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Nebraska Federal Court Denies Preliminary Injunction to Licensor Because of Delay in Seeking Injunctive Relief

A federal Court in Nebraska has recently denied a licensor’s request to enjoin a terminated licensee, concluding that there was no likelihood of irreparable harm where the licensor delayed in seeking injunctive relief. Stone Strong, LLC v. Stone Strong of Texas, LLC, 2021 WL 4710449 (D. Neb. Oct. 28, 2021). Stone Strong, LLC designs and sells retaining wall blocks under what it calls the Stone Strong System. Stone Strong entered into a Dealer and License Agreement with Stone Strong of Texas, under which the licensee paid a fee for the right to provide goods and services under the trademarked system. After Stone Strong of Texas failed to pay large amounts of past due fees, Stone Strong terminated the license agreement and eventually sought a preliminary injunction to prevent Stone Strong of Texas from using its trademarks. The district court refused to enjoin Stone Strong of Texas, however, because it determined that Stone Strong failed to demonstrate that it would be irreparably harmed in the absence of a preliminary injunction.

In denying the request, the court reasoned that, although Stone Strong was likely to prevail on the merits of its claims, any concern about the harm and customer confusion caused by the licensee’s continued use of the marks was negated by Stone Strong’s delay in seeking a preliminary injunction. Stone Strong waited nearly ten months after Stone Strong of Texas stopped paying its license fees to terminate the parties’ agreement and gave Stone Strong of Texas two additional months to wind down operations. The court also determined that money damages were sufficient to compensate Stone Strong for concerns about customer goodwill. Lastly, the court also concluded that the balance of harms between the parties and the public interest weighed against granting a preliminary injunction, and therefore denied Stone Strong’s motion.

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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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