Movie Gallery gets injunction against Hollywood founder

Wattles missed signage-removal deadline from March settlement

By Danny King -- Video Business, 9/23/2008 6:58:00 PM

SEPT. 23 | Movie Gallery won a court injunction against the founder and former owner of its Hollywood Video unit six months after settlement terms between Movie Gallery and Mark Wattles' Boards Video stated that the latter had to remove Hollywood Video and Game Crazy signage from 20 stores by the end of last month.

Boards Video must remove the signage within seven days, Movie Gallery said, citing an injunction from the U.S. bankruptcy court for Virginia's Eastern District. Boards missed the Aug. 31 deadline from a March 26 court order stemming from the settlement to take down the signage, Movie Gallery said.

"The Hollywood Video and Game Crazy brands are well known and highly valuable," Sherif Mityas, chief operating officer of Movie Gallery, said in a statement. "We will vigorously defend our brands and will not tolerate infringement on our trademarks."

Wattles plans to replace the signage as he expands two brands, Mark's Video and Game Tag, within his Wattles Gaming Systems umbrella throughout the western U.S. starting later this year, according to a report in The Oregonian. Wattles, who is squabbling with Movie Gallery over the reasonable amount of time it takes to switch branding for the 20 stores, said he had planned to move Hollywood Video and Game Crazy away from movie rental and toward videogame rental before he sold the chains to Movie Gallery, according to the report.

Movie Gallery in November filed court papers to sever its relationship with Wattles, who had been granted Hollywood Video licensing rights to 20 stores after selling the chain to Movie Gallery in 2005 for $1.2 billion. Movie Gallery's debt load from buying the chain, which Wattles founded in 1988, helped cause the company to file Chapter 11 in October. Movie Gallery emerged from bankruptcy in May.

Movie Gallery, the No. 2 movie-rental chain behind Blockbuster, said today that it also will seek damages against Boards as well as a permanent injunction against the company. Boards, whose 20 stores had been the subject of a dispute over whether they would be sold to Movie Gallery and at what price, said last year that it was paying Movie Gallery about $900,000 annually in royalties.

According to the March settlement, Movie Gallery was no longer obligated to supply Boards with titles with street dates after July 2, while Boards was going to be removed from Movie Gallery's point-of-sale system as early as May.