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The Franchise Memorandum

Court Grants Preliminary Injunction Based on Franchisee’s Use of Franchisor’s Trademarks at Unauthorized Location

A federal court in the Eastern District of New York has granted a franchisor’s request for a preliminary injunction against a franchisee who continued to use the franchisor’s trademarks after moving to an unauthorized location. Mitsubishi Motors N. Am. Inc. v. Grand Automotive, Inc., 2018 WL 2012875 (E.D.N.Y. Apr. 30, 2018). The parties entered into a dealer sales and service agreement in which Mitsubishi granted Grand Automotive the right to use the Mitsubishi trademarks to sell new cars at an authorized location. The dispute arose when Grand failed to renew its lease and subsequently relocated, continuing to use the Mitsubishi marks.

The court ultimately granted the injunction, finding that Mitsubishi met all of the required elements. Mitsubishi first argued that, absent an injunction, it would suffer irreparable harm in the form of loss of control over its trademarks and goodwill. The court agreed, observing that there was a real danger of consumers being confused into thinking that Grand was an authorized Mitsubishi dealer. Because a loss of control over reputation and goodwill would not be quantifiable in terms of monetary damages, the court determined that no adequate remedy at law existed. The court also found that the balance of the equities tipped in Mitsubishi’s favor because any harm Grand would face under an injunction would be economic in nature and therefore compensable by Mitsubishi. Moreover, the court noted that Grand “has only itself to blame for its present predicament” since it failed to timely renew its lease, further tipping the balance of equities in Mitsubishi’s favor. Mitsubishi also successfully demonstrated that an injunction was in the public interest. Finally, the court found that Mitsubishi demonstrated a likelihood of success on its unfair competition and contract claims.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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