Breach of franchisee obligations and damages
The Court of First Instance of Milan (judgment n.6559/2017) examined the case of a single-brand shop which, as a franchisee of confectionary products, commercialized, alongside products with original brand, also products with no brand or bearing a counterfeit trademark.
The Court of First Instance has seen in the behavior of the single-brand shop the violation of the other party’s (from now on called “franchisor”) industrial property rights, because responsible for selling, in addition to the original products, also products coming from other companies, sometimes putting on such products the trademark of the franchisor, sometimes selling products with no logo.
The behavior of the single-brand shop has also included a series of contractual breaches of the franchising contract. Among the obligations of the contract there was also the article “to resell in the shop only the original products and not to sell any products in concurrence with those of the franchisor”.
In addition, the Court of First Instance upheld the arguments of the franchisor, stating that: “The single-brand store, with a policy of progressive “appropriation” of the goodwill related to the franchisor, gradually replaced the only legitimate supplier with other suppliers and has (illicitly) separated its business from that of the franchisor. So we can share what the franchisor says about the fact that a new confectionary shop should would take not less than two years in order to starting and progressively consolidate a competitive position”.
Lastly, the Court of First Instance recognized and quantified the existence of a damage to the image caused by the behavior of the single-brand store which put in place a variety of behaviors that led to the erosion of the value of the brand and of the brand image of the franchisor, among which offering for sale “a whole range of non-branded products, some totally not existing in the catalogues and belonging to different and completely extraneous categories (like liqueur), damaging the high position and the level of excellence of the brand and the products distinguished by the same”.