early winter, snow, lobster traps, dock, fishing village, harborIn Viacom International Inc. v. IJR Capital Investments, LLC, 2017 WL 1037294 (S.D. Tex. Mar. 17, 2017), Viacom successfully asserted common-law rights in the trademark THE KRUSTY KRAB for a fictional restaurant, which appears in the cartoon SpongeBob SquarePants. The defendant, IJR, had filed an intent-to-use trademark application for the mark THE KRUSTY KRAB for restaurant services. After a Notice of Allowance had been issued, Viacom sent a cease-and-desist letter asserting that registration of the mark would cause a likelihood of confusion with the “iconic” fictional restaurant that had been featured in 166 out of 203 SpongeBob episodes over its seventeen-year run. IJR declined to withdraw its plan to use the mark for a restaurant. Viacom filed suit, alleging trademark infringement, unfair competition and dilution, and ultimately moved for summary judgment.

As to trademark infringement, IJR argued that Viacom never registered the mark THE KRUSTY KRAB and that it could not have a trademark right in a fictional restaurant. The court squarely rejected these arguments. Because trademark rights flow from use, not registration, and Viacom had demonstrated that it used the mark in commerce by featuring it in SpongeBob episodes and two commercially successful movies and by licensing the mark for use on merchandise, Viacom established that it had ownership of the mark. The court also rejected the notion that the fictional nature of the mark undermined its protectability, observing that “specific ingredients of a successful T.V. series, including symbols, design elements, and characters which the public directly associates with the plaintiff or its product,” are entitled to trademark protection, listing “kryptonite” and “The Daily Planet” from Superman as examples.

The court further found that the mark THE KRUSTY KRAB had acquired distinctiveness through secondary meaning, given the degree to which the fictional restaurant is featured on the show; the advertising budget of the two SpongeBob movies that featured the mark; the billion-page-view reach of the SpongeBob website on nick.com; and print and internet advertisements for “The Krusty Krab” licensed merchandise.

Finally, the court found a likelihood of confusion between the identical marks, notwithstanding that Viacom’s use is for a fictional restaurant. The court found it “persuasive that both parties use the mark to describe a restaurant (albeit in Viacom’s case it is a fictional restaurant under the sea where the namesake character works for restaurant owner, Mr. Krabs).” The court pointed out that consumers may believe that IJR’s restaurant is officially licensed or endorsed, similar to how Viacom’s parent company licensed its “Bubba Gump” mark from the movie Forrest Gump for use by the seafood restaurant chain Bubba Gump Shrimp Co. (Although not mentioned in the opinion, both Bubba Gump and The Krusty Krab made TIME magazine’s list of “Most Influential Fake Companies” in 2016.)

Thus, the court entered judgment for Viacom on its claims of trademark infringement and unfair competition. As to Viacom’s dilution claims, however, the court found as a threshold issue that the claims were unripe because IJR had not yet used the mark in commerce. While it had filed an intent-to-use application and received a Notice of Allowance, registered four domain names with variations of the words “krusty” or “krab,” and had undertaken preparations to open a restaurant, the owner had testified that “the lawsuit [k]ind of put stuff on hold” and he had not created marketing materials or advertisements. Thus, the court denied Viacom’s motion for summary judgment on its dilution claims.

In addition to the reminder that even fictional people, places and things can merit trademark protection in the right circumstances, this case is notable for distinguishing different standards of ripeness for infringement claims and dilution claims. While the filing of an intent-to-use application and expressing an intention to move forward with opening a restaurant was sufficient to bring a claim for trademark infringement and prevail on summary judgment, the lack of “use in commerce” in a technical sense rendered “alleged threats of future dilution…speculative.”

Following the district court’s grant of summary judgment on Viacom’s trademark infringement claims, Viacom voluntarily dismissed its remaining causes of action, and the court entered final judgment. IJR filed a notice of appeal to the Fifth Circuit on May 9, 2017; stay tuned to see what the appellate court makes of its foray into Bikini Bottom.