The Franchise Memorandum

In Big O Tires, LLC v. Felix Bros. Inc., 2011 U.S. Dist. LEXIS 143087 (D. Colo. Dec. 13, 2011), a federal district court in Colorado denied a franchisor’s motion for summary judgment on its trademark and trade dress claims against the owners of three Big O Tires franchises in California. The defendants had elected not to renew their franchise agreement for one of the units, and requested early termination of the remaining two units. After Big O, the franchisor, declined that request, the defendants continued to operate their remaining two franchises and changed the name of their third store to “Budget Tires and Automotive,” but did not fully deidentify that location.

In denying Big O’s motion for summary judgment, the court found that Big O was “sending mixed signals” to the defendants during the parties’ negotiations regarding the post-termination obligations and whether Big O might take over the defendants’ stores. Thus, the court found that there was a genuine dispute of material fact regarding whether Big O had acquiesced in the use of its marks during the parties’ termination negotiations. The court concluded that to the extent that Big O was aware of the continued operation of the tire business, and was actively engaging in discussion regarding the possibility of that location remaining a Big O franchise in some form, a jury could conclude that Big O implied that it would not assert its trademark and trade dress rights until all negotiations over the termination of that location were complete.