The US Court of Appeals for the Eighth Circuit affirmed a permanent injunction enjoining a dry cleaner franchisee from using plaintiff’s trademarks but explained that plaintiff was not entitled to punitive damages, costs or attorneys’ fees since the franchisee had agreed to cease using plaintiff’s trademarks. Martinizing International LLC v. BC Cleaners, LLC, et al., Case No. 16-1069 (8th Cir., Apr. 28, 2017) (Loken, J).

In 2011, Martinizing International entered into franchise agreements with Markus Kanning authorizing use of Martinizing’s trademarks in operating dry cleaning stores. The agreements prohibited Kanning from selling the franchise locations or assigning the franchise agreements without Martinizing’s consent. In 2014, BC Cleaners and the individuals Lundell and Carver (defendants) entered into an asset purchase agreement with KM Cleaners without asking for Martinizing’s consent. Defendants then continued to operate the dry cleaning stores using Martinizing’s trademarks.

In 2015, Martinizing’s counsel sent a cease-and-desist letter to defendants demanding that they either stop using Martinizing’s trademarks or enter into a franchise agreement with Martinizing. Defendants agreed with the demands of the cease-and-desist letter but continued to use the trademarks. Martinizing filed a complaint against defendants, alleging infringement of its trademarks and that Lundell and Carver were member-managers who “aided, abetted, directed and controlled BC with respect to the wrongful conduct.” Defendants failed to appear, and the district court granted a default judgment against BC Cleaners, holding that it willfully infringed Martinizing’s trademarks. However, the district court denied Martinizing a default judgment against Lundell and Carver, concluding that they were not personally liable for trademark infringement or a deceptive trade practice. Martinizing appealed, arguing that the court erred when it denied a default judgment against Lundell and Carver and reduced the award of attorneys’ fees for willful infringement.

The Eighth Circuit agreed with the district court’s conclusion that because defendants had been using Martinizing’s trademarks without approval notwithstanding their agreement to stop using the trademarks, the district court did not “abuse its discretion in not granting injunctive relief against the individual defendants, as BC Cleaners had agreed to stop using the trademarks.”

However, the Eighth Circuit concluded that Martinizing had failed to prove that BC Cleaners’ conduct entitled Martinizing to damages, an accounting of infringer profits or attorneys’ fees, i.e., in addition to the injunctive relief the Court upheld. For example, Martinizing made no showing that franchise fees were not paid by Kanning during the months when defendants were operating the stores under the unterminated agreements.