7-Eleven, Inc. v. Grewal

If a franchisee continues to use a franchisor’s trademarks for the benefit of his business after justified termination for breach of agreement, then the franchisor has the right to enjoin the unauthorized use of its trademark pursuant to the Lanham Act.

Opinion (Mastroianni): The 7-Eleven Corporation (“7-Eleven”) and the Grewel Corporation, owned by Mohinder Grewal (“Mrs. Grewel”), entered into a franchise agreement in 2005. After conducting an internal investigation, 7-Eleven determined that Mrs. Grewel and her husband, president and director of the Grewel Corporation (collectively “Defendants”) had engaged in a scheme to “deprive 7-Eleven of significant profits.” 7-Eleven estimated that 18% of all transactions between January and June of 2014 were conducted fraudulently; because of this, 7-Eleven delivered a non-curable notice of Material Breach and Termination of the Franchise to the Defendants in June of 2014. Defendants refused to vacate the premises, continuing to operate their convenience store using 7-Eleven’s marks; 7-Eleven filed a complaint requesting injunctive relief and monetary damages, and then moved for a preliminary injunction to prevent Defendants from continuing to use its marks and to enforce a non-compete clause in the Franchise Agreement. The request with respect to enforcement of the non-compete clause was denied. For the trademark infringement claim, the Court stated, “[i]f a franchisee continues to use a franchisor’s trademarks for the benefit of his business after justified termination for breach of agreement, then the franchisor has the right to enjoin the unauthorized use of its trademark pursuant to the Lanham Act.” The Court also stated that when a defendant does not dispute that the mark belongs to the plaintiff, the inquiry turns to whether the defendant’s use of the mark is likely to cause confusion among customers; when the use of the franchisor’s mark is not disputed, the likelihood of customer confusion is then presumed. Because the Court in this case could presume that customer confusion is likely, 7-Eleven was held to have met its burden of demonstrating that it is likely to succeed on the merits of its trademark infringement claim. For this reason, and others, the Court GRANTED 7-Eleven’s motion 7-Eleven’s request for injunctive relief with respect the trademark infringement.