Kentucky Fried Chicken Corp. v. Diversified Packaging Corp.

549 F.2d 368 (1977)

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Kentucky Fried Chicken Corp. v. Diversified Packaging Corp.

United States Court of Appeals for the Fifth Circuit
549 F.2d 368 (1977)

Facts

Colonel Harland Sanders founded Kentucky Fried Chicken in the early 1950s. By the 1970s, the Colonel no longer owned the business, having transferred it in five different segments. Kentucky Fried Chicken Corporation (KFC) (plaintiff) conducted the business in 47 states, and four other entities managed operations in the remaining three states. KFC primarily operated by franchising local outlets. KFC’s franchise agreements required franchisees to purchase supplies like carry-out boxes and napkins from KFC or from sources that KFC approved in writing. KFC had never refused a request to approve a supplier. Diversified Packaging Corporation (Diversified) (defendant) placed KFC’s trademarks on such supplies without KFC’s consent and advertised and sold the supplies to KFC franchisees. Diversified never requested that KFC approve it as a supplier, and in significant respects, Diversified’s products failed to meet KFC’s specifications. The trademarks that Diversified placed on its products were concurrently owned by KFC and the four entities managing Kentucky Fried Chicken’s business in states where KFC did not operate. KFC sued Diversified for unfair competition and trademark infringement. Diversified argued, among other things, that KFC had forfeited its marks by unrestrained licensing. The district court ruled in favor of KFC. Diversified appealed.

Rule of Law

Issue

Holding and Reasoning (Goldberg, J.)

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