IN THE UNITED STATES DISTRICT COURT FOR THENORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION

ROSATI’S FRANCHISE SYSTEMS, INC., )an Illinois corporation, ANTHONY ROSATI, )DAVID ROSATI, STEPHEN ROSATI, )GEARY ROSATI, RICHARD ROSATI, )JOANNE ROSATI CZERNEK and )LISA ROSATI SUMA, )

) No. 05 C 3146Plaintiffs, )

) Judge Gradyv. )

)FREDERIC ROSATI, MICHAEL ROSATI, )WILLIAM ROSATI and JEFFREY ROSATI, )

)Defendants. )

PLAINTIFFS’ RESPONSE TO DEFENDANTS’ MOTION TO DISMISS

Plaintiffs Rosati’s Franchise Systems, Inc. (“RFSI” or the “Company”), Anthony Rosati, David

Rosati, Stephen Rosati, Geary Rosati, Richard Rosati, Joanne Rosati Czernek and Lisa Rosati Suma

(the “Anthony Rosati Group”), by their attorneys, Young, Rosen, Finkel & Silbert, Ltd., as their

response to defendants’ motion to dismiss the complaint,1 state as follows:

I. INTRODUCTION

On May 26, 2005, RFSI and the Anthony Rosati Group filed their Verified Motion for

Temporary Restraining order and/or Preliminary Injunction, together with an eight count complaint

against defendants (Complaint), alleging Federal Trademark Infringement (15 U.S.C. § 1114(1))

(Count I), Federal Trademark Dilution (15 U.S.C. § 1125(c)(1)) (Count II), Violations of the Anti-

cybersquatting Consumer Protection Act (“ACPA”) (15 U.S.C. § 1125(d)) (Count III), Federal Unfair

Competition and False Designation of Origin (15 U.S.C. § 1125(a)(1) (Count IV), violations of the

Illinois Anti-Dilution Act 765 ILCS 1036/65(a) (West 2004)) (Count V), violations of the Illinois

1 ?Defendants’ Memorandum in Support of Their Motion to Dismiss will be cited as “Def. Mt. p. ___.”

Consumer Fraud Act and the Illinois Uniform Deceptive Trade Practices Act (815 ILCS 505/2 (West

2004) (Count VI), breach of License Agreement (Count VII), and breach of fiduciary duties (Count

VIII).2

Defendants bring this motion to dismiss, contending that all of plaintiffs’ claims fail because

defendants were authorized to use RSFI’s trademark–“Rosati’s Pizza”–for their exclusive benefit as a

domain name for their Web site. Defendants also argue that the individual plaintiffs lack standing to

bring federal infringement claims and that plaintiffs cannot maintain an Illinois Anti-Dilution Act

claim because plaintiffs and defendants are competitors. Defendants’ claims are without merit.

First, the allegations of the Complaint establish that defendants were not authorized to use the

trademark–“Rosati’s Pizza”–for their own exclusive benefit, as defendants agreed in a certain license

agreement that all benefits from RSFI’s trademarks must inure to RSFI and that their right to use

RSFI’s trademarks is limited to authorized uses. Since defendants’ use of “Rosati’s Pizza” neither

inures to RSFI (or the remaining shareholders) nor was authorized, defendants’ motion to dismiss the

federal and state infringement claims as well as the state common law claims (Counts I-VIII) should be

denied. Second, the individual plaintiffs have standing to bring the federal claims because they are

competitors of defendants and because their economic interests as shareholders are damaged when

RSFI is harmed as a corporation. Third, plaintiffs have set forth a valid claim under the Illinois Anti-

Dilution Act (Count V), as the statute’s scope includes actions brought by competitors who have

established trademark infringement claims. For these and the additional reasons discussed below,

defendants’ motion to dismiss should be denied.

II. FACTS ALLEGED IN THE COMPLAINT

A. RFSI and its Trademarks

RFSI operates and licenses restaurants under the name “Rosati’s Pizza,” featuring pizza and

2 ?The Complaint will be cited as “Cmplt. ¶ ___ [or] Ex. ___.”

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other menu items for dine-in, carry-out, and delivery service. RFSI is owned by ten shareholders, each

of whom owns 10% of RFSI and occupies one of the 10 positions on RFSI’s board of directors. Those

ten people are Richard Rosati, Anthony Rosati, David Rosati, Frederic (“Rick”) Rosati, Geary Rosati,

Joanne Rosati Czernek, Lisa Rosati Suma, Michael Rosati, Stephen Rosati, and William Rosati.

The Rosati’s restaurants have utilized distinctive and secret recipes, ingredients, and methods

of preparing food over the course of their existence. Since 1964, the public has associated the names

“Rosati’s” and “Rosati’s Pizza” with high quality pizza and other menu items for dine-in, carry-out,

and delivery services. RFSI and the individual plaintiffs have used these trade names extensively in

channels of interstate trade throughout the United States for over 40 years. In doing so, plaintiffs have

expended substantial effort and expense over the years to promote, publicize, and advertise the

“Rosati’s” and “Rosati’s Pizza” trade names and to acquire goodwill among Rosati’s customers,

distributors, and vendors.

Consequently, on July 18, 1995, RFSI obtained a federal trademark registration from the U.S.

Patent and Trademark Office (“Patent Office”) for the name “Rosati’s Pizza” (“Trademark No.

1906101"). Later, on November 14, 1995, RFSI obtained another federal trademark registration from

the Patent Office for the name “Rosati’s Authentic Chicago Pizza Est. 1964," together with an

associated logo (“Trademark No. 1934683"). The Rosati’s trademarks are not only unique, but are also

distinctive and famous. Since their registration, plaintiffs have continued to expend substantial effort

and expense to publicize the trademarks throughout the country. To plaintiffs’ knowledge, no similar

marks are being used by unrelated third parties in connection with the sale of goods and services

provided by RFSI. Copies of the Certificates of Registration for Trademarks Nos. 1906101 and

1934683 are attached as Exhibits A and B to the Complaint, respectively, and they are collectively

referred to herein as the “Rosati’s Trademarks.”

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B. Division Among RSFI Shareholders and Execution of the License Agreement

Conflicts have arisen among the RFSI shareholders and directors, and as a result, they have

coalesced into two groups. The plaintiffs in this case comprise one group, referred to as the “Anthony

Rosati Group,” consisting of Richard Rosati, Anthony Rosati, David Rosati, Geary Rosati, Joanne

Rosati Czernek, Lisa Rosati Suma, and Stephen Rosati. Together, these shareholders own 70% of

RSFI. The other group, referred to as the “Rick Rosati Group,” consists of defendants Frederic

(“Rick”) Rosati, Michael Rosati, and William Rosati. The Rick Rosati Group is the minority group,

having a 30% shareholder interest in RFSI.

About September, 1998, irreconcilable differences arose between the Anthony Rosati Group

and the Rick Rosati Group. Consequently, each of the ten shareholders entered into the “Rosati’s

Pizza License Agreement” (the “License Agreement”) with RFSI, agreeing that RFSI would retain all

rights, title, and interests in the Rosati’s trademarks and trade recipes, but would suspend franchising

Rosati’s restaurants. In lieu of franchises, the parties agreed that RFSI would issue licenses to each of

the ten RFSI shareholders, allowing them to sublicense the Rosati’s Trademarks and recipes. The

shareholders also agreed that the existing franchises would be divided among the shareholders of

RFSI. (See Cmplt. Ex. C (License Agreement)).

The License Agreement specifically addresses the use and ownership of the Trademarks,

providing in relevant part:

“WHEREAS, [Rosati’s Franchise Systems, Inc.] is the sole and exclusive owner of all rights, title and interests in and to the names “Rosati’s Pizza” and all trademarks and service marks associated therewith (including, without limitation, U.S. Reg. Nos. 1,906,101 and 1,934,683) (collectively, the “Marks”);

***

4. Ownership of Marks. Licensee acknowledges that any unauthorized use of the Marks by Licensee shall constitute an infringement of Company’s rights in and to the Marks and a breach of this Agreement. Licensee acknowledges and agrees that all use of the Marks by Licensee and any goodwill established thereby shall inure to the

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exclusive benefit of Company and that this Agreement does not confer any goodwill or other interests in the Marks upon Licensee (other than the right to use and sublicense the use of Marks in compliance with this Agreement). Licensee shall not, directly or indirectly, contest, deny or challenge the validity of the Marks or Company’s rights therein.” (Cmplt. Ex. C (Emphasis added.)).

C. The Marketing Cooperative

After executing the License Agreement, the ten shareholders agreed in 1999 to form the

Rosati’s Marketing Cooperative (the “Co-op”) to market the Rosati’s restaurants. Each of the

shareholders used the Co-op to advertise and market the 140 Rosati’s restaurants licensed pursuant to

the License Agreement. To that end, RFSI authorized the use of a Web site to advertise and list all of

the Rosati’s pizza stores and restaurants nationwide. The domain name for that Web site was

“Rosatispizza.com,” conspicuously bearing RFSI’s registered trademark “Rosati’s Pizza.” Until May

2005, each RSFI shareholder relied on the Web site as the sole means of advertising and marketing the

Rosati’s restaurants on the Internet. (Cmplt. Ex. D (Web site prior to May 13, 2005)).

D. The Rick Rosati’s Group’s Infringement of RFSI’s Trademarks

At an unknown time, but prior to May 13, 2005, the members of the Rick Rosati Group began

to infringe on RFSI’s registered trademarks when it seized control of the Rosati’s Web site for the

Group’s exclusive benefit (“Rosatispizza.com”) without RFSI authorization. The Rick Rosati Group

also seized control of “rosati.com,” another domain name comprised of a protected RFSI trademark.

The Rick Rosati Group arranged for defendant Jeffrey Rosati to register the names with the registrar

company Network Solutions, LLC, without requesting or obtaining RSFI’s authorization.

After acquiring control of the Web site and the domain names, the Rick Rosati Group directed

their attorney, Michael C. Deutsch, to send a May 10, 2005, letter to Anthony Rosati and copied the

letter to the remaining RFSI shareholders. In relevant part, the letter states:

“All Websites owned and controlled by the Rick Rosati Group (including the Website with the domain names “rosatispizza.com”, which was recently purchased by the Rick Rosati Group) will be revised. Among other revisions, they will only list the locations owned and controlled

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by the Rick Rosati Group. Our clients intend to make these revisions on May 13, 2005. Our clients request that their locations be deleted from all Websites owned and controlled by you and the other shareholders.” (Cmplt. Ex. F (Emphasis added.)).

On May 13, 2005, the Rick Rosati Group eliminated from the Rosati’s Web site the names of

all 94 pizza restaurants licensed, subfranchised, or sublicensed by members of the Anthony Rosati

Group. This action immediately deprived both RFSI and members of the Anthony Rosati Group of the

Web site as a critical marketing device. By doing so, the Anthony Rosati Group was deprived of e-

mail communications with their customers and was deprived of the right as shareholders to benefit

from the use of the registered trademarks as domain names for RFSI. As a result, customers were

confused and angry when they could not access information on the Web site regarding the restaurants

owned or sublicensed by the Anthony Rosati Group, and many customers sent letters and e-mails

expressing this confusion and anger resulting from defendants’ conduct. (Cmplt. Group Ex. H). The

Rick Rosati group’s actions caused the Anthony Rosati Group to suffer a substantial loss of business,

threatened RFSI’s business, damaged the Rosati’s trademarks, brand name and goodwill, and forced

the Anthony Rosait Group to cancel commercials and other advertisements which referred to the RFSI

Web site. A copy of the Web site home page without the 94 locations controlled by the Anthony

Rosati Group after May 13, 2005, but containing the artwork previously paid for, designed, and

copyrighted by the Rosati’s Marketing Co-op, is attached to the Complaint as Exhibit G.

Once the Rick Rosati Group removed any mention of the restaurants controlled by the Anthony

Rosati Group, it used the Rosati’s Web site to disparage the Rosati’s restaurants controlled by the

Anthony Rosati Group. Specifically, the Rick Rosati Group announced to customers, distributors,

vendors, sub-licensees, potential sub-licensees, and the general public that the restaurants controlled by

members of the Anthony Rosati Group are “knock offs,” that those members are selling phony

sublicenses and have no right to sublicense the Rosati’s Trademarks or Recipes, and that the

restaurants controlled by the Rick Rosati Group are the only “genuine” Rosati’s pizza restaurants. For

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example, when a customer visited the “Menus and Locations” page of the “www.rosatispizza.com”

Web site and clicked on “Arizona,” the customer was immediately faced with this notice:

“Note to our valued customers:

In 1986 Rick Rosati, Mike Rosati and long time employee Scott Selke (the Original Valley Owners) opened the first Rosati's Pizza in the Phoenix area. The three Original Valley Owners own to this day all Arizona locations listed on this site. We brought with us the same high quality food and high operating standards that we used for years in Chicago.

***In 2001 a second group started licensing the Rosati name to

independent owner operators. Due to the high number of complaints received at this web site in relation to locations controlled by the second group, we want to make it clear that the Original Valley Owners have no ownership or authority over locations that use the Rosati name that are not listed on this web site. Any complaints for locations not listed on this web site should be directed to that location and should be resolved by the parties that own that location.” (Cmplt. Ex. I (Emphasis added.)).

Moreover, the Rick Rosati Group instructed long-time RSFI suppliers and distributors to refuse to sell

products to the pizza restaurants owned or licensed by members of the Anthony Rosati Group.

III. STANDARD OF REVIEW

According to Rule 8 of the Federal Rules of Civil Procedure, all that a plaintiff must plead in a

complaint is a short and plain statement showing that plaintiff is entitled to relief, thus giving

defendant notice of the claims and the facts upon which they are based. Thompson v. Illinois

Department of Professional Regulation, 300 F.3d 750, 753 (7th Cir. 2002). In considering defendants’

motion to dismiss, the Court analyzes all of the alleged facts in the Complaint in a light most favorable

to plaintiffs. Alexander v. City of Chicago, 994 F.2d 333, 335 (7th Cir. 1993). In doing so, the Court

assumes that all of the facts plead are true and construes all inferences in plaintiffs’ favor. Thompson,

300 F.3d at 753. Those facts and inferences are gleaned from the Complaint, any exhibits attached to

the Complaint, and the supporting briefs. Id. A motion to dismiss should not be granted “ ‘unless it

appears beyond doubt that plaintiff[s] can prove no set of facts in support of [their] claim[s] which

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would entitle [them] to relief.’ ” Cody v. Harris, 409 F.3d 853, 857 (7th Cir. 2005).

IV. Defendants’ Motion to Dismiss Should be Denied.

It is axiomatic that the commercial component of the Internet has grown rapidly over the past

several years and provides an invaluable medium for companies to provide detailed information about

their products that cannot otherwise be conveyed through standard advertisements. OBH, Inc. v.

Spotlight, 86 F. Supp. 2d 176, 179 (W.D. N.Y. 2000). Many companies such as RSFI use the Internet

as an outlet their customers can use to order products directly from the company. Id. Given the utility

of the Internet, the commercial potential of the Internet is vast. Id. “Thus, businesses are racing to

stake out a spot on the Web in order to sell their goods and services.” Id.

Obviously, drawing the most customers to a company’s Web site is the goal of any company.

Locating a particular Web site is most easily accomplished by entering the domain name in a Web

browser program, because once the name is typed and entered, the Web site quickly appears on the

computer screen. OBH, Inc., 86 F. Supp. 2d at 180. If one does not know the domain name, he or she

likely attempts to guess the domain name or uses an Internet “search engine” to locate the site. Id. As

to the former, the user guesses the domain name, “often assume[ing], as a rule of thumb, that the

domain name [is] the company name followed by ‘.com.’ ” Id. Alternatively, because “a trademark is

better known than the company itself, a user may assume that the domain address will be ‘ “

‘trademark’ ”.com.’ ” Id. Users will also use search engines, which can produce a list of hundreds of

Web sites, including those of competitors, which the user must sort through to find the right one.

Consequently, in deciding on a domain name, companies strongly prefer to use one or more of their

famous trademarks, service marks, or their company name to make the search for their Web site as

easy as possible. Id. at 180; accord Beverly v. Network Solutions, Inc., 1998 WL 320829, at *1 (N.D.

Cal. 1998). Here, the domain name used by the RFSI Co-op consisted of part of the Company name

and a protected trademark. Having RFSI’s Web site correspond to its trademark and company name

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has been invaluable, as users have accurately guessed its Web site address and have visited the Web

site rather than the Web sites of competitors. Thus, defendants’ position that RFSI and the majority of

the shareholders of RFSI would agree to relinquish the ability to use RFSI’s trademarks as domain

names belies common sense and logic and should be rejected by the Court.

A. Unauthorized Use of Trademarks as Domain Names Violates the Lanham Act.

Notably, defendants have not, and cannot, dispute that their pirating and unauthorized use of

RFSI’s trademark as the domain name of their Web site, to the exclusion of RFSI and the Anthony

Rosati Group, is a clear violation of the Lanham Act, sections 1114(1), 1125(c), and 1125(d), as well

as the state law claims asserted in plaintiffs’ complaint.

Due to the role that domain names have in Internet commerce, Courts have repeatedly found

that one’s use of another’s trademark as a domain name for pecuniary gain violates the Lanham Act,

including trademark infringement under section 1114, trademark dilution under section 1125(c)(1),

violations of the ACPA under section 1125(d), unfair competition and false designation of origin under

section 1125(a)(1), and violations of corresponding state statutory schemes and common law. See,

e.g., Shields v. Zuccarini, 254 F.3d 476 (3d Cir. 2001) (affirming summary judgment for plaintiff in an

action brought under the ACPA); Flow Control Industries v. AMHI, Inc., 278 F. Supp. 2d 1193 (W.D.

Wash. 2003) (finding trademark infringement and cybersquatting where defendants used plaintiff’s

trademarks as metatags for their Web site so that Internet search engines would associate plaintiff’s

trademarks with defendants’ Web site); E & J Gallo Winery v. Spider Webs Ltd., 286 F.3d 270 (5th Cir.

2002) (affirming judgment in favor of plaintiff on Texas Anti-Dilution Statute and the ACPA where

defendants reserved plaintiff’s trademark name as a domain name). In the context of a domain name

infringing on a trademark, each of these trademark infringement claims under the Lanham Act

essentially requires a plaintiff to establish the core facts of defendant’s “ ‘use in commerce,’ without

plaintiff’s consent, of a reproduction, counterfeit, copy, or colorable imitation of a registered [or

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distinctive] mark in connection with the sale, offering for sale, distribution, or advertising of any goods

or services” which likely causes confusion, mistake, or deception with plaintiff’s mark. 15 U.S.C. §

1114(1)(a), (b); see Major League Baseball Promotion Corp. v. Colour-Tex, Inc., 729 F. Supp. 1035,

1039-40 (D. N.J. 1990) (noting that identical facts supporting a trademark infringement claim under

section 1114 also support claims of common law unfair competition and false designation of origin

under section 1125(a))); Digital Equipment Corp. v. Altavista Technology, Inc., 960 F. Supp. 456, 476

(D. Mass. 1997) (listing the same elements for a claim under section 1125(a)); 4 McCarthy On

Trademarks and Unfair Competition § 25:76 (4th ed. 2005) (noting that, for cybersquatting to

constitute infringement of a trademark, “the accused use must also fit within the language of the

Lanham Act”).3

Accordingly, to allege any of these infringement claims, plaintiff must set forth facts

establishing a “valid mark entitled to protection and that the defendant’s [unauthorized] use of it is

likely to cause confusion.” OBH, Inc., 86 F. Supp. 2d at 185; see, e.g., C. Shields v. Zuccarini, 254

F.3d 476, 482 (3d Cir. 2001) (providing that cybersquatting action under section 1125(d) requires

proof a protectable trade mark, that defendant’s domain name is identical or confusingly similar to the

3 ?The Federal Trademark Dilution Act (Federal Dilution Act) requires the plaintiff to establish that (1) the plaintiff’s mark must be famous; (2) it must be distinctive; (3) the defendant’s use must be a commercial use in commerce; (4) the use must have begun after the plaintiff’s mark became famous; and (5) it must cause dilution of the distinctive quality of the plaintiff’s mark. Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 219 (2d Cir. 1999).

The Federal Dilution Act defines “dilution” as “the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception.” 15 U.S.C. § 1125(c). Under section 1125(a)(1) making unfair competition unlawful, a defendant is liable where defendant, “on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . is likely to cause confusion.” 15 U.S.C. § 1125(a)(1)(A).

Lastly, under the ACPA, the registration of a domain name shall be considered to be a violation where: (1) the domain name is identical or misleadingly similar to a trade or service mark in which the plaintiff has rights; (2) the defendant has no rights or legitimate interests in the domain name; and (3) the domain name has been registered and is used in bad faith. 15 U.S.C. § 1125(d); 4 McCarthy on Trademarks and Unfair Competition § 25:77, fn. 4 (4th ed. 2005). “Bad faith” is evidenced by, inter alia, an attempt to attract, for financial gain, Internet users to defendant’s Web site by creating confusion with the trade or service mark of plaintiff, or registration of the domain name to prevent the plaintiff from reflecting the mark in a corresponding domain name, or registration of the domain name to disrupt the business of a competitor. 15 U.S.C. § 1125(d); 4 McCarthy on Trademarks and Unfair Competition § 25:77, fn. 4.

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protected mark, and defendant’s bad faith intent to profit from the domain name); Virtual Works, Inc.

v. Volkswagen of America, 238 F.3d 264, 269-70 (noting that plaintiff had to prove that defendant

intended to profit from its use of plaintiff’s trademark as a domain name and that the domain name was

identical or confusingly similar to the distinctive mark); Major League Baseball Promotion Corp., 729

F. Supp. 1035, 1039-40 (noting that section 1125 covers cases where the infringed trademarks are not

registered and allows the court more leeway to exercise its equitable powers than a federal statutory

trademark infringement claim); 4 McCarthy On Trademarks and Unfair Competition § 25:78 (noting

the elements of a cybersquatting claim, including use of a domain name that is identical or confusingly

similar to a distinctive mark for commercial gain). Whether there is a likelihood of confusion turns on

whether “numerous ordinary prudent purchasers are likely to be misled or confused as to the source of

the product in question because of the entrance in the marketplace of defendant’s mark.” Gruner +

Jahr USA Publishing v. Meredith Corp., 991 F.2d 1072, 1077 (2d Cir. 1993).

Defendants have not, and cannot, dispute that plaintiffs have set forth sufficient allegations of

fact establishing that: (1) RSFI’s trademarks are registered, distinctive, and entitled to protection under

the Lanham Act; (2) that defendants’ use of the domain name of “Rosatispizza.com” likely causes

confusion among consumers; and (3) that defendants have used RSFI’s protectable trademarks in

commerce for their own pecuniary gain. (See Def. Mt., pp. 6-7). Rather, defendants raise only two

issues in their attempt to dismiss plaintiffs’ infringement claims. First, they claim that the License

Agreement permits them to use RSFI’s trademarks for their Web site’s domain name, even though

such usage deprives RSFI of the benefit of its trademarks on the Web. Second, defendants claim that

the individual plaintiffs’ do not have standing to bring infringement claims. (Id.). As a matter of law,

defendants’ arguments must fail. The License Agreement clearly mandates that all usage of RFSI’s

trademarks must be authorized and must benefit the corporation. These facts clearly distinguish this

case from those upon which defendants rely. Further, individual plaintiffs have standing because they

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are competitors with the individual defendants and because any harm to RSFI damages their

shareholder interests in RSFI. Each argument will be addressed in turn.

1. The License Agreement Does Not Authorize Defendants toUse RFSI’s Trademarks Exclusively as a Domain Name on the Web.

One who obtains authorization to reproduce trademarked materials may not exceed the scope of

authority granted by the trademark owner. See Major League Baseball Promotion, 729 F. Supp. at

1042. “Any ‘sales of goods or services under the mark which are outside the area of consent granted in

the license are regarded as infringements of the mark.’ ” Digital Equipment Corporation v. AltaVista

Technology, Inc., 960 F. Supp. 456, 473 (D. Mass. 1997). The License Agreement in this case

provides that the construction and enforcement of the agreement shall be governed in all respects by

the laws of the State of Illinois. As such, whether the License Agreement authorized defendants to use

a RFSI trademark as a domain name must be determined by applying contract construction principles

provided by Illinois case law. See also Id. (applying state contract law principles in interpreting

license agreement); Sterling Drug Inc. v. Bayer AG, 792 F. Supp. 1357, (S.D. N.Y. 1992) (same).

The primary objective in contract interpretation is to give effect to the intention of the parties

involved. Dunlap v. Illinois Founders Insurance Co., 250 Ill. App. 3d 563, 568 (1st Dist. 1993). “If

the contract is clear and unambiguous, the parties’ intent must be determined solely from the plain

language of the contract.” Tishman Midwest Management Corporation v. Wayne Jarvis, Ltd., 146 Ill.

App. 3d 684, 689 (1st Dist. 1986); accord Dunlap, 250 Ill. App. 3d at 568. Merely because the parties

cannot agree on the interpretation of the contract does not render a contract ambiguous. Tishman, 146

Ill. App. 3d at 689. If the contract is ambiguous, than the interpretation is a question of fact properly

left to the jury to decide. Id. Where, however, the contract is not ambiguous, the Court must give the

words of the contract their plain and ordinary meaning and interpret the contract’s provisions as a

matter of law. Id.

The License Agreement at issue does not confer RFSI’s consent for defendants to usurp RFSI’s

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trademark–namely, “Rosati’s Pizza”–for use as the domain name of their Web site defendants’

exclusive benefit and to the grave, economic disadvantage of RFSI and the remaining shareholders of

RFSI. Section 4 of the License Agreement is the operative provision:

“4. Ownership of Marks. Licensee acknowledges that any unauthorized use of the Marks by Licensee shall constitute an infringement of Company’s rights in and to the Marks and a breach of this Agreement. Licensee acknowledges and agrees that all use of the Marks by Licensee and any goodwill established thereby shall inure to the exclusive benefit of Company and that this Agreement does not confer any goodwill or other interests in the Marks upon Licensee (other than the right to use and sublicense the use of Marks in compliance with this Agreement). Licensee shall not, directly or indirectly, contest, deny or challenge the validity of the Marks or Company’s rights therein.” (Cmplt. Ex. C).

The unambiguous language contained in section 4 of the License Agreement unambiguously

requires that all uses of RFSI’s trademarks “shall inure to the exclusive benefit of” RFSI and that the

agreement “does not confer any . . . interest in the Marks upon Licensee.” The License Agreement

further provides that the licensee agrees that he “shall not, directly or indirectly, contest, deny or

challenge” RFSI’s rights in the trademarks and that any unauthorized use of the Marks by Licensee

shall constitute infringement of RFSI’s rights. Accordingly, because only RFSI is to benefit from use

of its trademarks under the License Agreement, it follows that all of the shareholders (not just a

minority of them) are to benefit from usage of RSFI’s trademarks as domain names.

In direct violation of these provisions, however, defendants registered “Rosati’s Pizza,” one of

RFSI’s trademarks, as the domain name of their Web site for the exclusive benefit of themselves, their

restaurants, and their sublicensees. In doing so, defendants have prevented RFSI, as well as its

remaining shareholders, from receiving any economic benefit that is yielded from a Web site bearing

the domain name which is the same as RFSI’s famous trademark “Rosati’s Pizza.”

Given that defendants needed RSFI’s authorization to use RSFI trademarks and that the

benefits of the trademarks were always to inure to RFSI, the unambiguous language contained in the

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License Agreement required defendants to obtain specific permission before using an RFSI trademark

in such a manner which would only benefit them, to the exclusion of RFSI and its other shareholders.

There are simply no allegations in the Complaint, or information contained in any exhibit, upon which

a reasonable inference could be drawn that RFSI authorized defendants to use RFSI’s trademarks as

domain names for defendants’ sole benefit while excluding RFSI and its remaining shareholders from

receiving any economic benefit from those domain names.

Moreover, that all of the shareholders and license holders agreed to the Rosati’s Marketing Co-

op and its marketing efforts on a common Web site bearing RFSI’s trademark of “Rosati’s Pizza”

confirms that plaintiffs’ interpretation of the License Agreement is the correct one. While all

shareholders and licensees were pooling their advertising efforts on the Internet through the Rosati’s

Marketing Co-op, the benefit went directly to RFSI for the past seven years, benefiting RFSI’s

goodwill, and every shareholder, licensee, and sublicensees of RFSI. As such, defendants’

interpretation of the License Agreement is wholly without merit. Accordingly, plaintiffs have set forth

sufficient facts establishing infringement claims under federal and state law. (See Cmplt., Counts I

through VI). Defendants’ motion to dismiss should be denied.

2. Defendants’ Cases Are Inapposite.

Defendants’ reliance on Twentieth Century Fox Film Corporation v. Marvel Entertainment

Group, Inc., 220 F. Supp. 2d 289 (S.D. N.Y. 2002), is unavailing. (Def. Mt. p. 8). Two key factual

differences distinguish the instant case from Marvel: (1) the express terms of the License Agreement

here as compared to the one in Marvel; and (2) the amount of confusion created by defendants’ usage

of the trademark here versus the lack of confusion by the defendant’s usage in Marvel.

As to the first, the license agreement at issue in Marvel expressly granted defendant “ ‘all rights

in the “X-Men” comic book series . . . which [defendant] may require in order to produce, distribute,

exploit, advertise, promote and publicize, . . . in and by any and all manner, media, devices, processes

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and technology now or hereafter known or created, exclusively and in perpetuity, theatrical motion

pictures’ based on the X-Men comic books.’ ” Id. at 294 (Emphasis added). In addition to these

board, express rights to use the “X-Men” trademark in advertisements, the Marvel license agreement

did not expressly limit defendant’s usage of the trademarks by requiring defendant to obtain

authorization or by requiring all benefits of the trademarks to inure to the plaintiff.

Conversely, section 4 of the License Agreement in this case expressly requires all usage of

RFSI’s trademarks to benefit RFSI, which in turn, ensures that the benefits of the trademarks flow to

all shareholders of RFSI. While the License Agreement does allow licensees to use the trademarks, it

does not give the defendants the broad right to use the trademarks in “any and all media” as does the

license agreement in Marvel. Moreover, the defendants’ right to use the trademarks is expressly

limited by the clear and unambiguous language that defendants are forbidden from all unauthorized

uses of the trademarks. The clear import of that provision is that licensees must have authorization, or

at least, the acquiescence of RFSI to use the trademarks in certain ways. Again, no such requirement

was set forth in the Marvel license agreement.

Second, the domain names chosen by defendant in Marvel were not likely to cause consumers

to be confused, mistaken, or deceived into believing that plaintiff, not defendant, was the source of the

Web site. This is because the domain names of the Marvel defendant’s Web site included not only the

trademark–“X-Men”–but also descriptive verbiage identifying defendant’s products, such as “movie,”

“DVD,” or “video.” Furthermore, the appearance and content of the Web site clearly did not deal with

plaintiff’s comic book product line, but rather dealt with defendant’s promotion of its movies.

Conversely, the products promoted by defendants in this case are exactly the same as the

products promoted by plaintiffs–namely, pizza and other related menu items made pursuant to the

same secret recipes and sold at or delivered from Rosati’s restaurants. Furthermore, defendants did not

bother to modify RFSI’s trademark so consumers would only identify defendants’ domain name with

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their restaurants rather than confuse it with a domain name that might be used by RFSI and the

remaining shareholders. Instead, defendants merely usurped the domain name solely consisting of the

trademark “Rosati’s Pizza” and employed it for their own exclusive use. In fact, confusion among

customers was not only very likely, considering that they had been using the trademark to access both

plaintiffs’ and defendants’ restaurants for the preceding seven years, actual confusion occurred as

evidenced by a number of angry customer correspondence. Clearly, the likelihood of, and the actual,

confusion in this case distinguishes it from the lack of confusion created by the trademark usage at

issue in Marvel. As such, given the differences in the licensing agreement, the use of the trademarks,

and the product lines of the parties, the Marvel case is inapposite and fails to support defendants’

motion to dismiss.

Defendants also rely heavily on Hard Rock Café International (USA) Inc. v. Morton, 97 Civ.

9483, 1999 U.S. Dist. LEXIS 8340 (S.D. N.Y. June 2, 1999). (Def. Mt. p. 9). Defendants contend that

the holding in Hard Rock supports a finding that their usage of “Rosati’s Pizza” as their domain name

does not infringe on RFSI’s protectable interest in that mark. Such an argument is specious at best

given the facts and license agreement at issue in Hard Rock.

The court in Hard Rock held that:

“The License Agreement contains a broad enough grant of rights to permit [defendant] to use the domain name “hardrockhotel.com.” The License Agreement explicitly authorizes [defendant] to ‘develop, maintain and update a Web page for the Hard Rock Hotel/Casinos or Casinos in the [defendant’s] Territories.’ It also permits [defendant] to make use of the Hard Rock Hotel Mark ‘anywhere in the world.’ There are no geographical gaps in the area in which [defendant] may use the Mark and there are no blanket restrictions on the media in which the mark may be used, save the restriction on mail order sales.” Id.

Again, the License Agreement in this case limits defendants to authorized uses of RFSI’s

trademarks. While the License Agreement does not contain any express limitations, it does not contain

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the broad brush authority to use RFSI’s trademarks as the authorizations reviewed in the Hard Rock

decision. Given that defendants needed RSFI’s authorization to use its marks and that the benefits of

the marks were always to inure to RFSI, the unambiguous language contained in the License

Agreement required defendants to obtain specific permission before using RFSI’s trademarks for their

sole benefit, to the exclusion of RFSI and its other shareholders. Such a requirement was not at issue

in Hard Rock.

Moreover, unlike the defendant in Hard Rock, defendants in this case were never granted the

express right to establish a Web site that promoted only their restaurants. On the contrary, as discussed

above, RFSI, by its shareholders, agreed to establish a single Web site to promote all of the

shareholders and sublicensees’ restaurants under the domain name of “rosati’spizza.com.” As such,

the Hard Rock decision does not support defendants’ argument that their usage of “Rosati’s Pizza” as a

domain name does not infringe on RFSI’s protectable rights in that mark. Again, defendants have not,

and cannot, show that plaintiffs have failed to set forth cognizable infringement claims.

3. Plaintiffs-Shareholders Have Standing.

Defendants incorrectly claim that the individual shareholders comprising the Anthony Rosati

Group do not have standing to bring Lanham Act claims against defendants because they are licensees

under the License Agreement. (Def. Mt. p. 11).

The individual plaintiffs rely on their status as shareholders of RFSI and as competitors of

defendants to establish standing in this case; they do not rely on their status as licensees as defendants

suggest. Section 1125(a) states that any one found to have infringed on a trademark “shall be liable in

a civil action by any person who believes that he or she is or is likely to be damaged by such act .” 15

U.S.C. § 1125(a) (Emphasis added). It is well settled that this language confers standing upon

competitors who have been damaged by the infringing conduct of a defendant and upon shareholders

of a corporation which has been harmed by another’s violation of the Lanham Act. 4 McCarthy on

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Trademarks and Unfair Competition § 27:32; accord Thorn v. Reliance Van Company, Inc., 736 F.2d

929, 931-33 (3d Cir. 1984). As to the latter, the courts reason that a shareholder’s investment in the

corporation is likely damaged when the corporation is damaged, and that as a result, they too have

standing to bring claims under the Lanham Act. 4 McCarthy on Trademarks and Unfair Competition §

27:32; accord Thorn, 736 F.2d at 931-33.

Here, the individual plaintiffs’ standing is established on both bases. First, individual plaintiffs

compete with defendants through operation of their Rosati’s restaurants. Notably, the License

Agreement allows competing Rosati’s restaurants to be located five miles or more from another

Rosati’s restaurant. (See Cmplt. Ex. C (License Agreement)). Defendants’ own statements also make

it clear that restaurants of the Anthony Rosati Group compete with those of the Rick Rosati Group.

After the Rick Rosati Group seized control of RFSI’s Web site, the Group posted a message

disparaging the authenticity and quality of the restaurants either owned or licensed by the Anthony

Rosati Group. (See Cmplt. Ex. I). The intent of the message is clear: it was to direct customers toward

those restaurants owned and controlled by the Rick Rosati Group instead of those of the Anthony

Rosati Group. Such unfair, competitive conduct underscores the competition between the two groups’

restaurants. Second, the individual plaintiffs are shareholders of RFSI. Consequently, their investment

in RFSI is damaged by the Rick Rosati Group’s infringement of RSFI’s trademarks. Thus, the

individual plaintiffs have standing as both competitors and as shareholders of a competitor, and

defendants’ claim that they do not have standing is meritless.

B. Plaintiffs Have Successfully Alleged Sufficient Facts Supporting the State Law Claims.

Defendants first argue that plaintiffs’ state law claims should be dismissed based on the same

arguments defendants make in favor of dismissing plaintiffs’ federal claims.4 (Def. Mt. pp. 13-14).

4 Defendants do not specifically address plaintiffs’ breach of fiduciary duty claims. Those claims, however, do not depend on the infringement claims, as defendants’ purchase and use of the domain name breached defendants’ fiduciary duties by usurping a corporate opportunity which should have been offered to RSFI. Rexford Rand Corp. v. Ancel, 58 F.3d 1215, 1218 (7th Cir. 1995); accord Anest v. Audino, 332 Ill. App. 3d 468, 476-77 (2d Dist. 2002) (shareholder breached his

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For the reasons stated above, those arguments must be rejected, and defendants’ motion to dismiss

plaintiffs’ state law claims should be denied. Second, defendants erroneously contend that plaintiffs’

Illinois Anti-Dilution Act claims fail because plaintiffs are direct competitors. This is an incorrect

interpretation of the scope of section 65(a). 765 ILCS 1036/65(a) (West 2004).

Section 65(a) does not limit relief to non-competitors nor does it state or even imply that

competitors are not protected under the Act. On the contrary, the scope of persons entitled to

protection under section 65(a) is broad, providing in relevant part:

“The owner of a mark which is famous in this State shall be entitled . . . to an injunction against another person’s commercial use of a mark or tradename, if the use begins after the mark has become famous and causes dilution of the distinctive quality of the mark.” 765 ILCS 1036/65(a) (West 2004) (Emphasis added.); accord Alberto-Culver Co. v. Andrea Dumon, Inc., 466 F.2d 705, 709 (7th Cir. 1972).

In Alberto-Culver, the Court summarized the scope of 65(a) as follows:

“That statute affords protection against use of a trade name by a non-competitor as well as by competitors. Polaroid Corp. v. Polaraid, Inc., 319 F.2d 830, 836-837 (7th Cir. 1963); Spangler Candy Co. v. Crystal Pure Candy Co., 235 F.Supp. 18, 23 (N. D.Ill.1954), affirmed, 353 F.2d 641 (7th Cir. 1966). Since plaintiff and defendant are competitors, there would be no need to rely on the dilution statute if there were a substantial similarity between the two labels or a "likelihood" of confusion. Conversely, without such similarity or likelihood, there is no greater right to relief under that provision than on traditional infringement grounds.” Alberto-Culver Co., 466 F.2d at 709 (Emphasis added.).

Similarly, in John Morrell & Co. v. Reliable Packing Co., 172 F. Supp. 276 (D.C. Ill. 1959),

the Court rejected the same argument that defendants submit in this case. In doing so, the Court stated:

“Defendant has moved to strike the third count on the grounds that it is inconsistent with the other two, apparently on the theory that the Illinois statute does not apply when the parties to an action are in competition. It is true that that Act applies when the parties are not in competition. [Citation.] However, there is nothing in its language

fiduciary duty to corporation by usurping a corporate opportunity).

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restricting it to that situation. In fact, the clause authorizing an injunction includes the phrase ‘notwithstanding the absence of competition between the parties'. This seems to indicate that the legislature feared that the Act might be applied only to competitive situations and wished to make sure that both competitive and non-competitive facts were covered; and the Illinois Appellate Court has so applied the Act.” [Citation.] John Morrell, 172 F. Supp. at 276-77 (Emphasis added.). Further, in EZ Loader Boat Trailers, Inc. v. Cox Trailers, Inc., 746 F.2d 375, 380 (7th Cir.

1984), a case upon which defendants rely, the court affirmed summary judgment against a plaintiff-

competitor only because it failed to establish infringement claims due to a lack of a likelihood of

confusion, not because plaintiff and defendant were competitors. In doing so, the court stated:

“The Anti-Dilution Statute is designed to protect a strong trade name or mark from use by another and hence dilution regardless of competition between the parties . . . . Dilution of a particular trademark can occur even though there may be no likelihood of confusion because the parties are not in competition; but where the parties are in competition and plaintiff could not obtain relief under the traditional laws of infringement and unfair competition, he will not be able to obtain relief under the Anti-Dilution Statute.” EZ Loader Boat Trailers, Inc., 746 F.2d at 380 (Emphasis added.).

Thus, where a plaintiff-competitor has established an infringement claim due to the presence of

a likelihood of confusion, that plaintiff can maintain a claim under the Illinois Anti-Dilution Statute.

The broad language of the Illinois Anti-Dilution statute grants a right of recovery for both competitors

and non-competitors. In no way does it limit its scope to plaintiffs and defendants who are non-

competitors. To do so, would eviscerate its purpose and would be contrary to the common law upon

which it is based. Accordingly, plaintiffs have alleged sufficient facts establishing an infringement

claim and can maintain a claim under the Illinois Anti-Dilution Statute. Defendants’ claim to the

contrary is simply without merit and belies the clear and unequivocal language and intent of the Anti-

Dilution Statute.5

5Defendants also cite AHP Subsidiary Holding Company v. Stuart Hale Company, 1 F3d 611 (7th Cir. 1993) and Door Systems, Inc. v. Overhead Door Systems, Inc., 905 F. Supp. 492 (N.D. Ill. 1995). To the extent that those cases seemingly stand for the proposition that competition by itself is enough to disqualify a plaintiff from bringing a claim under the Illinois Anti-Dilution Statute, such holdings are specious considering the plain language of the statute and the precedent

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V. CONCLUSION

For each of the foregoing reasons, plaintiffs, RFSI, Anthony Rosati, David Rosati, Stephen

Rosati, Geary Rosati, Richard Rosati, Joanne Rosati Czernek, and Lisa Rosati Suma respectfully

request that this Court deny defendants’ motion to dismiss.6

Respectfully submitted,

ROSATI FRANCHISE SYSTEMS, INC., et al.

By: __________________________________ One of their attorneys.

Norman T. FinkelChristopher E. StoutYoung, Rosen, Finkel & Silbert, Ltd.33 N. La Salle Street, Suite 900Chicago, Illinois 60602

allowing actions brought by competitors. See Filter Dynamics Int’l, Inc. v. Astron Battery Inc., 19 Ill. App. 3d 299 (1st Dist. 1979) (both competitors and non-competitors can set forth claims under the Anti-Dilution Statute where they establish the elements of an infringement claim); accord Alberto-Culver Co., 466 F.2d at 709.6 Denial of defendants’ motion to dismiss renders defendants’ request for attorneys’ fees moot. Notwithstanding, should the Court agree with some or all of defendants’ motion, defendants’ request should be denied given that the weight of authority cited in this Memorandum renders this case outside the class of “exceptional cases” where the prevailing party is awarded attorneys’ fees. See 15 U.S.C. 1117(a); S. Industries, Inc. v. Centra, 249 F.3d 625 (11th Cir. 2001).

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