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Katharyn Zagorin
Haynes and Boone, LLP

On May 22, 2018, in Viacom Int’l, Inc. v. IJR Captial Invs., LLC, 242 F. Supp.3d 563 (2017), the Fifth Circuit Court of Appeals upheld summary judgment in favor of Viacom International Inc. (Viacom) on its trademark infringement and unfair competition claims against IJR Capital Investments, LLC (IJR).?á In a case of first impression, the court held that ?Ç£specific elements from within a television show?Çöas opposed to the title of the show itself?Çö[can] receive trademark protection.?Ç¥

Viacom is the owner of SpongeBob SquarePants, an animated television series created for Viacom?ÇÖs Nickelodeon Network that first premiered in 1999, and recently renewed for a twelfth season.?á The series follows the life of the title character, SpongeBob SquarePants, and his friends in the underwater town of Bikini Bottom.?á The Krusty Krab, the center of the controversy in this case, is a fast-food restaurant in the submerged town owned by Mr. Krabs, a money-hungry business owner intent on making a profit off the Krabby Patties grilled by SpongeBob.

In 2014, Javier Ramos, the owner of IJR, decided to open Krusty Krab restaurants?á of his own in Texas and California.?á Rather than fast food, the restaurant was to sell seafood, namely shrimp, crawfish, and po-boys.?á IJR filed a federal trademark application for THE KRUSTY KRAB for restaurant services in December 2014, which was issued a notice of allowance in August 2015.?á In November 2015, Viacom sent a cease-and-desist letter to IJR, asking IJR to withdraw its application for THE KRUSTY KRAB, and alleging infringement of its common law mark The Krusty Krab.?á After IJR refused to comply with Viacom?ÇÖs demands, Viacom filed suit in January 2016 with nine claims, including unfair competition under the Lanham Act and trademark infringement under Texas common law.?á After Viacom filed a motion for summary judgment on eight of its nine claims, the district court granted the motion on its Lanham Act unfair competition and common law trademark infringement claims.?á The district court dismissed the other seven claims with prejudice, as requested by Viacom, and IJR then appealed.

As with a federal trademark infringement claim, proving trademark infringement under Texas common law requires the plaintiff to show that it owns a legally protectable mark and that the defendant?ÇÖs use of that mark creates a likelihood of confusion as to source, affiliation, or sponsorship.?á IJR alleged that neither of these elements had been proved by Viacom.?á The first issue considered by the Court of Appeals was ?Ç£[w]hether Viacom actually uses the The Krusy Krab as a source identifier.?Ç¥?á In assessing this issue, the Court addressed a ?Ç£threshold question,?Ç¥ deciding that ?Ç£specific elements from within a television show?Çöas opposed to the title of the show itself?Çö[can] receive trademark protection.?Ç¥?á The Court reasoned that ?Ç£[e]xtending trademark protection to elements of television shows that serve as source identifiers can serve?Ç¥ to protect goodwill and investments made in trade names, as well as to guard against consumer confusion.

However, the Court was careful to note that ?Ç£use within a popular television series does not necessarily mean that the mark is used as a source identifier.?Ç¥?á The court said the question in this case was ?Ç£whether The Krusty Krab mark, ?Çÿas used, will be recognized in itself as an indication of origin for the particular product or service.?ÇÖ?Ç¥?á In other words, The Krusty Krab must create ?Ç£a separate and distinct commercial impression.?Ç¥?á The Court clarified that ?Ç£[i]n evaluating whether elements of a television series are trademarks, the focus is on the role that the element plays within the show and not the overall success or recognition of the show itself,?Ç¥ reasoning that an ?Ç£an element [that] only occasionally appears in a successful television series?Ç¥ may not serve as an indication of origin.?á On the other hand, ?Ç£an element [that] plays a more central role in a franchise?Ç¥ will usually?á receive trademark protection.

The Court found that The Krusty Krab?ÇÖs ?Ç£central role?Ç¥ in the SpongeBob franchise provided ?Ç£strong evidence?Ç¥ that the mark serves as an indication of origin for the show and its associated goods.?á The Krusty Krab ?Ç£is integral to ?ÇÿSpongeBob SquarePants,?ÇÖ as it appears in over 80% of episodes, plays a prominent role in the SpongeBob films and musical, and is featured online, in video games, and on licensed merchandise.?Ç¥?á Moreover, The Krusty Krab appears on various consumer products, such as Lego toy products and aquarium ornaments, among others.?á The Court found that the licensing of The Krusty Krab mark on these various consumer goods ?Ç£provide[d] further evidence that Viacom uses The Krusty Krab as a source identifier and therefore owns the mark.?Ç¥?á The Court also found that the use of the fictional restaurant in playsets and aquarium ornaments indicated that The Krusty Krab creates a distinct commercial impression.

In continuing its analysis of whether or not Viacom owns a valid mark, the Court found that the The Krusty Krab mark acquired distinctiveness through secondary meaning, as shown by the fact that ?Ç£[o]ver 80% of episodes?Ǫinclude The Krusty Krab, and it is a central element of the SpongeBob universe.?Ç¥?á In addition, Viacom?ÇÖs millions of dollars earned on the licensed goods and feature films that use the mark in question provide further evidence that The Krusty Krab has acquired distinctiveness.?á The Court also considered the effectiveness of print and Internet advertisements for the Krusty Krab products and films.?á Finally, the Court found that The Krusty Krab?ÇÖs popularity in the media and appearance on the series?ÇÖ social media platforms indicated that the mark has acquired secondary meaning.

Turning to the second element of the infringement analysis, the Court assessed whether or not IJR?ÇÖs use of The Krusty Krab created a likelihood of confusion as to source, affiliation, or sponsorship by considering the following seven factors:

(1) the type of mark allegedly infringed; (2) the similarity between the two marks; (3) the similarity of the products or services; (4) the identity of retail?á outlets and purchasers; (5) the identity of the advertising media used; (6) the defendant?ÇÖs intent; and (7) any evidence of actual confusion.

The Court found that Viacom?ÇÖs mark was strong, due to its acquired distinctiveness, and that the marks at issue were identical.?á Moreover, although Viacom?ÇÖs mark referenced a fictional hamburger restaurant in a television show, while IJR?ÇÖs mark was intended to be used in connection with a seafood restaurant, the fact that ?Ç£Viacom could naturally develop a real The Krusty Krab restaurant based on the fictional eatery, as its subsidiary did when it licensed Bubba Gump Shrimp Co.,?Ç¥ indicated a likelihood of confusion.?á In addition, both Viacom and IJR target the general public, although the Court found that there were ?Ç£substantial differences in the retail outlets and the predominant purchasers that mitigate the possibility of confusion.?Ç¥?á?á While Viacom ?Ç£targets television viewers, toy stores, and online retailers?Ǫ IJR?ÇÖs services will only be available in brick-and-mortar restaurants,?Ç¥ indicating different retail outlets.?á The Court also found that, despite some overlap, ?Ç£the core consumers of each mark are dissimilar.?Ç¥?á Although, the Court noted the real possibility that children, or adults, who are fans of SpongeBob could choose to eat at IJR?ÇÖs restaurant due to the name.?á Because the record contained no evidence of IJR?ÇÖs advertising efforts, the sixth factor was neutral in the likelihood of confusion analysis.

With regard to IJR?ÇÖs intent, the Court found that ?Ç£the district court erred in inferring bad intent?Ç¥ and that there was ?Ç£a genuine issue of material fact as to whether IJR intended to derive benefits from Viacom?ÇÖs The Krusty Krab.?Ç¥?á?á Although Ramos became aware of Viacom?ÇÖs mark during a clearance search before submitting IJR?ÇÖs application for THE KRUSTY KRAB, and his friend Ivan Murillo admitted that some might associate the name with SpongeBob SquarePants, the Court found that ?Ç£Murillo?ÇÖs word association, without more, does not establish bad faith at summary judgment?Ç¥ and that ?Ç£?Çÿmere awareness of the senior user?ÇÖs mark does not establish[]?Ǫbad intent.?ÇÖ?Ç¥

Finally, the Court contemplated actual confusion, considering a consumer survey presented by Viacom that found ?Ç£30% of respondents thought The Krusty Krab was connected with Viacom and 35% of respondents associated the hypothetical restaurant with Viacom.?Ç¥?á The Court found fault with the survey?ÇÖs word-association question asking if ?Ç£THE KRUSTY KRAB restaurant [is] affiliated or connected with any other company or organization,?Ç¥ stating that word-association surveys are entitled to little weight.?á Despite this, the Court found no substantial defect in the survey and that the survey weighed in favor of a finding of likelihood of confusion.

Ultimately, the Court found an ?Ç£impermissible?Ç¥ likelihood that ?Ç£consumers would affiliate Viacom?ÇÖs legally protectable The Krusty Krab mark with IJR?ÇÖs seafood restaurant by the same name.?Ç¥?á Although fairly predictable in its holding, this case brings the Fifth Circuit?ÇÖs dealing with elements of television shows in line with several other circuit courts, making clear that integral components of a television series can be protectable trademarks.?á In arriving at this conclusion, the court relied on its own case, Conan Props, Inc. v. Conans Pizza, Inc., involving the use of the name and image of Conan the Barbarian in a pizza restaurant, suggesting that characters could receive trademark protection.?á 752 F.2d 145, 148, 150 (5th Cir. 1985).?á The Court was also informed by the decision in Warner Bros., Inc. v. Gay Toys, Inc., a Second Circuit decision holding that ?Ç£trademark protection may extend ?Çÿto the specific ingredients of a successful T.V. series,?ÇÖ?Ç¥ in that case a muscle car from the television?á series ?Ç£Dukes of Hazard.?Ç¥?á 658 F.2d 76 (2d Cir. 1981).?á A similar ruling was also made by the Seventh Circuit regarding the same muscle car.?á Processed Plastic Co. v. Warner Commc?ÇÖns, Inc., 675 F.2d 852 (7th Cir. 1985).?á Although Viacom ultimately prevailed in this case, it now appears to be taking a more proactive approach to protecting its favorite hamburger joint, having filed an application for KRUSTY KRAB covering a website related to television programs in January 2017.?á (Fed. Trademark Application Serial No. 87305436).?á But even if other television series don?ÇÖt follow Viacom?ÇÖs lead in applying for federal protection, the Fifth Circuit has signaled its willingness to protect trademark rights in important elements of shows, from character names to underwater restaurants and (presumably) anything in between.

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June 2018