Terminated Franchisee’s Continued Use of Trademark Qualified as Counterfeiting

A federal district court in Indiana held that a terminated real estate franchisee who continued to use the trademarks of its former franchisor was liable for trademark infringement, trademark dilution, and most notably, trademark counterfeiting. The franchisee was also found liable for false advertising and false designation of origin under the Lanham Act, unfair competition, and breach of the franchise agreement.

Federal judicial circuits are currently split regarding whether a terminated franchisee’s continued unauthorized use of a franchisor’s trademark can constitute counterfeiting. If the Indiana district court’s decision is upheld, it may provide strong precedent for franchisors seeking to curtail the activities of holdover franchisees. Under the federal Lanham Act, liability for counterfeiting is accompanied by mandatory treble or other statutory damages, as well as an award of reasonable costs and attorney fees.

Century 21 Real Estate, LLC v. Destiny Real Estate Properties, 2011 WL 6736060, N.D. Ind., Dec. 19, 2011.

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