Faizi v. Temori

Background

Ahmad Mukhtar Faizi filed a verified shareholder derivative complaint for money damages and injunctive relief on behalf of nominal defendant Falafel Flame, Inc. The complaint named Falafel Flame directors Baktash Temori and Masoud Rustakhis, along with various restaurant and business entities.

According to the complaint, Faizi, Temori, and Rustakhis founded Falafel Flame in 2019 and each owned 33.33% of the company. Falafel Flame later obtained a federal registration for the FALAFEL FLAME® service mark. Faizi alleged that defendants opened or operated four unapproved restaurants in Hayward, San Jose, Sunnyvale, and Upland, California, using the “Falafel Flame” name and the registered mark. He also alleged that “Blaze BBQ” entities used Falafel Flame’s name and logo without permission.

Faizi’s motion concerned only trademark-related claims: federal trademark infringement under the Lanham Act, California trademark infringement, and California trademark dilution. He sought to stop the unapproved establishments from using the mark and requested expedited discovery.

Legal standard and analysis

A preliminary injunction is temporary relief issued before a final judgment. The court required Faizi to show either a likelihood of success on the merits or serious questions going to the merits, a likelihood of irreparable harm, favorable balancing of hardships, and that an injunction would serve the public interest.

Defendants argued that Faizi had acted improperly and had accepted or failed to require royalty payments. The court rejected those arguments for purposes of this motion. It reasoned that the motion concerned alleged infringement of a mark owned by Falafel Flame, not the separate issue of royalty payments, and defendants had not shown that Falafel Flame had acquiesced in infringement.

The court found that Falafel Flame owned the federally registered mark, which defendants did not dispute. It concluded that the mark was suggestive and therefore protected without proof of secondary meaning. The alleged unapproved restaurants used an identical or substantially similar mark for the same restaurant services, making customer confusion likely. The court also considered the relevant trademark factors, including the marks’ similarity, the related services, marketing channels, customer care, evidence suggesting actual confusion, defendants’ knowledge and intent, and the possibility of business expansion.

The court determined that Faizi had shown a likelihood of success on the merits of the derivative Lanham Act trademark claim. That finding triggered a rebuttable presumption of irreparable harm, which defendants did not rebut. The court found that the balance of hardships favored Faizi and that the public interest supported an injunction because it would prevent further infringement and consumer confusion.

Order

The court granted Faizi’s motion for a preliminary injunction, subject to Falafel Flame posting a $4,000 bond within 14 days. The injunction applied to Temori, Rustakhis, the defendants operating the specified unapproved Falafel Flame restaurants, and persons acting with them. It barred them from using, imitating, or copying the FALAFEL FLAME® mark or confusingly similar marks; operating the specified Hayward, Sunnyvale, Upland, and San Jose businesses under the “Falafel Flame” name or using the mark; claiming sponsorship or affiliation with Falafel Flame; and engaging in conduct likely to confuse consumers.

The order also required removal and cessation of use of the mark on advertising, promotional materials, websites, social-media accounts, signs, menus, and other physical materials under the defendants’ control. The injunction would take effect when the bond was posted and would remain in effect while the case continued unless modified or dissolved by the court.

The court further found good cause for expedited discovery and allowed Faizi to immediately serve interrogatories on Temori and Rustakhis concerning any licenses to use the mark and other unauthorized uses. The court stated that such interrogatories would count against the presumptive discovery limits unless it ordered otherwise. Judge Virginia K. Demarchi entered the order as a United States magistrate judge.