Kfc Corporation V. Marion-Kay Company, Inc.

KFC Corporation v. Marion-Kay Company, Inc. 620 F. Supp. 1160, Web 1985 U. S. Dist. Lexis 14766 The Kentucky Fried Chicken Corporation (KFC) is the franchisor of KFC restaurants. KFC’s registered trademarks and service marks include “Kentucky Fried Chicken,” “It’s Finger Lickin’ Good,” and the portrait of Colonel Harlan Sanders. KFC grants licenses to its franchisees to use these marks in connection with the preparations and sale of “Original Recipe Kentucky Fried Chicken. Original Recipe Kentucky Fried Chicken, which is sold only by KFC franchisees, is prepared by a special cooking process featuring the use of a secret recipe seasoning known as “KFC Seasoning. ” This blend of seasoning was developed by KFC’s founder, Colonel Harlan Sanders. As a condition of each franchise agreement, KFC requires that its franchisees use only KFC Seasoning in connection with the preparation and sale of Kentucky Fried Chicken. To make the seasoning, which is a trade secret, KFC has entered into contracts with two spice blenders, the John W. Sexton Company, Inc. Sexton), and Strange Company (Strange).

Each company blends about one half of the KFC Seasoning, with neither having knowledge of the complete formulation, and both entered into secrecy agreements to maintain confidentiality of their formulations. After the seasoning is blended by Sexton and Strange, it is mixed together and sold directly to all KFC franchisees. KFC does not receive a royalty or any other economic benefit for its sale. KFC’s relationship with Sexton and Strange has existed for more than 25 years; no other companies are licensed to blend the seasoning. Marion-Kay Company, Inc. Marion-Kay) was a spice blender engaged in the manufacture of chicken seasoning known as “Marion-Kay Seasoning. ” Marion-Kay requested permission from KFC to sell its seasoning products to KFC franchisees, which KFC refused. Four years later, KFC learned that Marion-Kay was supplying some KFC franchisees with Marion-Kay Seasoning and demanded that it cease this practice. When Marion-Kay refused, KFC sued it for interference with contractual relations. Marion-Kay filed a counterclaim, alleging violation of antitrust law. The issue in this case is whether or not Marion-Kay acted ethically in selling its seasoning to the KFC franchisees.

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The rules of law in this case are 1) the violation of the Lanham Trademark Act (which provides for registration of trademarks and service marks to prohibit others from misusing these marks) through false descriptions and representation of Marion-Kay seasoning products to KFC franchisees of “Kentucky Fried Chicken” restaurants and that Marion-Kay tortuously interfered with KFC’s contractual relations with its franchisees, and 2) Section 1 of the Sherman Act which prohibits contracts, combinations, and conspiracies in restraint of trade.

The application of law was the ruling that in a situation involving the sale of franchise items, there can be no unlawful tying arrangement absent some proof that there has been a sale of two separate products. In this instance, the tied product was manufactured pursuant to a secret formula, in which the trademark actually served as a representation of the end product marketed by the franchisor to which the public expects. The Court was precluded from finding that the trademark was a separate product from the allegedly tied item because the trademark itself and the quality of the end product are identified as a single item.

In conclusion, Marion-Kay did not act ethically by selling its seasoning to the KFC franchisees because it knowingly and purposely went against KFC’s repeated requests to not interact with its franchisees. The KFC trademarks and service marks by the KFC franchisees is so interrelated with KFC Seasoning, that no reasonable person could find that the franchise trademarks and KFC Seasoning are two separate products for tying arrangement purposes.

Therefore, the requirement that KFC franchisees purchase KFC Seasoning through Sexton and Strange is not an unlawful tying arrangement in violation of Section 1 of the Sherman Act. As a matter of law in accordance with the Lanham Trademark Act, KFC may, in order to protect its trade secrets and quality of its goods, choose any manufacturer it wants to reproduce and distribute KFC Seasoning to the franchisees.

The fact that Marion-Kay is precluded from manufacturing and distributing KFC Seasoning is not a violation of the anti-trust laws and that Marion-Kay is in violation of the Lanham Trademark Act. I agree with the outcome of this case. I believe that the seasoning is a trademark of KFC and the rights and secrets to it are allowed to be protected and that Marion-Kay was acting unethically in selling its seasonings to the franchisees.