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Intelligent Office System, LLC v. Virtualink Canada, Ltd.

United States District Court, D. Colorado

February 18, 2016

THE INTELLIGENT OFFICE SYSTEM, LLC, a Colorado limited liability company, Plaintiff,
VIRTUALINK CANADA, LTD., a Canadian corporation, and BRIAN MONTEITH, Defendants.


Christine M. Arguello Judge

Before the Court is Plaintiff Intelligent Office System, LLC’s (IO’s) Motion for a Preliminary Injunction. (Doc. # 9.) As explained in greater detail below, IO fails to show either that (1) it would suffer irreparable harm absent the requested injunction or (2) that the balance of the hardships weighs in its favor. Accordingly, the Court denies the instant Motion.


IO is a Boulder-based LLC that has developed proprietary methods for establishing, operating, and promoting so-called “virtual” offices. Such offices allow customers to split overhead costs by “sharing” the use of office personnel (such as receptionists or secretaries), office equipment (such as scanners, copiers, and fax machines), and office space (such as workspaces and conference rooms). (Doc. # 1, ¶ 9; Doc. # 91 at 1-2.)

On Feburary 1, 2006, IO entered into a 20-year “Master License Agreement” (MLA) with Virtualink Canada, LTD (Virtualink), a Canadian corporation. (Doc. # 9-2 at 5.) The MLA granted Virtualink the exclusive rights to use IO’s trademarks and its “licensed methods” in connection with the licensing of subfranchisees throughout Canada (exclusive of Prince Edward Island). (Id.) In exchange for a cash payment and the right to use IO’s trademarks and licensed methods, Virtualink agreed to a variety of detailed conditions, including (1) paying IO a percentage of the gross royalty receipts it collected from subfranchisees in Canada; (2) using IO’s standard, form franchise agreement and adhering to IO’s other standards and specifications in developing the subfranchisees; and (3) meeting and maintaining certain “sales and opening goals, ” which provide that a particular increasing “minimum number” of virtual office “centers” would be opened throughout the Licensed Territory in each year of the 20-year agreement (for example, Virtualink is supposed to have established nine centers in 2009, and 15 centers in 2011). (See id.)

Section 14.2 of the MLA contains the following language regarding termination of that agreement:

The Licensor [IO] shall have the right to terminate all agreements, including this Agreement, between Licensor and Master Licensee [Virtualink] or its affiliates, on 30 days prior written notice, if Master Licensee or its affiliates materially breach the provisions of any agreement any of them have with the Licensor.
Under circumstances where the breach is of the nature that it may be remedied through the actions of the Master Licensee, the Licensor shall permit the Master Licensee the same thirty day period to remedy any such breach or default, after which time, if the breach or default has not been remedied, the Licensor may terminate this Agreement immediately.
Notwithstanding the foregoing, if the breach is remediable, but is of a nature which cannot be reasonably remedied within such thirty day period and the Master Licensee has commenced and is continuing to make good faith efforts to remedy the breach during such thirty day period, then the Master Licensee shall be given an additional reasonable period of time to remedy the same and this Agreement shall not terminate. Under no circumstances will the Licensor terminate the Agreement without good cause.

(Doc. # 9-2 at 21) (emphasis added). Section 14.3 of the MLA also provides that Virtualink had some of the following “post-termination obligations”:

Pay to the Licensor all fees, and any and all amounts or accounts payable then owed the Licensor or its affiliates pursuant to this Agreement, or pursuant to any other agreement, whether written or oral, between the parties, within fifteen days of the effective date of such termination;
Immediately cease to identify the Master License business as being, or having been, associated with the Licensor, and immediately cease using any of the Marks, or any mark in any way associated with the Licensed Methods for any purpose, except pursuant to any other effective agreement with the Licensor;
Promptly take such action as may be required to cancel all trade names or equivalent registrations relating to its use of any Marks of the Licensor or, at the option of the Licensor, assign the same to the Licensor;
Abide by the provisions related to transfer of any and all of the Master Licensee's interest under any Franchise Agreements, as set forth below and offer to the Licensor the option to take assignment of the Franchise Agreements ...

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