The dispute exists because AFC Enterprises originally licensed some rights – exactly what rights are, of course, what is in dispute – from Hearst in March 1976, about four years after the restaurant was founded. There were many agreements after that (it takes almost two pages in the recitals in the last amendment to list all the agreements), but all licenses are due to expire December 31, 2012. The complaint says that the restaurant has ceased all use of the characters domestically, is requiring that the few remaining international franchises that still use them to cease by December 31, 2012, and will let the license expire. From a 2002 amendment it appears that AFC Enterprises is paying around $900,000 annually to Hearst regardless of whether it exercises the rights Hearst granted.
Interestingly, the parties put this in the 2002 amendment:
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| Notwithstanding the plain language and clear intent of the Agreement, through discussions and meetings between representatives of AFC and representatives of Hearst, an actual controversy exists over the meaning and application of the Agreement. In correspondence dated September 5, 2001, Hearst’s President at the time, T.R. Shepard III forwarded to Jon L. Luther, POPEYES® President at the time, a memorandum prepared by Hearst’s counsel, Baker & Hostetler. In the memorandum, Hearst’s counsel claimed that Hearst could claim rights to the POPEYES® trademarks in connection with prepared foods and restaurant and franchise services. The memorandum also stated that, “if the agreements were terminated or canceled, at the minimum AFC would not be able to make any use of the POPEYES® marks outside of restaurant services… and it is also likely that a court will prohibit AFC from making any use of the POPEYES® mark.” |
I don’t think a letter in 2001 gets you to imminent harm, although I see the argument. And although the license still has 13 more months, and I can understand you’d want to get something like this straightened out well ahead of time – does the scale of the harm factor into ripeness for declaratory judgment? At any rate, I expect we’ll see a motion to dismiss for lack of jurisdiction.
From the snippets in the agreements I saw, it looks like AFC Enterprises has a good argument. It’s somewhat surprising that ownership of the trademark wasn’t stated clearly enough to avoid the dispute from the beginning, though. But in 1976 Popeye was still a hot character and the restaurant a nascent business, perhaps only successful now because of the original association. Maybe there was a licensing agreement only because of a threat by Hearst (although the founder said the restaurant was named after detective Popeye Doyle in “The French Connection”), so leaving it unsaid perhaps wasn’t an oversight but the best that could be accomplished under the circumstances. Maybe AFC Enterprises always knew it had this battle to fight sooner or later.
AFC Enterprises, Inc. v. The Hearst Corp., No. 1:11-cv-04150-WSD (N.D. Ga. Nov. 30, 2011).
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