Court Watch

A federal district court in New Jersey found that a franchisor was likely to prevail on the merits and that continued use of the franchisor's name post-termination would create confusion in the mind of the public as to the source of the products sold, but declined to issue a preliminary injunction that would require the franchisee to turn over possession of the franchised locations to the franchisor. 7-Eleven, Inc. v. Sodhi, Bus. Fran. Guide (Wolterskluwer) '15,697 (D. NJ Feb. 9, 2016). There, the franchisee operated a number of 7-11 stores and was charged with having taken over $270,000 out of the business through manipulation of 7-11's loan.

Unfortunately, the franchisee's egregious conduct did not result in an appropriate injunctive remedy (although the court ordered the franchisee to post a bond, discussed infra ) due to the court's interpretation of the United States Supreme Court's decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391-94 (2006). There, the Supreme Court held irreparable harm could not automatically be presumed by reason of a finding of patent infringement. Subsequent federal decisions have split as to whether the presumption should apply in trademark cases. In the Sodhi case, the court held that the plaintiff must prove facts showing that it would suffer irreparable harm by the franchisee remaining in possession of the premises and using the 7-11 trademark, and this could not be presumed by the fact that the franchisee breached the contract, resulting in its loss of the franchise and termination of its trademark license. The franchisor attempted to prove some of this by references to customer complaints at one of the stores, some of which arose before the termination. The franchisor also argued, with supporting case law, that real property is presumed unique, which should result in a decree of specific performance or an injunction. The court dismissed this argument on the basis that eBay put an end to any presumptions.