Intellectual Property Issues

Trademarks, trade secrets, trade dress and confidential information are essential to the franchise business model.

Carmen D. Caruso Law Firm has depth of experience in litigating intellectual property issues as they arise in franchising.

Trademark Infringement Claims

Upon the termination or expiration of a franchise or dealership arrangement, the ex-franchisee or dealer is vulnerable to trademark infringement claims arising under federal law for any unauthorized use of the trademarks or trade name post-termination. However, the ex-franchisee or dealer may have equitable defenses.

  • In a unique case involving substantial hardware store franchisees, the franchise agreements expired but the parties continued the franchise relationship while discussing possible renewal or amicable separation. When the franchisor suddenly announced the cessation of negotiations and demanded immediate de-branding, the franchisee could not comply, prompting the franchisor to sue for trademark infringement in federal court in Chicago. On these facts, we successfully argued that the franchisor should be estopped from springing its “trademark trap” on the unsuspecting franchisee that had been negotiating in good faith. We avoided liability for trademark infringement and negotiated a favorable exit.
  • We have litigated “brand damage” claims that a franchisor’s failure to maintain the goodwill in its trademark constituted a breach of the franchise agreement and the implied covenant of good faith and fair dealing.
  • We have successfully defended against Lanham Act trademark infringement claims in non-franchise settings, including the defense of a telemarketing firm accused of selling golf clubs that were knock-offs of a major brand.

Trade Secrets, Trade Dress and “Confidential Information”

Trade Secrets, trade dress and “confidential information” are not always clearly defined, and the resulting ambiguity can lead to conflict. Carmen D. Caruso Law Firm has substantial experience in these areas:

  • On behalf of franchisees facing renewal, we blocked a lawn care franchisor from requiring the franchisees to agree that the franchisees’ customer lists were part of the “confidential information” that the franchisor licensed to the franchisees.
  • On behalf of a terminated bagel shop franchisee, we litigated to defend against claims of trade secret and trade dress infringement.
  • On behalf of a franchisor engaged in the retail pet business, Carmen D. Caruso litigated to prevent a former franchisee from selling distinctive and branded display racks to purchasers outside the franchise system, where the seller thought he could avoid liability by covering over the brand name.
  • On behalf of a substantial international franchisor, Carmen and his former partners developed evidence to debunk trade secret claims in certain oven technology that the client had tested but did not accept.

Patent Licensing & Franchising

Occasionally a patent owner will seek to convert patent licensees into franchises to extend the licensee’s obligations and commitment beyond the patent’s statutory expiration. This strategy raises unique issues we have dealt with. Carmen D. Caruso has successfully represented franchisees in a patent-based franchise system in arbitration with the patentor/franchisor.

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