Cookie Crumbles Against Injunction Granted to Terminated Trademark Licensee
Concluding that a terminated exclusive trademark licensee failed to establish the elements required to impose a preliminary injunction, the US Court of Appeals for the 10th Circuit reversed the district court’s grant of a preliminary injunction after termination of the exclusive license between the parties. Mrs. Fields Franchising, LLC and Mrs. Fields Famous Brands, LLC v. MFGPC, Case Nos. 19-4046, -4063 (10th Cir. Nov. 7, 2019) (Briscoe, J).
Mrs. Fields Franchising (MFF) owns the rights to the “MRS. FIELDS” trademark and licenses those rights to allow other entities to manufacture, sell and distribute products using the brand. In a fight over the termination of an exclusive license agreement pertaining to the production and distribution of popcorn products under the MRS. FIELDS trademark, MFF filed a complaint against its former popcorn licensee, MFGPC, seeking a declaratory judgment that the license agreement was properly terminated and was no longer in effect. MFGPC countered with claims that MFF breached the exclusive license agreement along with a motion for a temporary restraining order and preliminary injunction prohibiting MFF from interfering with MFGPC’s right to sell MRS. FIELDS-branded popcorn.
The district court ultimately granted MFGPC’s motion for the preliminary injunction and ordered MFF to terminate any licenses it had entered into with other companies for the use of the MRS. FIELDS trademark on popcorn products, and to comply with the terms of the licensing agreement with MFGPC. MFF appealed.
The 10th Circuit agreed with MFF that the district court erred in finding that the license agreement afforded MFGPC a “perpetual license,” and that this error infected the district court’s analysis of the requirements for imposing a preliminary injunction. The Court explained that, as the moving party, MFGPC needed to prove four things to succeed on its preliminary injunction motion:
- MFGPC was likely to succeed on the merits.
- MFGPC would suffer irreparable injury without the injunction.
- The threatened injury outweighed MFF’s injury under the injunction.
- The injunction would not be adverse to the public interest.
The Court also found this to be a case of a “disfavored preliminary injunction,” which is one that ostensibly requires more than merely preserving the parties’ relative position pending trial and thus places a heavier burden on the moving party with respect to the likelihood of success and balance of harms factors.
The 10th Circuit focused its analysis on its disagreement with the district court’s finding that the license to MFGPC was “effectively perpetual,” and instead found that the “term and termination” clause of the agreement provided specific circumstances under which the license could be terminated or not renewed. The district court’s erroneous finding that the license agreement was perpetual caused its analysis of MFGPC’s likelihood of success on the merits and the existence of irreparable harm to be “fatally flawed.” Absent a perpetual license, the Court was not persuaded that calculating damages would be impossible, and thus found that MFGPC did not establish a strong likelihood that it would prevail on its claim for specific performance. The Court also found that MFGPC failed to establish irreparable harm, again finding error in the district court’s perceived challenges in calculating damages under a perpetual license.
The 10th Circuit further explained that despite the general acknowledgment that irreparable harm often arises from the breach of an exclusivity agreement, such a conclusion is not automatic.