S territories. The system's sales have grown in step, with revenues up almost 38% last year to some $625 million.

It’s Good to Be Popular (But Not Too Popular)—Choosing a Trademark for your Franchise System

For new franchisors, standing out from the crowd can be a task of epic proportions. Selecting a strong and memorable trademark is certainly an important (indeed, critical) first step, but for the relatively unknown, picking a trademark that is too abstract can occasionally be viewed as a step in the wrong direction—you want to stand out, but you also want people to actually know what you do or sell.