Friday, March 19, 2010

Court reviews validity of a service mark license agreement in a service mark case


This appeal involves a licensing agreement for service marks protected under trademark laws. One of the defendants is the owner of the service marks, which are used at both restaurants and motels. This original owner of the service marks sold the motel business along with the service marks, but it retained the restaurant business. After using the service marks for many years, the owner of the motel business decided to convert its motels from the service mark brand to another brand. Eventually, the owner of the motel business sold its motels to the plaintiff, and it included in the sale its rights under the service mark license agreement. Soon after that, the owner of the service marks sold its restaurant business and its service marks to the other defendant herein. When the plaintiff motel business attempted to franchise new motels using the service mark name, the defendant new owner of the service marks objected and terminated the license agreement.

The plaintiff motel business filed this lawsuit, alleging breach of contract, tortious interference with contract, and violation of the Tennessee Consumer Protection Act. It sought declaratory relief, injunctive relief, and restitution. The new service mark owner asserted that the license agreement was unenforceable based on lack of consideration, waiver, and fraud. The parties filed cross- motions for summary judgment.

The trial court denied the plaintiff's motion for summary judgment and granted summary judgment in favor of the defendants. The trial court concluded, inter alia, that the service mark license agreement assigned to the plaintiff was invalid for lack of consideration and, alternatively, that the plaintiff waived its right to franchise new motels using the service mark name. The plaintiff's complaint was dismissed in its entirety. The plaintiff now appeals.

We reverse, finding, inter alia, that the license agreement was supported by consideration, that no valid basis existed on which to terminate the license agreement, and that the doctrine of waiver is not applicable under the facts in this case. Furthermore, we find that the dismissal of the request for restitution as a remedy for the defendant's breach of contract is premature at this juncture.

Opinion may be found at: