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March 2013

Gordon & Rees New Jersey Team Wins Preliminary Injunctions for National Franchisors

Recently, Gordon & Rees New Jersey partner Ronald A. Giller, senior counsel Michael T. Miano, and associates Elior D. Shiloh and Sarah L. Wieselgren won injunctions in two separate cases to protect franchisors from former franchisees' use of trademarks in meta tags and use of franchise telephone numbers.

In the first case, Gordon & Rees's client, a national franchisor, brought an action against a former franchisee for unpaid royalties and trademark infringement based on the use of the trademarks on its new website and in the website's meta tags. The defendants opposed the injunction application and argued that using the trademarks in website meta tags is permissible as a "nominative fair use" because the trademarks are embedded in the source code and not seen by users.

Gordon & Rees successfully established that the meta tags did not describe the defendants' services and were not used to identify the franchisor's services. The New Jersey Superior Court found in favor of the franchisor and ordered the removal of the trademarks from the websites, including the meta tags, to prevent customer confusion.

Gordon & Rees also represented the national franchisor in an action against former franchisees for breach of the franchise agreement and trademark infringement. Based on a provision in the agreement, the New Jersey Superior Court entered an injunction requiring the defendants to assign all of the telephone numbers associated with their former offices to the franchisor.

Although the defendants had obtained the telephone numbers prior to becoming a franchisee and owned them for more than 20 years, Gordon & Rees successfully argued that, if the numbers were not assigned, the defendants would continue to take advantage of the franchisor's goodwill and usurp business opportunities because prospective customers believed the requisite numbers were associated with the franchisor. The argument was supported by the fact that the defendants had used the numbers in connection with their franchise offices for 10 years, and Internet searches for the franchisor provided results containing the numbers.

The court, therefore, held that any potential harm to the defendants was outweighed by the irreparable harm the franchisor would suffer without the assignment.

Ronald A. Giller
Sarah L. Tomkin