Burger King Corp. v. Agad

Citation911 F. Supp. 1499
Decision Date29 September 1995
Docket NumberNo. 95-007-CIV.,95-007-CIV.
PartiesBURGER KING CORPORATION, Plaintiff, v. Idrees S. AGAD and Mohammad Iqbal Balagamwala, Defendants.
CourtU.S. District Court — Southern District of Florida

Howard Wolfson, Norman Leon, Whitman, Breed, Abbott & Morgan, New York City, Francisco R. Angones, Angones, Hunter, McClure, Lynch & Williams, P.A., Miami, FL, for plaintiff.

Robert Zarco, Zarco & Associates, Miami, FL, for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

KEHOE, Senior District Judge.

This matter came before the Court upon the request of Plaintiff Burger King Corporation (hereinafter "BKC") for a permanent injunction enjoining the unauthorized operation of Burger King Restaurant No. 171 and use of BKC's registered trademarks and attendant service marks by Defendants Idrees S. Agad and Mohammad Iqbal Balagamwala. Having considered the file generally, the memoranda submitted by the parties and the evidence introduced at the preliminary and final permanent injunction hearings held in this matter the Court hereupon ENTERS the following findings of fact and conclusions.

FINDINGS OF FACT
A. The Parties

1. BKC is incorporated under the laws of the State of Florida and maintains its principal place of business in Miami, Florida, and is engaged in the business of operating a national and world-wide system of company-owned and franchised "Burger King" restaurants.

2. Defendants Idrees S. Agad and Mohammad Iqbal Balagamwala are citizens and residents of the state of Georgia.

3. BKC and the Defendants are parties to certain agreements discussed below.

B. The BKC Marks

4. To identify the source, origin and sponsorship of "Burger King" restaurants, products and services, BKC employs and causes to be advertised throughout the United States various trademarks and service marks, collectively referred to herein as the "BKC Marks."1 (The registrations of the BKC Marks are currently in full force and effect.)

5. Eleven of the twelve BKC Marks were registered over five years ago and, therefore, are now incontestable pursuant to Title 15, United States Code, Section 1065.

6. BKC and its franchisees have spent considerable sums of money advertising and promoting BKC's restaurants, services and products.2 As a result of the expenditures and efforts by BKC and its franchisees, valuable "good will" has been developed for the BKC Marks and for the restaurants, products and services which bear the Marks and thus identify BKC as their sponsor or source.

C. The Defendants' Franchise and Lease/Sublease Agreements With BKC For Restaurant 171 Have Expired By Their Own Terms

7. The Defendants were the franchisees of Burger King Restaurant No. 171, which is located at 2425 Peachtree Road, N.E., Atlanta, Georgia ("Restaurant 171"). On May 17, 1979, they entered into a Franchise Agreement with BKC for that restaurant. Paragraph 1 of the Addendum to the Franchise Agreement provides that the Agreement "shall expire on December 30, 1994, ... and that the Defendants accept this license with the full and complete understanding that the license expires on December 30, 1994, with no promise or assurance of renewal or the granting of a new license at expiration." Thus, by its own terms, the Franchise Agreement for Restaurant 171, and the Defendants' limited license to use BKC's Marks in connection with the operation of that restaurant, expired on December 30, 1994.

8. BKC also subleases to the Defendants the property underlying Restaurant 171, pursuant to a Sublease Agreement dated May 17, 1979, Paragraph 2.1 of which provides that the Sublease "shall commence on May 18, 1979 ... and shall expire on December 30, 1994...." There is no provision for renewal in the Sublease.

9. The Defendants' Franchise and Sublease Agreements for Restaurant 171 expired by their own terms on December 30, 1994.

10. Section 16.B. of Defendants' Franchise Agreement specifically provides that:

(1) Upon termination or expiration of this Agreement, FRANCHISEE's right to use the Burger King Marks and the Burger King System shall terminate. FRANCHISEE shall not thereafter identify himself as a Burger King franchisee or publicly identify himself as a former Burger King franchisee or use any of BKC's trade secrets, operating procedures, promotional materials, Marks or any mark confusingly similar.
* * * * * *
(3) If the parties do not enter into a successor Franchise Agreement, FRANCHISEE agrees to immediately upon termination or expiration of this Agreement, make such removals or changes in signs and the building as BKC shall request, so as to effectively distinguish the premises from its former appearance and from any other Burger King Restaurant....

11. Similarly, Section 8.3 of their Lease/Sublease Agreement provides that:

In the event of cancellation or termination of this Lease either by operation of law or otherwise, or in the event Lessor gives notice to Lessee to vacate the premises pursuant to a default of this Lease, Lessee agrees to immediately peacefully surrender the premises to Lessor ... emphasis added

12. In accordance with the expiration dates of the Franchise and Sublease Agreements, on December 30, 1994, BKC demanded in writing that the Defendants cease operating Restaurant 171 at the close of business that day and vacate the premises pursuant to the terms of their Agreements with BKC.

13 Notwithstanding the expiration of their Agreements and BKC's demand, subsequent to December 30, 1994, the Defendants have continued to occupy Restaurant 171 and to hold themselves out to the public as operating a genuine and authorized "Burger King" restaurant.

14. The Defendants' continued possession and operation of Restaurant 171 is not authorized by BKC.

15. By virtue of the expiration of the Defendants' Franchise and Sublease Agreements, BKC is unable to control the nature and quality of the goods and services that the Defendants provide at Restaurant 171.

16. The Defendants' continued operation of Restaurant 171 will mislead consumers into believing that the products sold at the restaurant are authorized and endorsed by BKC, prepared in the manner prescribed by BKC and subject to BKC's supervision.

17. As long as the Defendants continue to operate Restaurant 171, consumers have no practical way of knowing that BKC's relationship with the Defendants at that restaurant has expired. As a result, any consumer dissatisfaction with Restaurant 171 or with the products or services provided therein will be attributed to BKC and to the entire Burger King System. Thus, the potential damage to the goodwill associated with the BKC Marks and to BKC's reputation is significant, possibly incalculable.

18. Accordingly, because of the above-described facts and circumstances, BKC commenced this action in January 1995, and promptly moved for injunctive relief, seeking to enjoin the Defendants' continued operation of Restaurant 171 and infringement of its BKC Marks. Hearings were thereupon held on BKC's Motion for a Preliminary Injunction, resulting in the denial of the motion, and a hearing held shortly thereafter on BKC's request for a permanent injunction.

CONCLUSIONS OF LAW
A. Jurisdiction and Venue

1. This Court has subject matter jurisdiction over this action pursuant to Section 39 of the Lanham Act, Title 15, United States Code, Section 1121, and Title 28, United States Codes, Sections 1331, 1332(a)(1), 1337 and 1338(a).

2. Venue is proper in this Court pursuant to Title 28, United States Code, Section 1391(a) and (b), and the terms of the agreements entered into by and between the parties.

B. The Defendants' Unauthorized Use of the BKC Marks After the Expiration of their Franchise Violates the Lanham Trademark Act

3. BKC's statutory claims against the Defendants arise under two principal provisions of the Lanham Act (Title 15, United States Code, Section 1051 et seq.). The first is Section 32(1) of the Lanham Act, which proscribes the "use in commerce ... of a registered mark ... which use is likely to cause confusion, or to cause mistake", and is "without the consent of the registrant." Title 15, United States Code, Section 1114(1)(a). The second is Section 43(a), which prohibits, inter alia, "false designation of origin, ... or any false or misleading description of fact, or false or misleading representation" as to the source of business establishments, services or goods. Title 15, United States Code, Section 1125(a). Under either section, the Lanham Act "creates a claim for trademark infringement when a trademark holder can demonstrate that the use of its trademark by another is likely to confuse consumers as to the source of the product." Home Box Office, Inc. v. Showtime/The Movie Channel, Inc., 832 F.2d 1311, 1314 (2d Cir.1987). "The critical question ... is whether there is a likelihood of confusion, mistake, or deception between the registered mark and the allegedly infringing mark." John H. Harland Company v. Clarke Checks, Inc., 711 F.2d 966, 972 (11th Cir.1983); Sun-Fun Products, Inc. v. Suntan Research & Development, Inc., 656 F.2d 186, 189 (5th Cir.1981).

4. To establish its claim for trademark infringement and, accordingly, its entitlement to permanent injunctive relief, BKC must prove the following:

(1) That the BKC Marks are valid and subsisting;
(2) That the Defendants' license to use the BKC Marks has expired;
(3) That the Defendants' continue to use the BKC Marks without BKC's consent; and
(4) That the Defendants' actions are likely to mislead consumers as to the source, sponsorship or origin of the restaurant's goods and services.

See, e.g., the factors set forth in Dieter v. B & H Industries of Southwest Florida, Inc., 880 F.2d 322, 326 (11th Cir.1989), cert. denied, 498 U.S. 950, 111 S.Ct. 369, 112 L.Ed.2d 332 (1990); Conagra, Inc. v. Singleton, 743 F.2d 1508, 1512 (11th Cir.1984); Burger King Corporation v. Mason, 710 F.2d 1480, 1491-92 (11th Cir.1983), cert. denied, 465 U.S. 1102, 104...

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