The Franchise Memorandum

A federal court in Texas awarded a defendants’ profits, the franchisor’s lost royalty fees, treble damages, and attorneys’ fees and costs following summary judgment. Choice Hotels Int’l, Inc. v. Gosla Fam. Tr., 2022 WL 4295362 (W.D. Tex. Sept. 16, 2022). Choice Hotels terminated its franchise agreement with the Gosla Family Trust in 2017, but Gosla continued to operate as a Quality Inn hotel for more than a year thereafter. Choice sued Gosla to enforce the termination and was awarded summary judgment without opposition. The court deferred ruling on damages until the parties submitted supplemental briefing. The court granted Choice the damages it requested when Gosla failed to make any filing related to damages.

The court’s award of $412,287.30 of Gosla’s profits derived from its infringement was based on Gosla’s room revenues, and further awarded Choice $19,171.36 in lost royalty fees based on historical room revenue data—reasoning that Choice had “sustained damages equal to the profit they could have made from a license to use the trademark.” The court also held that Choice was entitled to treble damages because Gosla intentionally continued to use the trademarks after being warned that its use of the marks was prohibited under the terms of the franchise agreement and trademark law. Rather than awarding the full measure of treble damages, however, the court awarded Choice an additional $100,000 without explanation as to the determination of this amount. In total, court awarded damages to Choice Hotels in the amount of $531,458.66, together with Choice’s attorneys’ fees and costs pursuant to the Lanham Act.