Ken's Steak House, Ken's Foods embroiled in trademark lawsuit - Statistical Data Included

FRAMINGHAM, MASS. -- The 61-year-old KEN'S STEAK HOUSE and salad-dressing producer KEN'S FOODS are locked in a a legal dispute that will hinge finally on who controls the rights to trademarks that both businesses have been using for decades.

Both the 660-seat Framingham-based steakhouse and the multimillion-dollar food products company have laid claim to the ownership of three trademarks: "Ken's," "Ken's Steak House" and a rendering of the restaurant as reprinted on the salad-dressing labels and menus.

Ken's Foods Inc., which ranks right behind Kraft and Wishbone as the No.3 salad-dressing maker, was formed almost 50 years ago by the owners of the steakhouse and two friends to bottle and sell the restaurant's popular Italian-style salad dressing through retail channels. The dressing was -- and continues to be -- marketed under the Ken's Steak House brand with the image of the restaurant on the label. Today privately held Ken's Foods produces more than 400 varieties of dressings, marinades, and deli and seafood sauces, which generate annual sales of about $200 million.

The legal battle began when Ken's Foods filed a lawsuit against the restaurant operator in U.S. District Court in Boston last November, claiming, among other things, federal trademark infringement. The Marlborough, Mass.-based company asserted that Ken's Steak House had been misrepresenting its role concerning the commercial success of the salad dressing on the Internet, in telephone ads and in the media.

The lawsuit seeks to block the restaurateur from making further "confusing" and "misleading" statements while also asking for damages, attorney fees and costs.

According to Howard Susser, attorney for Ken's Foods, his client obtained a Massachusetts trademark registration in 1959 and a federal trademark registration in 1980 for the three trademarks. He noted that Ken's Steak House was able to employ the symbols for restaurant usage.

However, Julia Huston, attorney for Ken's Steak House, said her client has petitioned the court to cancel the trademark registrations, arguing that Ken's Foods did not volunteer information at the time of registration that anyone else had the right to the symbols in dispute.

"The trademark office gives [ownership] to the one that applies, without conducting research of its own," she said.

Susser argued, however, that the owners of Ken's Steak House have known about the registration for 20 years but never disputed it until now.

This January Ken's Steak House filed a counterclaim stating that it had been affiliated historically with Ken's Foods since the mid-1950s and sold its namesake salad dressing commercially in the restaurant for more than four decades. As a result, Huston argued, it is entitled to link the two businesses.

Moreover, Ken's Steak House asked the court to recognize it as the longtime licensor of the brand and to designate Ken's Foods as the licensee.

The restaurant was opened in 1940 by Ken and Florence Hanna on Route 9 in Framingham as a 15-seat roadside diner called Cafe, 41, according to court documents. Over time it grew in size, and in the mid-1950s the Hannas changed the name officially to Ken's Steak House. By 2001 the steakhouse was generating an estimated $4.5 million in sales annually, according to Chain Store Guide's 2002 Directory of High Volume Independent Restaurants.

It was during the mid-'50s that the Hannas were approached by two friends, Louise and Frank Crowley, who suggested that the couples team up to produce the restaurant's popular Italian-style salad dressing for commercial sales. Frank Crowley had experience in the grocery business, and the Hannas and Crowleys agreed to form an independent company that would bottle and market the dressing. Both couples agreed to share equally in the profits from the venture. The company was incorporated in 1958 as Ken's Foods Inc.

Huston maintained that during that period the Hanna's granted an oral, or implied, license to Ken's Foods to use the Ken's Steak House marks.

In 1973 Florence and Ken Hanna sold their remaining outstanding shares to their son, Timothy Hanna, and Joseph Shay, the husband of their daughter, Mary Constance Shay. The Hannas died in the mid-1990s.

The current dispute has been complicated by the fact that Timothy Hanna is not only the owner of Ken's Steak House but also the largest shareholder in Ken's Foods, with 20 percent of the stock.

Ken's Foods, on the other hand, is run by Louise and Frank Crowley's son, Frank Andrew Crowley III, while Joseph Shay serves as vice president of finance for the company.

Ken's Foods since its founding has grown dramatically, to the extent that is now ranks as the third-largest seller of salad dressing in the United States, behind only Kraft and Wishbone. It employs about 600 staffers at plants in Massachusetts and Georgia and has plans to open a new facility in Nevada.

About 59 percent of Ken's Foods' business is generated through sales to the foodservice industry, which totaled about $100 million in 2001, according to court documents. Retail sales of the company's bottled products reached almost $88 million last year.

Ken's Foods, in addition to alleging misrepresentation on the restaurant's Internet site, also claimed that Timothy Hanna offered misleading information in an article that appeared in Nation's Restaurant News last July 30. The article said, "Although [Hanna] is not involved in day-to-day factory operation, he is the largest shareholder in Ken's Foods, he says, and takes steps to ensure there are no ingredient mishaps. 'We specialize in natural ingredients,' he insists. 'The only two oils we have are canola and olive. We buy no genetically engineered goods of any kind nor do we at Ken's Steak House.'"

Ken's Foods asserts in its lawsuit that the comments made by Hanna "falsely state and imply that [he] and the KSH restaurant are affiliated with KFI, or that... Hanna himself, or the restaurant, play some role in the manufacture and sale of the KFI's products, when neither is the case."

In its counterclaim Ken's Steak House called the suit "completely unmeritorious and is just the most recent act of harassment in a long line of abuses Ken's Foods has committed against Ken's Steak House."

Huston said Ken's Foods is "asking for a court order for the restaurant to stop referring to itself as the home of Ken's Steak House dressing or claiming that there is any affiliation past or present.

"I think what [Ken's Foods is] seeking is clear, independent title for the Ken's Steak House name," Huston said. "It's obviously very valuable. What we would like to see is that both parties could continue doing what they're doing... and that we ask the court to declare that there is a royalty-free, revocable license from Ken's Steak House to Ken's Foods."

Susser said Ken's Foods has moved to dismiss the claims for a revocable license, stating that Ken's Steak House wants "the power under threat of revocation to demand more money."

Huston said her client "doesn't have any present intention on revoking the license. They never tried to revoke it over the course of the past 50 years. But the licensee wants the ability to revoke the license if it feels that Ken's Foods no longer reflects well on the Ken's Steak House name."