IP Law Daily, TRADEMARK—D. Colo.: Dismissal denied in spice shop franchise dispute, (Nov 22, 2024)

By Kevin M. Finson

The court could not say as a matter of law that there was no likelihood of confusion between the marks SPICE & TEA MERCHANTS and BRECKENRIDGE TEA & SPICE because they were used with the same goods in the same location.

In a lawsuit filed by a Michigan-based spice franchisor against its former franchisee and its former landlord, the franchisor stated claims for infringement of a registered mark and trade dress, the U.S. District Court in Denver has held. Likelihood of confusion as to either was a question of fact not suitable for resolution at the motion to dismiss stage and the franchisor presented sufficient allegations to support its trademark infringement and unfair competition allegations, as well as its claim that the former landlord breached its lease. (Spice Merchants Entities Corp. v. Pretty Colorado, LLC, No. 1:24-cv-00371-NRN (D. Colo. Nov. 20, 2024)).

Lisa Freeman, through her companies Spice Merchants Entities Corp. and STM Properties, LLC (collectively, Freeman) was a franchisor who licensed the marks SPICE MERCHANTS and SPICE & TEA MERCHANTS to franchisees who operating retail businesses that sold spices and teas. Pretty Colorado, LLC (Pretty) was one such franchisee, and Ellis Young (USA) Ltd. (Young) was a landlord who owned real property which it leased to Freeman and which Freeman subleased to Pretty to operate its franchise business. Freeman alleged that Pretty violated the franchise agreement by failing to pay royalties. Freeman terminated the sublease to Pretty, and Young then terminated the lease to Freeman and began renting to Pretty directly. Pretty reopened the store under the name Breckenridge Tea & Spice, while allegedly using Freeman’s trade dress and in violation of a covenant not to compete. Freeman brought suit against both Pretty and Young. Both defendants moved to dismiss several claims.

Trademark infringement. With regard to the trademark infringement claim, it was undisputed that the defendants had stopped using the SPICE & TEA MERCHANTS mark and were instead using the name BRECKENRIDGE TEA & SPICE. The court found, however, that it could not say as a matter of law that there was no likelihood of confusion between these marks as they were both used for the same products in the same location with similar packaging. The court denied the motion to dismiss this claim.

Trade dress. The court found that the claim for unfair competition based on trade dress was not suitable for dismissal for the same reasons as the trademark infringement claim. It could not say as a matter of law that the trade dress was not protectable or not infringed. In particular, the franchisor “adequately allege[d] that the Spice franchises and franchisor-owned locations have inherently distinctive trade dress which includes custom furniture and fixtures, sourced barn beams and siding, and specifically sourced hutches and custom-built metal tables.”

Breach of contract. The court found that the complaint properly alleged that there was a contract, that Freeman substantially performed, and that Young improperly terminated the lease without giving Freeman the opportunity to cure required by the lease terms. Although Young argued that it was justified in terminating the lease given substantial breaches by Freeman, those were questions of fact not suitable for resolution at the motion to dismiss stage, so the court denied the motion to dismiss.

The court denied the motion to dismiss.

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

Judge: Neureiter, N.

Attorneys: Samuel Griffin John (Milgrom & Daskam) 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

Cases: Trademark ColoradoNews