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In Brief: Use of a licensed trademark is limited by the scope of the license.
Here’s What Happened:
Sam Rosati ran a well-known Italian restaurant and pizzeria for decades in Chicago, Illinois. When he retired, his sons opened a chain of pizzerias using the Rosati’s name. Rosati’s has been a staple of Chicago-style pizza since the 1960s. The Rosati’s trademark is held by Rosati’s Franchise Systems, Inc., which is in turn owned by ten members of the extended Rosati family.
As happens with families in business together, in 1998, Sam’s descendants started fighting with each other about how the business should be run. The shareholders resolved the disputes by giving a license to each shareholder to run separate restaurants. The licenses gave each of them their own exclusive territories and allowed them to sell franchises within their territory. Each licensee was granted a license to use and to sublicense the use of the Rosati’s trademarks and recipes “to operate Rosati’s Pizza Restaurants.”
In April 2005, three of the shareholders purchased the domain names, “rosatispizza.com” and “rosatis.com”. The other shareholders complained. The three shareholders responded by removing the listings of the other shareholders’ restaurants from the website. Litigation ensued and eventually the dispute was resolved.
In 2020, two of the shareholder-licensees began to sell frozen pizzas under the Rosati’s name at Illinois grocery stores. The other shareholders brought suit. The plaintiffs argued that the license agreement did not grant the defendants the right to sell frozen Rosati’s pizzas. The plaintiffs sought a preliminary injunction. The court agreed with the plaintiffs. The court found that the license agreements granted a license only to operate “Rosati’s Pizza Restaurants” and to prepare fresh pizzas using the Rosati’s recipe. The license didn’t authorize the sale of frozen pizzas made in a factory for distribution in grocery stores. The defendants’ unauthorized use of the Rosati’s mark was likely to cause confusion. So the defendants were enjoined from selling frozen pizza.
WHY YOU SHOULD KNOW THIS: No matter how you slice it, the license agreement controlled the use of the trademarks. There were ways to avoid this outcome. The first was to anticipate future uses in the license. That can be hard to do when you’re in the moment of drafting a license. Another solution would have been to go to the licensor with the great idea to sell frozen pizza. While the defendants may have had to share the idea with the other licensees, that outcome would have been better than litigating a lost cause.
Next Week: Pizza Wars Part II: New York Style.