What happens to a trademark that is licensed to a licensee with a franchise, and the licensee goes bust?

sbarro

 

Sbarro LLC is a chain of pizza restaurants that specializes in New York style pizza and other Italian-American cuisine. Its headquarters is located in Melville, Huntington, New York. The chain has branches outside of the US. Yochai Peleg and Tokdan LTD. bought the Israel franchise and were registered as licensees of the wordmark in the Israel trademark register. There are two marks, 93778 for pasta, tomato sauce, clam sauce and vinegar; all included in class 30, and 93779 for restaurant and catering services; all included in class 42.

In August 2010, Sbarro requested to cancel the license to Yochai Peleg and Tokdan LTD.  On 23 August 2010, Adv. Rami Kogan requested to suspend the process at the patent office as he’d been appointed guardian of the bankrupt company by the courts. On 12 December 2012 the company was dissolved and on 17 December 2012, Sbarro again requested that the license be withdrawn, and the temporary restraining order was withdrawn on 3 February 2013.

On 24 April 2014, the trademark department contacted Adv. Kogan to clarify whether he represented either or both parties, and on 21 May 2013 (in decision, the date is 21 May 2012, but this appears to be a typo), Adv Kogan wrote that he doesn’t object to the mark being registered in the name of Tokdan LTD. which, of course, was not the issue, and not something that he could request anyway. Thus on 23 May 2013, the Patent and Trademark Office requested that he clarify which of the parties he represents and whether they object to the license being withdrawn, but no answer was forthcoming. Consequently, once again, on 10 July 2013, Sbarro requested that the license be cancelled.

In her ruling on the issue, Ms Yaara Shoshani Caspi noted that the patent office did have the authority to cancel the mark, but since the register had effects in rem, it wasn’t simply a contractual issue. It wasn’t clear to what extent the licensor had kept the licensee in the loop. She ruled that the licensor should provide an affidavit as evidence of their reasons for wishing to withdraw the license and show evidence of it being delivered to the licensee to give them the opportunity to respond.

COMMENT

Sbarro is probably the world #1 Italian style franchise. Sbarro Israel is Kosher (at least in Jerusalem) and didn’t serve clam sauce. I doubt if any of the non-Kosher branches in Israel do either. A list of Israel branches may be found here

It is important for importers, distributors and franchisees to register their licenses to a trademark, because then they become the address of record for customs to contact where goods suspected of infringing the mark are imported. It gives the franchisee standing, i.e. the right to sue competitors using similarly named companies, and the like.  The licenses were granted in 1995.

In 2001, a Hamas bomber destroyed the Jerusalem branch of Sbarro. Of note, the bomber was a Kuwaiti, not a Palestinian. 15 people were killed and 130 wounded. See here 

 

 

 

 

 

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