If he was using their trademark they HAD to shut him down. Tons of jurisprudence already in place. Trademark holders are forced to aggressively defend their IP or risk losing it. The lawyer was right. They were right. But now they can “come to an agreement” and their trademark is defended for the next time.
Trademarks are to protect against counterfeits, not against reselling an original item. See my previous post.
He was selling their product in their box. Based on your premise I would have to remove all logos from my car when I am done with it sell it as a generic “car”
See the teensy little flaw in your logic?
If he was making donuts and calling them KK donuts, that would be a trademark violation. He was buying KK donuts from KK and selling them to his own customers. There was no trademark infringement. Those were his KK donuts. He was free to sell them as what they were. By taking his money KK relinquished any control they had over those donuts and he was free to sell them.
Obviously KK realized they were wrong to tell him to stop selling his own donuts.