Nestlé aims to crumble franchisee in trademark suit

Nestlé has targeted its franchisee Crest Foods, an operator of dessert café restaurants, in a trademark infringement claim.

The multinational alleged that Crest Foods, which does business under the Nestle Toll House brand, had used its ‘Nestlé’ and ‘Toll House’ trademarks without authorisation.

In the lawsuit, filed on Friday, October 7, at the US District Court for the Central District of California, Nestlé claimed that Crest had also wilfully and materially breached written contracts concerning the marks.

The company has claimed trademark infringement, dilution, false designation of origin, deceptive acts and practices, unfair competition, and breach of contract.

In 2000, Nestlé authorised Crest to use the trademarks and related marks for the “limited purpose of developing a series of quick service cafés that reflect, honour, and enhance the Nestlé Toll House brand”.

Nestlé alleged that Crest “drastically exceeded” the scope of its rights, engaging in a “series of unauthorised uses of the famous” trademarks.

It said: “As time has passed, the quality, appearance, and brand identity at the Crest Cafés has deteriorated. Crest has overseen a franchise network that has expanded haphazardly, often with no regard for consistency or quality, in direct violation of the quality control restrictions imposed by the agreements.”

The multinational also alleged that Crest’s “improper and unlawful actions” have increased in scope and severity over time and that despite repeated requests, Crest has “refused to cure its breaches and unauthorised uses exceeding the scope of the written contracts”.

The actions include developing and using non-approved advertising campaigns, taking a wide variety of actions without the required advance written approval of Nestlé, improperly modifying and displaying Nestlé’s logos and marks, and using out-of-date marketing materials.

It added that “Crest routinely holds itself out as a Nestlé entity, improperly utilising the Nestlé marks on everything from its letterhead to its Facebook page”.

Nestlé alleged that Crest’s conduct is “in whole or in part, malicious, intentional and wilful” and that it will cause “irreparable harm and injury to Nestlé’s business reputation and goodwill”.

The multinational is seeking injunctive relief, compensatory damages, triple damages, an accounting and disgorgement of all Crest’s profits resulting from infringement, and a jury trial.

A spokesperson for Crest said: "Crest Foods is aware of the action that Nestlé has filed against us. We categorically deny their allegations and intend to vigorously defend against their claim.”