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.
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Assume that I’ve already identified a franchise opportunity that fits my personal, business and financial profile and my application has been approved.
Before Buying a Franchise Identify Your TRUE Investment
Your approach as a potential franchise buyer is to identify the real investment dollars you’ll need to get the franchise to profitability. The initial source of this information is Item 7 in the FDD. Item 7 is a schedule that details the estimated investment in the franchise. This schedule includes the cost of various items, including: the initial franchise fee, training related expenses, rent, insurance, professional fees for legal and accounting services, supplies, equipment, licenses and permits and additional working capital. Depending upon the specific franchise, there may be added categories. When reviewing the Item 7 schedule it’s important to know that franchisors are not required to list every type of fee or expense that might be part of the investment in the franchise but rather the likely investment needed to start the franchise. As you work to establish your investment number keep in mind the words “estimated” and “typical.” Item 7 is a guide, and as such, you should use this information accordingly.
Getting Started - What is a Franchise
Most of you are probably already familiar with franchises. You may even patronize a variety of franchised businesses without realising that they are franchises. These businesses range from car servicing and financial services to yogurt and home repairs. According to the International Franchise Association(IFA) franchises employed nearly 9,000,000 Americans in 2015 and generated nearly $880 billion. Franchising is difficult to escape.