As previously reported on this blog, the Southern District of Texas ruled in Viacom International Inc. v. IJR Capital Investments LLC that Viacom could assert common-law rights in the trademark THE KRUSTY KRAB for a fictional restaurant on the animated show SpongeBob SquarePants. When defendant IJR took action to launch a real-life THE KRUSTY KRAB restaurant, Viacom asserted infringement of its unregistered trademark and successfully argued that the mark had acquired distinctiveness through the large number of episodes of the show and two feature-length films that featured the mark; extensive licensing of THE KRUSTY KRAB for playsets, Lego sets, video games, aquarium accessories, stickers and shirts; and the extensive advertising expenditures for and promotion of the SpongeBob show. Thus, the district court concluded that IJR’s proposed restaurant using an identical mark constituted trademark infringement and unfair competition.

IJR appealed the grant of summary judgment to the Fifth Circuit. In a 2018 decision, a unanimous panel affirmed the district court and agreed that IJR had infringed Viacom’s unregistered trademark THE KRUSTY KRAB.

The Fifth Circuit’s opinion noted that the fundamental issue on appeal, with reference to the express language in the Lanham Act, is whether Viacom owns a “trademark” that is used “to identify and distinguish” one’s goods “from those manufactured or sold by others.” 15 U.S.C. § 1127.  The opinion noted that although courts have frequently “bypassed the use inquiry and conducted only a distinctiveness analysis,” the two issues “are separate questions,” and the Court undertook to resolve whether there was a genuine issue of material fact as to whether Viacom “actually uses The Krusty Krab as a source identifier.”

This case is notable because it required the court to directly confront an issue that is typically subsumed into the question of whether a mark is distinctive enough to be protectable. Although fictional elements are frequently “distinctive,” it is less obvious whether a fictional element, although used within a popular television series, is used as a source identifier. The court set forth examples of cases where a fictional character or element had been found to function as a source identifier, noting that the question is whether the fictional element “as used, will be recognized in itself as an origin for the particular product or service,” apart from the overall success or recognition of the show itself. Thus, the court noted previous cases in which:

  • CONAN THE BARBARIAN, a character from a comic book series, could not be used for a pizza restaurant;
  • The distinctive orange muscle car with a Confederate battle flag emblem, called “The General Lee” on the show The Dukes of Hazzard, could not be replicated by a toy company;
  • The fictional newspaper The Daily Planet and the fictional element KRYPTONITE are protectable trademarks associated with the Superman franchise, and thus could not be used for an actual newspaper.

In these examples, the allegedly infringed trademark was a critical and frequently recurring aspect of a fictional work. In another example considered by the Court, however, the Trademark Trial and Appeal Board declined to extend trademark protection to the ROMULAN fictional alien species featured in the Star Trek television series. Although the ROMULAN mark appeared in television episodes, movies, books, licensed toys, puzzles, games and more, the TTAB had concluded that the ROMULAN mark was “only” used “from time to time” and therefore failed to provide a source-identifying function.

Having laid out these examples, the Court found that THE KRUSTY KRAB was analogous to The General Lee, The Daily Planet and Conan the Barbarian, insofar as the mark “appears in over 80% of” SpongeBob episodes; plays a prominent role in the SpongeBob films, musical, video games and licensed merchandise; and is used consistently in both the shows and the merchandise. Thus, there was no genuine issue of material fact with respect to whether Viacom had made trademark usage of THE KRUSTY KRAB.

Turning to the separate distinctiveness inquiry, the Court’s record contained sufficient undisputed facts demonstrating acquired distinctiveness that the district court’s grant of summary judgment in favor of Viacom was proper. The length of time of the use (18 years), the hundreds of millions of dollars earned in product licensing deals and feature film distribution, and the number of references to THE KRUSTY KRAB by the press and on SpongeBob SquarePants social media platforms all supported the finding that the mark has secondary meaning. Although there was no consumer survey evidence of secondary meaning, Viacom had presented survey evidence on the issue of likelihood of confusion, offering a survey indicating that 35% of survey respondents associated a hypothetical THE KRUSTY KRAB restaurant with Viacom. The court noted that Viacom’s expert’s Eveready-format survey “resembled a word association test,” asking if “the KRUSTY KRAB restaurant [is] affiliated or connected with any other company or organization,” but ultimately found that the level of confusion found and the format of the survey were both admissible to weigh in favor of a likelihood of confusion.

The court concluded that while its holding “does not grant trademark protection to Viacom in every context, third parties cannot appropriate the goodwill and reputation of The Krusty Krab by naming a restaurant The Krusty Krab absent a showing that the restaurant was developed in a context sufficient to avoid any likelihood of consumer confusion” (emphasis added). One wonders what such “development” of a distinctive mark into an unlicensed commercial concept might look like that could insulate a junior user from Lanham Act liability. Thus, while the Viacom decision provides practitioners with useful guideposts for when fictional elements are protectable as trademarks (by virtue of trademark usage and distinctiveness), the case was so straightforward on likelihood of confusion due to the identical marks being used for identical services (notwithstanding that the defendant’s restaurant was going to feature fried seafood rather than the hamburgers served in the fictional restaurant) that the Court’s observation preserves an interesting question for another day.