24 May 2018Trademarks

Fiction versus reality: Viacom win over Krusty Krab restaurant affirmed

A US appeals court has affirmed a trademark victory for Viacom against a restaurant called The Krusty Krab, the same name as a fictional eatery in the animated TV series “SpongeBob SquarePants”.

On Tuesday, May 22, the US Court of Appeals for the Fifth Circuit backed a lower court decision in favour of media conglomerate Viacom, even though the company does not own a trademark for ‘The Krusty Krab’.

Circuit Judges Reavley, Smith and Owen agreed that the term did identify Viacom as the source and that there would be a likelihood of confusion between the fictional and real-life restaurants.

Launched in 1999, “SpongeBob SquarePants” centres on the eponymous main character who, according to the court, is a “sea sponge that wears square shorts, lives in an underwater pineapple, and works at the fictional The Krusty Krab restaurant as a fry cook”.

It added that the show has become the most-watched animated television series for 15 consecutive years and that The Krusty Krab has appeared in 166 of the 203 episodes.

In 2014, the owners of IJR Capital Investments decided to open seafood restaurants in California and Texas. They were initially called Crusted Crab, apparently with a nod to “the crusted glaze applied to cooked seafood”, but the name quickly changed to The Krusty Krab.

In December that year, IJR filed a trademark application with the US Patent and Trademark Office (USPTO) for ‘The Krusty Krab’, since Viacom did not own a federal registration. The USPTO approved IJR’s mark and published it for opposition.

In November 2015, Viacom wrote to IJR demanding it withdraw the mark and alleged infringement of its common law rights to ‘The Krusty Krab’. After discussions between the parties, and after IJR postponed the restaurants’ opening, Viacom filed a complaint for trademark infringement in January 2016.

The US District Court for the Southern District of Texas ruled in Viacom’s favour in January 2017, granting summary judgment on its trademark infringement and unfair competition claims.

On appeal, IJR said there are “genuine issues of material fact as to whether Viacom owns a legally protectable mark and whether there is a likelihood of confusion between the two The Krusty Krab marks”.

The appeals court said that while Viacom has never registered ‘The Krusty Krab’ mark, the US Supreme Court has held that the Lanham Act “protects qualifying unregistered marks”. The court clarified that although Viacom’s trademark claims were filed under Texas common law, such issues are analysed in the same way as Lanham Act claims.

The court explained that the success of “SpongeBob Square Pants” is not in dispute, “but use within a popular television series does not necessarily mean that the mark is used as a source identifier”.

However, the court added: “The Krusty Krab’s key role in ‘SpongeBob SquarePants’ coupled with the consistent use of the mark on licensed products establishes ownership of the mark because of its immediate recognition as an identifier of the source for goods and services.”

These factors “lead inescapably” to the conclusion that The Krusty Krab identifies the source of products, ie, Viacom, whose mark has acquired distinctiveness through secondary meaning, the court said.

It added: “The digits of confusion—particularly the strength of Viacom’s mark, the identical spelling and pronunciation of the marks, both marks’ identification of restaurants, and evidence of actual confusion—dictate that IJR’s use of the mark infringes on Viacom’s trademark.”

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13 January 2017   A US district court judge has ruled in favour of media network Viacom International, the owner of Nickelodeon, in a trademark dispute concerning cartoon “Spongebob Squarepants”.