The Franchise Memorandum

In Marblelife, Inc. v. Stone Resources, Inc., 2010 U.S. Dist. LEXIS 136041 (E.D. Pa. Dec. 23, 2010), the defendant franchisee chose to let its franchise agreement expire. The franchisee then began operating a competing business in violation of a covenant against competition contained in the franchise agreement, using the franchisor’s confidential business information, trade secrets, trademarks, and exclusive advertising arrangement. The franchisor moved for injunctive relief to prevent trademark infringement and to enforce the two-year post-termination non-compete agreement.

In granting the franchisor’s motion, a federal court in Pennsylvania found that the franchisor had a strong likelihood of success on the merits based on the franchisee’s failure to comply with the non-compete provisions of the franchise agreement. The court found that the franchisor’s goodwill was likely to be irreparably harmed by the former franchisee’s continued operation in his former territory, and enjoined the franchisee from operating any competitive business within the 10 county area or any other county where a MARBLELIFE business operates. With respect to the trademark infringement claims, the court found a significant risk of confusion and enjoined the former franchisee from any further infringement.