Has my licensing agreement to use a trademark name and logo been breached?

It appears what you bought (termed a "license") was really a franchise in disguise. You were forced to make an investment decision without disclosure of all material facts contained within 23 chapters of a franchise disclosure document. For example, in a Franchise Disclosure Document (FDD) there is one chapter of required disclosure of trademark rights and registrations, including whether the application and other documents had been filed in a timely manner to avoid the very problem that's arisen. You and the other "licensees" may have much stronger rights to rescind your agreements and get money back based on franchise disclosure law violations (that what you really bought was a disguised, illegal franchise). It's not possible to give you an analysis of your potential rights and liabilities without reviewing the license document. As far as the new P.T.O. registration goes, you probably have superior common law rights in your trading area that predate the new P.T.O. registrant, so that's good. Another option to consider is you and the other licensees probably can and should take steps to cancel the new registration (on the grounds of superior, prior rights) and get it registered again. Now is the time for you and the other licensees to think through these issues. Any questions, you can contact me through the Franchise Foundations attorney link below.

Kevin B. Murphy, B.S., M.B.A., J.D.
Mr. Franchise
FRANCHISE FOUNDATIONS

The licensing agreement in question may or may not fall under the Federal Trade Commission's definition of a franchise. Under the FTC franchise rule, a franchise exists if:

1) a licensee offers goods or services under a licensor's trademark or service mark,
2) the licensor exercises "significant control" or provides "significant assistance" in the licensee's business, and
3) the licensee is required to pay a fee of $500 or more within six (6) months of the commencement of the licensee's use of the trademark or service mark.

If these three statutory conditions are met, a franchise relationship exists which required disclosure at the time the franchise opportunity was offered.

Clearly you have been using the original licensor's trademark and you have probably met the fee requirement. The remaining question appears to be whether the training provided by the licensor can be viewed as "significant control or assistance". According to "Interpretive Guidelines" issued by the FTC to address this issue, such things as the licensor furnishing a detailed operation manual or selecting site locations may suggest "significant control" over the licensee.

The Interpretive Guidelines also offer some very important exceptions relative to your issue. Most significantly, the FTC will not consider controls over a licensee which are designed solely to protect the licensor's ownership rights in a trademark. This is because Federal law requires the licensor of a trademark to control the quality and uniformity of goods or services associated with the licensed trademark . If the licensor does not impose sufficient quality controls over the licensee, he can actually lose his rights in the trademark through what is called a "naked license". The training provided to you by the licensor may have been merely to protect his ownership rights in his trademark by ensuring the proper level of quality control was maintained through your use of the mark. If so, the FTC would not consider the training a "significant control".

Additionally, for the controls imposed by the licensor to be "significant", they must be related to the licensee's entire method of operation, not just one particular product or service. Therefore, if you have other products or services which are not offered under the licensor's trademark, and the training provided by the licensor did not extend to these other areas of your business, the requirement of "significant control" has probably not been met.

Further, if you maintained your business for two years prior to entering the license agreement, and the services offered under the licensed trademark account for no more than 20% of your sales, the FTC will not view the relationship as a franchise regardless of whether all three of the elements (trademark, $500 fee, and "significant control") are met.

Your question of whether the license agreement has been breached by the previous trademark owner is hard to answer without having a clearer picture of the timeline of events such as when the owner's federal registration expired and when the license agreements were assigned to the new owner. However, it is possible to license a trademark that does not have the protection of a federal trademark.

Your question involves at least two different areas of the law, trademark law and contract law. Many attorneys with experience with contract lawsuits may be able to help you, but they would have to see the actual agreements before they could give you an answer. The trademark issues are much more complicated and there are fewer attorneys who have a strong grasp on trademark law. It is entirely possible that both the company that licensed the trademark too you and the second company that acquired the registration will have rights to the trademark that will impact your business. You should contact a trademark attorney in Connecticut as soon as possible to discuss what your risks are.