Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Colo.: Former tea shop franchisee granted summary judgment on trademark infringement and unfair competition claims, (Apr 28, 2025)

By Mina Capouet, J.D., LL.M.

Ex-franchisee tea shop did not infringe trademark nor compete unfairly by continuing to operate a competing store in the same location.

In a continuing fight between franchisor Spice Merchants entities Corp., STM Properties, LLC, and Lisa Freeman on one side and franchisee Pretty Colorado LLC and Corinne Winslow and Ellis Young (USA) LTD (Ellis) on the other, the District Court of Colorado granted in part and denied in part the franchisee’s partial motion for summary judgment. Spice Merchants asserted claims for trademark and trade dress infringement and unfair competition against Pretty Colorado under the Lanham Act, 15 U.S.C. §§ 1114 and 1125, as well as a breach of contract claim. The court granted the defendants’ motion on the infringement and unfair competition claims, however, denied its motion on the breach of contract claim (Spice Merchants Entities Corp. v. Pretty Colorado, LLC, No. 1:24-cv-00371-NRN (D. Colo. Apr. 23, 2025)).

Background. “Spice & Tea Merchants” is a registered mark (Mark 430) for online retail store services featuring cookware, cooking accessories, namely kitchen and culinary equipment, salt and pepper shakers, kitchen and culinary utensils and accessories. Pretty Colorado, on the other hand, sells teas, sea salts, sugars, syrups, jams, tea accessories, tea/coffee stirrers, tea sugar cubes, among other things.

Spice Merchants Entities Corp. offers franchises of the “Spice & Tea Merchants” brand to owners of spice and tea shops. Pretty Colorado, through owner Winslow, was a franchisee running a franchised store in downtown Breckenridge selling tea, spices, and other items. Ellis was the landlord who initially had an executed lease with STM Properties (Freeman’s real estate entity) as lessee for the Breckenridge location. Freeman then subleased the store property to Winslow under a sublease agreement. The sublease between STM Properties and Winslow expired in March 2022. There was a month-to-month sublease arrangement between STM Properties and Winslow and Pretty. The head lease was between Ellis as landlord and STM Properties as lessee. On December 8, 2023, Ellis terminated the head lease with STM and Winslow independently reopened the tea and spice shop under a new brand under the name “Breckenridge Tea & Spice.”

Spice Merchants Entities Corp. and STM Properties, LLC, sued the defendants, asserting several claims. Before the court was the defendants’ partial motion for summary judgment on the claims for trademark infringement and unfair competition under the Lanham Act, 15 U.S.C. §§ 1114 & 1125, against Winslow and Pretty, and the breach of contract claim against Ellis.

Degree of similarity between the marks. In its assessment of this factor of the likelihood of confusion test, the court looked at the marks on three levels: sight, sound, and meaning. First, the court noted that while “Spice & Tea Merchants” and “Breckenridge Tea & Spice” both contain the words “tea” and “spice” they must be considered in their entirety, which do not sound at all the same when spoken out loud. Next, the court found the marks do not have the same meaning as only one mark indicates that spices and teas are sold in Breckenridge, a geographic locale and is missing the word “Merchants.” Finally, the court found the sight factor weighed in favor of defendants in light of the fact that when compared, the logs and fonts used on the packaging of the two businesses were not similar in a way that consumers would be confused when they encountered them in the marketplace. The court found that confusion was unlikely based on the similarity of the marks.

Intent of alleged infringer. Based on the conclusion that the marks are not similar, the court also found that, by inference, Pretty and Winslow did not intentionally attempt to “pass off” their products as those of their competitors. While the court acknowledged that Pretty and Winslow are operating the store while selling substantially the same goods—spices and teas—as the previously franchised operation, it did not find any evidence of ill intent by the defendants to assume association with the previously franchised store in adopting the new mark. The court did not find this factor weighed in favor of finding a likelihood of confusion.

Strength or weakness of the mark. Likening the mark to one no stronger than the mark “Bagel Shop” for a bakery selling bagels, the court noted that “Spice & Tea Merchants” was a weak, descriptive mark for a store that sells spice and tea. Further, the court found this point was bolstered by Pretty’s reference to “thousands of third-party marks containing the terms ‘tea’ and ‘spice’” on the Principal Register. The court found this factor weighed strongly in favor of finding a likelihood of confusion.

Evidence of actual confusion. In this analysis, the court explained that while evidence must show that there was actual confusion among consumers in the marketplace, “anecdotal instances of actual confusion may be de minimis and may be disregarded in the confusion analysis.” The plaintiff’s evidence of one isolated incident where a customer bought a packet of tea at Breckenridge Tea & Spice and then visited a Spice Merchant store in a different location inquiring about that specific type of tea had “minimal probative value on whether reasonable consumers as a whole are being actually confused” as to whether Breckenridge Tea & Spice was somehow affiliated with Spice & Tea Merchants, the court explained. This factor weighed in favor of not finding likelihood of confusion.

Similarities of goods, services, and marketing strategies. With respect to the degree of similarity of the goods and services provided by both businesses, the court was “wholly unpersuaded” that the sale of teas and spices were the same or similar to cookware and cooking accessories. The court noted that the protections associated with Mark 430 for “kitchen and culinary equipment” were only “tenuously related to a specialty shop that primarily sells tea and spices.” Considering that the registered mark was for a cookware and kitchen equipment store the protections afforded by the mark did not extend to anything other than its stated purpose—the retail of culinary equipment. The mark clearly did not also extend to the sale of teas and spices. The court found in favor of Pretty on this factor.

Degree of care likely by purchasers of goods/services. Finally, the court found “paltry” evidence concerning the degree of care purchasers exercise when selecting tea products, noting Spice Merchant’s argument that buyers typically exercise little care in choosing inexpensive items purchased on impulse, such as teas and spices. Therefore, the court found a likelihood of confusion on this factor.

Considering all the relevant factors considered as a whole, including the lack of similarity between the marks and the lack of evidence of actual confusion, the court found there was no likelihood of any confusion as a matter of law and undisputed fact.

Trade dress infringement. The court explained that while the trade dress of a product is its overall image and appearance, including size, shape, color, texture, graphics, and sales techniques as its definitive features, the Lanham Act prohibits the use in commerce of any word, name, or symbol that is likely to confuse, cause mistake, or deceive “as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person.” To show that trade dress infringement has occurred, a plaintiff must show: (1) that its trade dress is inherently distinctive or has become distinctive through secondary meaning, and (2) likelihood of confusion.

The court found that evidence was lacking on this issue and felt unpersuaded by the mere fact that both stores use wood furniture, wood and glass items, as well as fabric decorations in their products and store layouts. The court found that there were no disputed factual issues on the question of trade dress infringement and insufficient evidence to demonstrate that Spice Merchant’s trade dress was sufficiently unique and distinctive to warrant protection. The court felt that the evidence merely showed that the trade dress described by plaintiffs are commonly used by tea and spice stores nationwide, including predecessor tea and spice shops that were formerly in business at the Breckenridge location. The court granted summary judgment on Spice Merchant’s Lanham Act claims.

Breach of contract. In their motion for summary judgment defendants, the defendants argued that the breach of contract claim against Ellis must fail because STM subleased the property without Ellis’ prior written consent, thus violating the Head Lease. Also, they argued that Ellis legally terminated the lease with STM as no valid, written sublease existed. However, the court found that there was a genuine issue of material fact as to whether Ellis was aware that Winslow and Pretty were subleasing the property from STM and whether Ellis had approved of this arrangement. The court also found that the fact that Ellis immediately signed a new lease agreement with Winslow and Pretty after it terminated the Head Lease with STM raised the possibility that the termination may have been pretextual. The court found this question of fact to preclude summary judgment.

The Case is No. 1:24-cv-00371-NRN.

Judge: Neureiter, N.

Attorneys: Gianna C. Rossi (Robinson Waters & O'Dorisio, P.C.) for Spice Merchants Entities Corp. and STM Properties, LLC. Alyssa Hill (Ogborn Mihm LLP) for Pretty Colorado, LLC.

Companies: Spice Merchants Entities Corp.; STM Properties, LLC; Pretty Colorado, LLC; Ellis Young [USA], Ltd.

Cases: FranchisingDistribution ColoradoNews