What does a law firm specializing in franchise law actually do? During the last 12 months, we were fortunate to have the opportunity to represent many franchisors and licensors, franchisees and licensees and sellers and buyers in a wide variety of matters. As examples, we acted as counsel for:

*    4 sellers/franchisors in asset sales involving more than 10 company-owned units to franchisees.

*    5 franchisors in more than 20 franchisee-to-franchisee transfers of franchised units.

*    3 franchisors in more than 20 franchisee renewals of Franchise Agreements.

*    5 franchisors in more than 30 default, termination or work-out matters.

*    28 franchisors in registrations, renewals, amendments and exemptions for their Franchise Disclosure Documents in every applicable state.

*    11 franchise candidates in their due diligence and decision-making process for the purchase of franchise opportunities.

*    4 sellers/buyers in their franchise due diligence in multi-million dollar sales and purchases of franchisors.

*    A franchisor in franchise-related enforcement proceedings initiated in 5 states.

*    8 franchisors in the preparation of documents for franchise sale transactions in 12 foreign countries.

In addition,Barry Kurtz served as a consultant to professional firms or as an expert witness in 5 franchisor/franchisee related matters.

First and foremost, we are franchise attorneys. Additionally, we have substantial experience representing independent restaurant operators, sellers and buyers of restaurant, retail and service businesses, landlords and tenants of commercial properties, and start-up businesses of all kinds.

In the past, franchisors have generally sought relief in the courts from holdover franchisees-franchisees that continue to operate franchised businesses and use the franchisors' trademarks after termination or expiration of franchise agreements-by alleging trademark infringement claims. However, in December 2011, a federal district court judge in Indiana found that holdover franchisees may be liable for counterfeiting, as well as trademark infringement.

In Century 21 Real Estate, LLC v. Destiny Real Estate Properties, Century 21 terminated the franchise agreement after its franchisee failed to make the payments required under the agreement. Nevertheless, the former franchisee continued to operate its real estate business and continued to use Century 21's exact marks in signage and Internet ads. Century 21 sued the former franchisee in federal district court and asserted, among other claims, that the former franchisee knowingly and willfully violated the Federal Trademark Act, because of its unauthorized and continued use of Century 21's registered mark. The trial court reasoned that, although the franchisee had used a formerly authorized mark instead of a fake, knockoff or reproduction, it was, nonetheless, a counterfeit mark under the statute.

This decision is important to franchisors for several reasons. First, a judgment for counterfeiting requires the court to award the owner of the mark treble damages, while a judgment for infringement does not. In addition, a judgment for counterfeiting permits the owner of the mark to recover attorneys fees and is potentially non-dischargeable in bankruptcy court.

Century 21 is now precedent for franchisors to assert counterfeiting claims against holdover franchisees. As a result of this decision, franchisors will likely require franchisees to acknowledge in their franchise agreements that their continued use of the franchisor's mark after termination of the agreement will constitute counterfeiting under the Federal Trademark Act to deter franchisees from holding over after termination of the agreement and to encourage settlement if litigation is initiated on this issue.

Although the Century 21 decision appears to represent a positive development for franchisors, higher courts will likely review the trial court's holding in the near future, especially since there is now a split among the federal circuit courts on whether the use of a formerly authorized trademark may be deemed counterfeit. Stay tuned for updates. To see the full case, click here.