12 February 2019Trademarks

The Palm stakeholders get $119m in licensing row

The  New York Supreme Court has entered a final judgment in a trademark-licensing suit involving royalties to be paid for licensing the IP of American steakhouse chain  The Palm.

The Palm restaurant chain and its IP is owned by a parent company, Just One More Restaurant Corporation (JOMR).

In a precedent-setting judgment yesterday, February 11, the court ordered Wally Ganzi and Bruce Bozzi, who own 80% of JOMR, to pay a group of stakeholders (who own the other 20%) $119 million because they executed self-dealing and to reflect undervalued IP license agreements favouring The Palm restaurants they personally own.

The court also annulled all of The Palm restaurant licenses as having been products of “a textbook example of fiduciary misconduct.”

The judgment comes shortly after an initial decision by the same court in November 2018 awarded the stakeholders $120 million. It was the first time the court has determined that the correct and proper way to licence valuable IP is through a percentage of sales methodology.

In their argument, the stakeholders had challenged the flat fee royalty rate at which the majority stakeholders licensed The Palm IP as below market value. The rate was $6000 per restaurant, per year. The court agreed with the stakeholders and introduced a royalty based upon 5% of sales.

Fred Newman, a founding partner at  Hoguet Newman Regal & Kenney and counsel for the stakeholders, said the judgment was “the first time a trial court has fully resolved that important question” of the “correct and proper way to licence valuable IP”.

“It’s a huge number,” Newman said. “We challenged the flat fee royalty rate, set over 40 years ago, and won. This was a hard-fought battle and a much-deserved outcome for our clients.”

According to Josh Rievman, a founding partner of Dunning Rievman & Davies and co-counsel for the stakeholders, the judgment means that new licenses for all restaurants at the rate of 5 percent of gross sales will now be required.

“We are delighted to bring a long-awaited measure of justice to clients who were denied their rightful legacy for decades,” Rievman said.

WIPR has contacted The Palm for comment.

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