IP Law Daily, TRADEMARK—W.D. Okla.: Pizza Inn secures preliminary injunction ceasing operations at two franchisees in Oklahoma, (Apr 21, 2023)

By Seth Abrams, J.D., M.A.

The franchisor established a likelihood of success on the merits of its trademark infringement claim against franchisees.

The federal district court in Oklahoma City, Oklahoma granted Pizza Inn, Inc.’s motion for preliminary injunction against defendants Allen’s Dynamic Food, Inc. and Fawzi Odetallah. The court held that Pizza Inn (1) established a likelihood of success on the merits; (2) will suffer irreparable harm if the injunction is denied; (3) is favored by a balance of harms analysis; and (4) established that the injunction would not be adverse to the public interest. The court also concluded that no security from Pizza Inn was needed (Pizza Inn, Inc. v. Allen’s Dynamic Food, Inc., April 19, 2023, Wyrick, P.).

This motion involved a dispute between Pizza Inn, the franchisor, and two of its franchisees over continued operation after alleged termination of the franchise agreements. The first franchise was in Ponca City, Oklahoma, which was the subject of a prior lawsuit between franchisor and franchisee Odetallah. The franchisor prevailed in that lawsuit in which the court found that the franchise agreement was properly terminated by the franchisor and Odetallah was operating the restaurant in breach of the parties’ agreement and in violation of federal trademark law.

Despite this ruling, franchisor alleged that the franchisee still operates the Ponca City Pizza Inn. The second franchise was in McAlester, Oklahoma. For this franchise, franchisor asserts that it properly terminated the franchise agreement with Allen, and despite doing so, the franchisee continued to operate the McAlester restaurant in breach of the franchise agreement and in violation of federal trademark law. This franchise is personally guaranteed by the franchisee of the Ponca City restaurant. The franchisor asked the court to enjoin the franchisees from operating their respective restaurants, as well as using the franchisor’s trademarks and a prohibition on selling pizza or Pizza Inn main menu items at either location. After analyzing the relevant factors, the court granted the preliminary injunction.

Likelihood of success on the merits. The court found that the franchisor was likely to succeed on the merits. It found that the franchisor terminated the franchise agreements, which were the contracts that authorized the use of the trademarks at issue. The termination of the Ponca City franchise agreement was litigated in the prior lawsuit. For the McAlester location, the franchisor established that the franchisee was in default, and it properly terminated the franchise agreement by letter on April 13, 2022. The franchisee raised the argument that it was entitled to sixty days written notice under the agreement. However, the section referred to dealt with “renewal of the franchise, not termination after default.” The franchisor thus established that the franchise agreements at both the Ponca City and McAlester locations were properly terminated.

The court found that the franchisor was likely to succeed on the merits of its trademark-infringement claims. The franchisor made a showing that the franchisees had continued using franchisor’s trademarks in commerce at both locations. Employees answered the phone at both restaurants as “Pizza Inn” and took an order for two of Pizza Inn’s main menu items. The franchisee offered no rebuttal evidence, and, as a result, the court found the use of the franchisor’s “trademarks without authorization at the Ponca City and McAlester restaurants.” Because the court presumed that continued unauthorized use by a franchisee is trademark infringement, it found that the franchisor here was likely to succeed on the merits.

Irreparable harm. The franchisor established that it will suffer irreparable harm if the injunction is not issued. The court noted that “[i]n the context of trademark infringement, the Trademark Protection Act of 2020 (“TMA”) created a rebuttable presumption of irreparable harm upon a finding of success on the merits.” Having concluded that the franchisor has a likelihood of success on the merits, the burden falls to the franchisees to establish that “consumer confusion is unlikely to cause irreparable harm.” Here, the franchisees offered no evidence concerning irreparable harm, and as a result, the court found that, under the TMA presumption, the threat of irreparable harm exists.

Balance of harms. The franchisor also has met its burden to establish that its “threatened injury outweighs the injury that [the franchisees] will suffer under an injunction.” In trademark-infringement cases, this analysis typically favors the trademark holder because “[o]ne who adopts the marks of another for similar goods act at his own peril.” Franchisees did not offer any harm that they will suffer under the injunction, and, in any event, the court noted that any harms are a “product of their own failure to comply with the franchise agreements and to cease operating the [franchises] after the agreements were terminated.”

Public interest. The final factor for issuing the injunction is whether it would be adverse to the public interest. Here, the franchisor met its burden once again. The court noted that the “only way to prevent public confusion or deception is to enjoin the offending party from using the mark.” The court found that this was sufficient for the conclusion that issuing the injunction would serve the public interest.

Security requirement waived. Having concluded that the injunction should issue, the court next determined whether the franchisor should be required to post security. Because the franchisees did not ask for security, combined with the record, the court found that the posting of security was unnecessary.

The case is No. CIV-23-00164-PRW.

Attorneys: Cody Towns, I (Towns Law Firm, PC) for Pizza Inn Inc. Bret D. Davis (Lamun Mock Cunnyngham & Davis PC) for Allen’s Dynamic Food Inc. and Fawzi Allen Odetellah.

Companies: Pizza Inn Inc.; Allen’s Dynamic Food Inc.

Cases: Trademark OklahomaNews