By Erik Gruenwedel | Posted: 24 Sep 2008
A federal court has issued a preliminary injunction against Mark Wattles’ Boards Video Company LLC from operating 20 video stores under the Hollywood Video and Game Crazy trademarks.
Wattles, co-founder and former CEO of Hollywood Video, sold the former No. 2 video rental company to No. 3 Movie Gallery in 2005 for $1.1 billion.
The decision by the U.S. Bankruptcy Court in Richmond, Va., mandates Boards remove all Hollywood Video and Game Crazy signage from its stores within seven days.
Dothan, Ala.-based Gallery said it would seek damages and pursue a permanent injunction against Boards, on the grounds Wattles company’s actions subjected Gallery’s image, reputation, and market position to “irreparable harm.”
“We are pleased with the court’s order and are hopeful that Boards will cease its continuing violations,” said Sherif Mityas, COO and president of retail operations with Gallery. “We will vigorously defend our brands and will not tolerate infringement on our trademarks.”
Wattles operated 20 Hollywood Video stores since 2001 and continued to run them following the sale under a license agreement. The stores generate about $30 million in annual revenue and employ about 400 people, according to court filings.
Gallery contends the agreements ended when it entered bankruptcy and emerged under new ownership and management.
Wattles claimed that failure to operate the stores under the Hollywood name would negatively impact the businesses.
In court filings, the executive said he personally guaranteed many of the stores' leases and faced about $19 million in costs should the stores cease operation.
The Wattles-owned Hollywood Video stores have generated more than $600,000 in royalties (2% quarterly) and $385,000 yearly in distribution fees to Gallery since 2003. Gallery earned more than $1 million in fees this year, according to court records.
Denver-based Wattles, whose handpicked appointee, James Marcum, was named CEO of Circuit City this week, was not immediately available for comment.