OPERATION CLAMBAKE: SCIENTOLOGY COURT FILES

Part of a public library containing court papers related to lawsuits involving Scientology in some way. Collected to help lawyers and critics of Scientology in future lawsuits from or against this cult. Please report back if this has been of help, or send new contributions to the collection. Thanks. Andreas Heldal-Lund (heldal@online.no)




    CHURCH OF SCIENTOLOGY INTERNATIONAL, a corporation;  Religious Technology
 Center, a corporation;  and Scientology Missions International, a corporation,
                             Plaintiffs-Appellants,
                                       v.
 The ELMIRA MISSION OF THE CHURCH OF SCIENTOLOGY, a corporation, a/k/a Church of
    Scientology, Mission of Elmira, a/k/a Dianetics Center, a/k/a Scientology
 Elmira, a/k/a Center for Creative Learning;  Harry Palmer, an individual;  and
             Avra Honey-Smith, an individual, Defendants-Appellees.
                            No. 537, Docket 85-7693.
                         United States Court of Appeals,
                                 Second Circuit.
                              Argued Dec. 6, 1985.
                             Decided June 23, 1986.
  International religious organization which brought trademark infringement suit
 against local religious organization moved for preliminary injunction to
 restrain local organization from further infringement during pendency of suit.
 The United States District Court for the Western District of New York, 614
 F.Supp. 500, Michael A. Telesca, J., denied motion, and international
 organization appealed.  The Court of Appeals, Cardamone, Circuit Judge, held
 that:  (1) even if local organization, a licensee, had not in fact reduced
 reputation associated with marks of international organization, mere
 possibility that local organization could during interval prior to trial depart
 from teachings of international organization was irreparable harm sufficient to
 support issuance of the injunction, and (2) international organization
 established probability of success on merits entitling it to preliminary
 injunction, by making unrebutted case that it owned trademarks and presenting
 evidence establishing customer confusion.
  Reversed and remanded with direction.

 [1] FEDERAL COURTS
 Appellate court may reverse ruling on preliminary injunction only when district
 court has abused its discretion by misinterpreting law, by committing a clear
 error of fact, or by erroneously fashioning substance or form of injunction.

 [2] TRADE REGULATION
 Establishing high possibility of consumer confusion as to sponsorship almost
 inevitably establishes irreparable harm as an element necessary for trademark
 holder to be entitled to injunction;  proof of such confusion also serves as
 additional evidence with respect to separate finding that must be made of
 holder's likelihood of success on merits.

 [3] TRADE REGULATION
 In licensor/licensee case, reasons for issuing preliminary injunction for
 trademark infringement are more compelling than in ordinary case;  when in
 licensing context unlawful use and consumer confusion have been demonstrated,
 finding of irreparable harm is automatic.

 [4] TRADE REGULATION
 Licensor, as holder of numerously federally registered trademarks and service
 marks, was entitled to strong presumption of marks' validity and of ownership,
 and, upon licensee's obtaining license to use marks, licensees acknowledged
 marks' validity and licensor's superior rights to them.

 [4] TRADE REGULATION
 Licensor, as holder of numerously federally registered trademarks and service
 marks, was entitled to strong presumption of marks' validity and of ownership,
 and, upon licensee's obtaining license to use marks, licensees acknowledged
 marks' validity and licensor's superior rights to them.

 [4] TRADE REGULATION
 Licensor, as holder of numerously federally registered trademarks and service
 marks, was entitled to strong presumption of marks' validity and of ownership,
 and, upon licensee's obtaining license to use marks, licensees acknowledged
 marks' validity and licensor's superior rights to them.

 [5] TRADE REGULATION
 In order for preliminary injunction to issue restraining trademark
 infringement, there must first be established an infringing use and a
 probability of confusion as to ownership or sponsorship of product.

 [6] TRADE REGULATION
 Unauthorized use of mark by former licensee invariably threatens injury to
 economic value of goodwill and reputation associated with licensor's mark, and,
 as a consequence, licensor who establishes likelihood of confusion as to
 product sources in trademark infringement suit simultaneously demonstrates
 requisite irreparable harm essential to obtaining preliminary injunction.

 [7] TRADE REGULATION
 International religious organization was not required to prove that local
 religious organization, a terminated licensee, had departed from tenets of
 religion in order to be entitled to preliminary injunction;  rather, loss of
 control resulting from local organization's continued use of trade and service
 marks constituted irreparable harm in licensing context, because ability at any
 time to ensure compliance with agreement and to control local organization's
 activities was integral part of contract.

 [8] TRADE REGULATION
 Even if local religious organization, a licensee, had not in fact reduced
 reputation associated with marks of international religious organization, mere
 possibility that local organization could during interval prior to trial depart
 from teachings of international organization was irreparable harm
 sufficient to support issuance of the injunction.

 [9] TRADE REGULATION
 Licensor that establishes infringing use and consumer confusion in trademark
 suit brought against former licensee has proved irreparable harm as matter of
 law, for purpose of determining whether licensor is entitled to preliminary
 injunction.

 [10] TRADE REGULATION
 International religious organization established probability of success on
 merits entitling it to preliminary injunction restraining use of trade and
 service marks by local religious organization, a terminated licensee, by making
 unrebutted case that it owned trademarks and presenting evidence establishing
 customer confusion.

 [11] TRADE REGULATION
 Once licensor authorizes licensee to use trademark in particular area, licensor
 has demonstrated desire to expand into that area, and, when licensee loses
 authorization, licensor should not have to prove its intention to reerect a new
 presence in area in order to be entitled to preliminary injunction restraining
 trademark infringement in such area.
  *40 Michael C. Elmer, Washington, D.C. (Finnegan, Henderson, Farabow,
 Garrett & Dunner, Washington, D.C., Paul J. Yesawich, III, Kevin J. Arquit,
 Harris, Beach, Wilcox, Rubin and Levey, Rochester, N.Y., Thomas M. Small,
 Fulwider, Patton, Rieber, Lee & Utecht, Los Angeles, Cal., of counsel), for
 plaintiffs-appellants.
  Mark S. Nunn, Rochester, N.Y. (Weidman & Jordan, Rochester, N.Y., of counsel),
 for defendants-appellees.

  Before LUMBARD, CARDAMONE and WINTER, Circuit Judges.

  CARDAMONE, Circuit Judge:
  This appeal is from a denial of a preliminary injunction.  614 F.Supp.
 500.  Appellants, who had licensed appellees to use their registered
 trademarks, later terminated the appellees' authority.  When the former
 licensees continued their now unauthorized use, appellants brought a Lanham Act
 suit and sought a preliminary injunction.  The issue in this case is whether in
 the licensor/licensee context irreparable harm automatically flows from a
 finding of unlawful use and consumer confusion.  Common sense plainly suggests
 that when a terminated franchisee's continued use of its former franchisor's
 trademarks results in demonstrated consumer confusion, the franchisor has been
 irreparably harmed.  Hence, we reverse the order denying a preliminary
 injunction and direct its issuance.
                                        I
  The facts are largely undisputed.  Plaintiffs-appellants are three California
 corporations:  Church of Scientology International (CSI) is the "Mother Church"
 for its 33 churches and 80 Missions in the United States;  Scientology Missions
 International (SMI) is the head of the Missions;  and Religious Technology
 Center (RTC) is the owner and protector of the trademarks and service marks of
 the religion of Scientology.  Defendants-appellees are Harry Palmer and Avra
 Honey-Smith, residents of Elmira, New York, and the Elmira Mission of the
 Church of Scientology, a New York corporation.  L. Ron Hubbard was the founder
 of and--until his recent death on January 24, 1986--reputedly controlled the
 Church of Scientology.  Defendant Harry Palmer has since 1972 operated an
 authorized Scientology Mission in Elmira.  In 1975 the Elmira Mission
 incorporated under the name "the Elmira Mission of the Church of Scientology"
 and the following year it was granted a license to use all Scientology
 trademarks and service marks held and controlled by Mr. Hubbard.  In exchange
 for that right, defendants were to pay ten percent of its income as a tithe to
 the Mission Office.  Six years later Mr. Hubbard allegedly assigned his rights
 in all Scientology trademarks to RTC, which had been organized especially to
 own and protect all Scientology trademarks.
  *41 RTC immediately increased the licensing fee.  On September 9, 1982
 defendants signed a new License Agreement requiring them to pay 15 percent of
 their income as well as additional fees to RTC in order to continue using the
 Scientology trademarks.  The following day defendants renounced the agreement,
 but continued to use the marks and to pay the former ten percent tithe.  When
 in November 1984 defendants ceased making any payments to the Mission Office,
 appellants promptly moved for arbitration provided for under the agreement.
 Upon defendants' refusal to appear or participate, a default judgment was
 rendered by the arbitrator against them on November 14, 1984.  As further
 efforts to resolve the dispute were unsuccessful, appellants on March 25, 1985
 filed a complaint in the United States District Court for the Western District
 of New York (Telesca, J.) and sought a preliminary injunction.  Plaintiffs'
 complaint broadly alleges claims for relief under the Trademark Act of 1946
 (the Lanham Act), 15 U.S.C. ss 1051-1127 (1982), specifically ss 1114(1)
 and 1125(a), and pendent actions under New York laws relating to trade and
 service marks, trade names, dilution, unfair practices and breach of contract.
 The application for a preliminary injunction, limited to the Lanham Act claims,
 seeks to enjoin defendants from continuing to use appellants' marks pending the
 trial of the action.
  The district court denied the motion on August 1, 1985.  The court noted that
 a preliminary injunction may be granted only if the plaintiff makes a showing
 of irreparable harm.  It concluded that the presumption of irreparable harm
 which arises from a demonstration by a trademark plaintiff of a likelihood of
 confusion is rebuttable.  The district judge then found plaintiffs had not
 sufficiently shown that defendants' use of the trademarks would in any way
 damage the business or reputation of the Church of Scientology.  The district
 court further found inconsistencies in our traditional rule that a trademark
 plaintiff almost inevitably satisfies the required irreparable harm prong upon
 showing that the use of his mark or name by someone else in connection with the
 sale or offer of goods and/or services nearly identical to those of the
 trademark-owner is likely to cause consumer confusion.  The district court
 denied the preliminary injunction having found irreparable harm absent.  It did
 not therefore reach or consider the likelihood of success prong.  This
 expedited appeal followed.
                                       II
                               A. Irreparable Harm
                              1. Traditional Rules
  [1] An appellate court may reverse the grant or denial of a preliminary
 injunction only when the district court has abused its discretion, by
 misinterpreting the law, by committing a clear error of fact, or by erroneously
 fashioning the substance or form of the injunction.  Coca-Cola v. Tropicana
 Products, Inc., 690 F.2d 312, 315-16 (2d Cir.1982).  A preliminary injunction
 should be granted where the moving party demonstrates (1) irreparable harm and
 (2) either (a) a probability of success on the merits or (b) sufficiently
 serious questions going to the merits to make them fair grounds for litigation
 and a balance of hardships tipping decidedly in the moving party's favor.
 Id. at 314-15;  Power Test Petroleum Distributors v. Calcu Gas, 754 F.2d
 91, 95 (2d Cir.1985).
  [2][3] For many years we have consistently held that a preliminary
 injunction should usually issue when the use of a mark creates a likelihood of
 confusion in the consumers' minds as to the ownership or sponsorship of a
 product.  Our cases clearly say that establishing a high probability of
 confusion as to sponsorship almost inevitably establishes irreparable harm.
 Proof of such confusion also serves as additional evidence with respect to the
 separate finding that must be made of plaintiff's likelihood of success on the
 merits.   Standard & Poor's Corp. Inc. v. Commodity Exchange Inc., 683 F.2d
 704, 708 (2d Cir. 1982);  see, e.g., Matter of Vuitton et Fils *42 S.A.,
 606 F.2d 1, 4 (2d Cir.1979) (per curiam);  Omega Importing Corp. v. Petri-
 Kine Camera Company, 451 F.2d 1190, 1195 (2d Cir.1971).  These rules govern in
 the ordinary case.  The implication of the phrase that irreparable harm "almost
 inevitably" follows from likelihood of confusion leaves the door slightly ajar
 perhaps for those few cases in other trademark contexts where irreparable harm
 does not follow.  The district court may have thought that this was one of
 those rare cases.  But in a licensor/licensee case the reasons for issuing a
 preliminary injunction for trademark infringement are more compelling than in
 the ordinary case.  When in the licensing context unlawful use and consumer
 confusion have been demonstrated, a finding of irreparable harm is automatic.
  [4] Appellants licensed their marks to defendants and then, according to the
 undisputed facts in the record, terminated defendants' authority to use them
 under the terms of a written contract between the parties.  As holders of
 numerous federally registered trademarks and service marks, appellants are
 entitled to a strong presumption of their marks' validity and of ownership.
 See American Home Products v. Johnson Chemical Co., 589 F.2d 103, 107 (2d
 Cir.1978).  Moreover, when defendants obtained a license to use the marks--
 first in the mid-1970s from L. Ron Hubbard and later in 1982 from RTC--they
 acknowledged the marks' validity and appellants' superior rights to them.
  Such acknowledgment strongly reinforces appellants' claim that infringement
 would be caused if defendants, as former licensees, continued their use of the
 marks after their authorization to do so had been terminated.  Burger King
 Corp. v. Mason, 710 F.2d 1480, 1492-93 (11th Cir.1983), cert. denied, 465
 U.S. 1102, 104 S.Ct. 1599, 80 L.Ed.2d 130 (1984).  The record reveals that
 defendants continue their unlawful use of the identical marks registered to
 appellants.  Appellants clearly were and continue to be interested in the use
 of their marks in Elmira, since it was the Scientology Church itself which
 first licensed defendants as an authorized Scientology Mission, thereby
 evincing an interest in the Elmira market.  In light of these undisputed facts,
 the district court found that consumer confusion would be caused by defendants'
 use of appellants' marks.  Although the district court implied that appellants
 would probably succeed on the merits, it made no explicit finding on this
 point.
                      2. Rule Applied By The District Court
  In finding that no irreparable harm would be caused to appellants if the
 injunction were denied, the district court read our cases as creating an
 inconsistent pattern.  This conclusion was bottomed on its interpretation of
 two recent decisions, Citibank, N.A. v. Citytrust, 756 F.2d 273 (2d
 Cir.1985), and Bell & Howell:  Mamiya Co. v. Masel Supply Co., 719 F.2d 42
 (2d Cir.1983).  From its reading of those cases, the district court held that a
 finding of irreparable harm no longer automatically follows from a finding that
 the defendant is using plaintiffs' marks and that consumers are likely to be
 confused by that use.  Rather, it believed a court must focus on the type of
 consumer confusion likely to be caused to determine whether the irreparable
 harm prong has been satisfied before a preliminary injunction may issue.  It
 held that the confusion caused by the fact that consumers were led to believe
 they were dealing with an authorized or licensed distributor would not be
 enough to find irreparable injury, unless specific economic or reputational
 injury could be demonstrated.
  [5] These two cases did not create an exception to our traditional rule that
 a finding of irreparable harm follows from a trademark plaintiff's showing of
 infringing use and likelihood of confusion.  Citibank essentially stands for
 the proposition that absent a likelihood of confusion between two banks
 operating for years in the same market with the similar names of "Citytrust"
 and "Citicorp", and because of plaintiff's substantial delay in seeking an
 injunction, irreparable harm did not follow.  Id. at 277.  Again, in
 Bell & Howell, we noted that:  "On the basis of the present record,
 irreparable injury may well not be present *43 herein since there would
 appear to be little confusion, if any, as to the origin of the goods...."
 719 F.2d at 46.  These cases acknowledge the cornerstone of the rule
 governing issuance of a preliminary injunction, that is to say, there must
 first be established an infringing use and a probability of confusion as to the
 ownership or sponsorship of a product.
  In a recent case discussing the standards for granting preliminary injunctive
 relief, we reiterated the traditional rule that irreparable injury may be found
 where " 'there is any likelihood that an appreciable number of ordinarily
 prudent purchasers are likely to be misled, or indeed simply confused, as to
 the source of the goods in question.' "  Joseph Scott Co. v. Scott Swimming
 Pools, Inc., 764 F.2d 62, 66 (2d Cir.1985) (quoting McGregor-Doniger, Inc.
 v. Drizzle Inc., 599 F.2d 1126, 1130 (2d Cir.1979)).  The district court's
 misperception of our holdings caused it also to ignore the fact that a
 licensor's plea for injunctive relief is stronger than the ordinary trademark
 plaintiff's and--because of the necessity of licensor control--irreparable harm
 always flows from unlawful use and confusion.  Since Palmer continues to teach
 by the tenets of the Scientology religion, as he had while an authorized
 licensee, the trial court found that defendants would not damage the economic
 value of the goodwill and reputation associated with appellants' mark, and that
 the courses and services offered by the Elmira Mission would be in no way
 inferior to, or even different from, those being provided by authorized
 missions and churches.
                     3. Rule in Trademark Infringement Suits
  [6] The unauthorized use of a mark by a former licensee invariably threatens
 injury to the economic value of the goodwill and reputation associated with a
 licensor's mark.  As a consequence, a licensor who establishes a likelihood of
 confusion as to product source in a trademark infringement suit simultaneously
 demonstrates the requisite irreparable harm essential to obtaining a
 preliminary injunction.
  In Power Test Petroleum Distributors v. Calcu Gas, 754 F.2d at 95, we said
 that irreparable harm exists in a trademark case when the party seeking the
 preliminary injunction "shows that it will lose control over the reputation of
 its trademark pending trial."  (Citing 2 McCarthy, Trademarks and Unfair
 Competition s 30.15 (2d ed. 1984)).  Control of the trademark is crucial in the
 licensing context because a licensor who fails to monitor its mark risks a
 later determination that it has been abandoned.  Id. at 97.  " 'If a
 trademark owner allows licensees to depart from its quality [or other]
 standards, the public will be misled, and the trademark will cease to have
 utility as an informational device.' "  Id. (quoting Kentucky Fried
 Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368, 380 (5th
 Cir.1977)).
  A trademark licensor has a particular interest in controlling the use of its
 mark by its licensees in order to preserve the mark's quality and its continued
 vitality.  The Scientology Church, for example, has always believed it critical
 to monitor the services provided by Palmer as a means of protecting its marks,
 and to dictate the standards by which Palmer preaches the Scientology faith.
 The 1982 license agreement gave RTC the right continuously to monitor and
 control Scientology's marks.  Defendants themselves acknowledged the existence
 of licensor control in the September 9, 1982 agreement they entered into with
 appellants.  That agreement explicitly provided:
   (d) [appellants] shall have the right to monitor all operations of MISSION
 with respect to the Marks, inspect all books, records and facilities pertaining
 to use of the Marks and receive sample specimens and summaries of literature,
 publications and product, using the Marks in reasonable numbers and with
 reasonable frequency to insure compliance with all standards, specifications
 and guidelines.
  [7] Thus, plaintiffs did not need to prove that defendants had departed from
 the tenets of the religion to monitor their activities.  The ability at any
 time to insure *44 compliance with the agreement and to control defendants'
 activities was an integral part of the contract.  Denying a preliminary
 injunction in this case--where the district court found a likelihood of
 confusion--puts the Church's reputation beyond its own control.  And, it is
 that loss of control which is the very thing that constitutes irreparable harm
 in the licensing context.
  [8] To support its denial of injunctive relief, the district court stated
 that appellants had not established that defendants had in fact reduced the
 reputation associated with the marks.  On the contrary, without a preliminary
 injunction, appellants will be unable to control the use of their mark by
 unauthorized licensees;  the mere possibility that defendants could during the
 interval until trial depart from the teachings of the Church is sufficient to
 warrant the issuance of a preliminary injunction.  See Grand Lodge, Etc. v.
 Eureka Lodge No. 5, Etc., 114 F.2d 46, 48 (2d Cir.), cert. denied, 311 U.S.
 709, 61 S.Ct. 319, 85 L.Ed. 461 (1940) (to allow a former "Elk" Lodge that had
 seceded from the general organization to continue using the name would "subject
 plaintiff in the public mind to responsibility for the action of a group over
 which it has no further control.").  In the eyes of the Scientology Church,
 Palmer and the Elmira Mission he operates have seceded from the "Mother"
 Church.  As such, they can no longer be relied upon to be true to its
 teachings, nor are they subject to its control.
  In National Bd. of Y.M.C.A. v. Flint Y.M.C.A., 764 F.2d 199, 201 (6th
 Cir.1985), it was precisely because the National YMCA organization had
 acquiesced in the use of its marks by unaffiliated or suspended local YMCA
 organizations that the court refused to issue a preliminary injunction.  The
 initial showing of acquiescence in the use of the mark by former affiliates and
 lack of competition in products or services precluded a finding of confusion or
 the concomitant likelihood of success on the merits.  Id. at 201.  Hence,
 once a trademark owner loses control of its mark by failing zealously to watch
 over its use by others--or by not objecting to its unauthorized use--the
 reputation associated with the mark is reduced.  Here, there is no evidence
 that appellants as licensors acquiesced in defendants' unauthorized use.  The
 evidence is the opposite.  Thus, allowing defendants the opportunity to reduce
 the marks' reputational value and goodwill by its continued unauthorized use
 constitutes the irreparable harm that is requisite to the issuance of the
 preliminary injunction.
  Finally, the public interest is especially served by issuing a preliminary
 injunction against a former licensee as the licensee's status increases the
 probability of consumer confusion.  A licensee or franchisee who once possessed
 authorization to use the trademarks of its licensor or franchisor becomes
 associated in the public's mind with the trademark holder.  When such party, as
 defendants here, loses its authorization yet continues to use the mark, the
 potential for consumer confusion is greater than in the case of a random
 infringer.  Consumers have already associated some significant source
 identification with the licensor.  In this way the use of a mark by a former
 licensee confuses and defrauds the public.  Burger King Corp. v. Mason, 710
 F.2d at 1493;  United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134
 (3d Cir.1981);  Professional Golfers Ass'n v. Bankers Life & Casualty Co.,
 514 F.2d 665 (5th Cir.1975);  McCarthy, Trademarks and Unfair Competition s
 257 (2d ed. 1984).
  [9] For these reasons, a licensor that establishes infringing use and
 consumer confusion in a trademark suit brought against its former licensee has
 proved irreparable harm as a matter of law.
                            B. Probability of Success
  [10] Having found irreparable harm, a court must make a separate and
 distinct finding that plaintiff has established a probability of success on the
 merits.  Although the district court made no explicit finding that appellants
 were likely to prevail on the merits, it did find and the record revealed that
 defendants continue to use *45 the identical registered trademarks that they
 had previously licensed.  Defendants raise the defense that the signed transfer
 of rights by L. Ron Hubbard to RTC was forged and thus invalid.  This assertion
 is unsupported by any credible evidence.  Because the Church has made an
 unrebutted case that it owns the Scientology trademarks, plaintiffs are likely
 to prevail on their claim for trademark infringement.  Moreover, the district
 court's finding of confusion in this case is additional evidence that strongly
 supports our determination that plaintiffs have established a probability of
 success on the merits.  See Standard & Poor's Corp., 683 F.2d at 708.  Since
 both irreparable harm and likelihood of success have been satisfied, the
 injunction should issue.
                              III Findings of Fact
  If defendants' use of the Scientology Trademarks posed a risk of diverting
 business from appellants by misleading the consumer, the district court said it
 would find irreparable harm in the economic injury this diversion would cause.
 But, the court believed the risk of lost business was not present because the
 parties are not in direct economic competition with one another;  no other
 Scientology Mission had been established within 150 miles of Elmira.  Because
 irreparable harm was established as a matter of law without examining whether
 defendants are in direct economic competition with plaintiffs, we need not
 decide this issue.  Nevertheless, the district court's factual findings are
 highly questionable.
  Although recognizing that an injunction should issue if there is any
 probability that a trademark holder desires to expand into the area where
 defendant operates, see Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636, 640
 (D.C.Cir.1982);  Dawn Donuts Co. v. Hart's Food Stores, Inc., 267 F.2d 358,
 362 (2d Cir.1959), the district court found no evidence of appellants' planned
 expansion into Elmira to compete with defendants.  "All of the evidence
 presented to this Court indicates that the impact of the Elmira Mission's
 activities is entirely confined to an area where the plaintiffs have had no
 competing business interests at all."  Such finding is certainly suspect.
  [11] This proposition may be valid where the trademark owner has no prior
 entry--and thus has done nothing to create a reputation--in the relevant
 market.  But here the district court ignored the fact that the Scientology
 Church, as licensor to the Elmira Mission, has demonstrated a strong interest
 in maintaining its presence in the Elmira area.  Evidence of this fact is the
 license it granted to defendants since 1972 to be its authorized licensee in
 that area.  Until defendants renounced their agreement with appellants, they
 acted as the Scientology Church's presence in Elmira.  Appellants appear to
 desire to be present in the Elmira area where there is a demonstrated interest
 in their teachings.  Now that Palmer has breached his agreement and moved
 outside the Church, this area falls within appellants' area of natural
 expansion.  National Lampoon, Inc. v. American Broadcasting Cos., Inc., 376
 F.Supp. 733, 747 (S.D.N.Y.), aff'd, 497 F.2d 1343 (2d Cir.1974).  Once a
 licensor authorizes a licensee to use the mark in a particular area, he has
 demonstrated his desire to expand into that area, and when his licensee loses
 that authorization, he should not have to prove its intention to re-erect a new
 presence in the area.  Thus, defendants present a risk of diverting business
 from appellants by misleading consumers into thinking the Elmira mission is
 authorized by the Scientology Church.  Foxtrap, Inc., 671 F.2d at 640
 ("Under the Lanham Act, a federal registrant is entitled to enjoin a remote
 junior user of the mark if there is a likelihood of the registrant's entry into
 the disputed area.").
                                       IV
  Accordingly, we reverse the order denying a preliminary injunction and remand
 the matter to the district court with a direction to it to issue the
 preliminary injunction pending trial.

End of file...