THE KRUSTY KRAB TRADEMARK Restaurant Services Infringement

In Viacom International Inc. v. IJR Capital Investments, LLC, the Southern District of Texas upheld Viacom’s claim of infringement against a company that filed a federal trademark application for THE KRUSTY KRAB and intended to open a restaurant under this name.  THE KRUSTY KRAB is a fictional restaurant featured on the children’s cartoon SpongeBob Square Pants.

Even though Viacom had not registered the name THE KRUSTY KRAB, the District Court granted summary judgment on the likelihood of confusion claim in its favor under the Lanham Act.  The Court found that Viacom had common law trademark rights in the trademark due to extensive use and advertising of the mark, noting that SpongeBob’s likely reaction to its decision would likely have been “Aw, tarter sauce!”

The Court first looked at whether the mark was inherently distinctive or had acquired distinctiveness in the minds of the consuming public.  The court found that the mark had acquired distinctiveness through its use in the television show, movie, and through advertising and marketing on products.

The Court next looked at whether there was likely to be confusion between IJR’s mark and Viacom’s mark.  The Court looked at the likelihood of confusion factors:  1) the strength of Viacom’s THE KRUSTY KRAB mark; 2) the similarity between the marks; 3) the similarity of the products or services; 4) the likely consumers of the goods or services; 5) the channels of trade (where the products or services are sold); 6) whether or not IJR had a bad faith intent in attempting to register and use the mark (whether it was aware of SpongeBob and THE KRUSTY KRAB); 7) whether there had been actual confusion (IJR’s mark had not yet been used); 8) the sophistication of potential consumers of the goods and services of the mark.

The Court found that 17 years of use of the mark, extensive advertising and marketing, and the unique spelling of the mark all created a likelihood of confusion in the marketplace.

To add to its claim, Viacom produced evidence from a consumer survey which, interestingly, found that 30% of consumers associated THE KRUSTY KRAB with Viacom.

As Viacom had not yet used the trademark, the Court did not hear its claims on trademark dilution, where Viacom would have had to show that they have a famous mark and that the use by IJR was likely to dilute the fame of the mark.

Trademark Parody and Copyright Fair Use

The Second Circuit affirmed a district court ruling granting summary judgment to My Other Bag, Inc., owner of MY OTHER BAG, against Louis Vuitton.  My Other Bag are handbags that on one side show pictures of famous handbags, such as those of Louis Vuitton, and on the other side had the words “My Other Bag”.  Louis Vuitton had sued My Other Bag, Inc. for trademark infringement, dilution by blurring, and copyright infringement.

The lower court held that My Other Bag’s use was parody stating “MOB’s use of Louis Vuitton’s marks in service of what is an obvious attempt at humor is not likely to cause confusion or the blurring of the distinctiveness of Louis Vuitton’s marks; if anything, it is likely only to enforce and enhance the distinctiveness and notoriety of the famous brand”.  The court also rejected the copyright claim on the basis of fair use.

The Second Circuit affirmed that the MOB marks were parodies.  The higher court stated “a parody must convey two simultaneous – and contradictory – messages that it is the original, but also that it is not the original and is instead a parody.”  The court distinguished this case from other cases, such as STARBUCKS v. CHARBUCKS, where CHARBUCKS was used to identify a type of coffee that would compete with STARBUCKS at the same level and quality.

With respect to the copyright claim, the court held that MOB was a transformative and non-infringing use as the bags were a “new expression and message.”

TTAB Rules Little Caesars DEEP!DEEP! DISH Descriptive

Little Caesars restaurant attempted to register its DEEP!DEEP! DISH trademark for pizza.  The company conceded that “Deep Dish” was a descriptive term for pizza.  It claimed, however, that the mark had acquired distinctiveness and was part of a family of marks that reinforced its acquired distinctiveness.

Little Caesars argued that its burden to prove acquired distinctiveness should be lower since the mark is a unitary phrase with a different commercial impression than the words do separately.  The company claimed that the repetition of the word Deep, with the explanation point.

The company also relied on the “family of marks” doctrine which would expedite the public’s recognition of a mark that shares a similar characteristic as another mark.

The Trademark Trial and Appeal Board (TTAB) held that:

“in an ex parte proceeding under Section 2(f), an applicant may adduce, and an examining attorney must consider, evidence of the existence of a family of marks offered to help prove acquisition of distinctiveness for a new member of the putative family.”  The board stated that Little Caesers had failed to prove the elements necessary to establish a family of marks:

  1.  that the mark shares recognizable common characteristics with the family;
  2. that the mark is distinctive;
  3. that the mark has been promoted in such a way as to create “recognition among the purchasing public that the common characteristic is indicative of a common origin of the goods or services.”

The Board held that repetition of a descriptive word with an exclamation point  was too abstract to constitute a common characteristic with a family of marks.  The Board stated that to recognize such a family of marks would “effectively grant Applicant an exclusive proprietary right to an unbounded variety of merely descriptive double word marks”, making it similar to a Phantom Trademark, which is a mark that incorporates an element that is subject to change, such as the date, a geographic location, or a model number.  An example of a Phantom Trademark is the FOR DUMMIES set of books.

With respect to the distinctiveness of the DEEP!DEEP! DISH mark, the Board found that the family claimed by Little Caesars did not repeat an element already recognized by consumers as indicating source, but merely repeated common descriptive words in relation to pizza.

With respect to the promotion factor, the Board found that despite Little Caesars having provided evidence of promotion since 1980, the promotion only showed the popularity of its products and not an indication of consumer recognition of the marks as source indicators.  The advertisements provided by the company also contained other trademarks which made it impossible for the Board to know the extent to which the advertising benefitted the DEEP!DEEP! DISH trademark or the other trademarks also listed in the advertisements.

Changes to the Trademark Trial and Appeal Board (TTAB)

Effective January 14, 2017, all Trademark proceedings (oppositions, cancellations, concurrent use and ex parte appeal proceedings) which are already in progress are subject to the following changes:

  1.  All pleadings and submissions need to be submitted through the Electronic System for Trademark Trials and Appeals “ESTTA”.
  2. Service of all papers must now be made by only email unless stipulated otherwise by the parties.
  3. Service by mail no longer entitles the respondent an additional 5 days to respond.
  4. Deadlines for submissions to the TTAB that are initiated by a date of service are 20 days.
  5. Responses to summary judgment and to requests for discovery remain at 30 days.
  6. Discovery request must be served early enough to allow for responses prior to the close of discovery (this should be an interesting issue).
  7. There will still be a duty to supplement discovery after the close of discovery.
  8. Motions to compel initial disclosures must be filed within 30 days after the deadline for serving initial disclosures.
  9. Prior to the first pretrial disclosure deadline, motions to compel discovery, motions to test the sufficiency of responses or objections, and motion for summary judgment must be filed.
  10.  There is a limit of 75 requests for production, requests admissions, and interrogatories.
  11. Testimony may be submitted by affidavit or declaration.
  12. Under Trademark Rules 2.122, 2.123, and 2.125 there are new rules for the submission of trial evidence and deposition transcripts.
  13. For proceedings filed on or after January 14, 2017, the TTAB’s notice of institution constitutes service of complaints.

For further resources you may consult, which contains the Notice of Final Rulemaking in the Federal Register on October 7, 2016, at 81 F.R. 69950.

International Implications of the Lanham Act – Trader Joe’s

Trader Joe’s, a grocery store that operates stores through the United States, successfully implicated the provisions of the Lanham Act against a Canadian company that was buying Trader Joe branded products in Washington State and brining them across the border to sell in its Vancouver store.  The U.S. Court of Appeals for the Ninth Circuit stated “We hold that the extraterritorial reach of the Lanham Act is a merits question that does not implicate federal courts’ subject matter jurisdiction” and that the resale of Trader Joe’s goods without proper quality control measures and at higher prices could affect United States Commerce by harming Trader Joe’s reputation.

The Washington State Trader Joe’s noticed that a particular customer was coming in a number of times weekly to purchase large amounts of items.  The customer, Michael Hallatt, operated a store called Pirate Joe’s 22 miles north of the Washington State Trader Joe’s.  The Pirate Joe’s store uses a similar red lettering logo as Trader Joe’s.  The lawsuit claims that Mr. Hallett has spent more than $350,000 buying Trader Joe’s products for resale.

The lower Court had initially dismissed the suit stating that United States Courts do not have subject matter jurisdiction over trademark infringement occurring only in Canada.   The Court stated “Plaintiff does not state a claim upon which relief can be granted because the [Washington laws]  do not apply where no Party is a Washington resident, all allegedly wrongful conduct occurs out of state, and any harm to Washington residents is extremely tangential if existent.”  The Court of Appeals, however, found that Trader Joe’s had to sufficiently allege an impact on United States commerce and that it was injured by the actions of Hallett.  Trader Joe’s argued that it was suffering reputational harm as Hallett was not exercising sufficient quality control over the products, many of which are perishable.  Trader Joe’s lawyer stated that customers of Pirate Joe’s could mistakenly associate the Trader Joe’s brand with overpriced goods (Hallett was selling the goods for more in his store) and inferior customer service.

Pirate Joe’s website at www. currently states:

“Pirate Joe’s is an unaffiliated unauthorized re-seller of Trader Joe’s products (we were sued, they lost, they appealed, they won a second try). We stock what we are asked to stock by Trader Joe’s lovers who don’t always have the time (or a car or a passport) to head south to Bellingham (the nearest Trader Joe’s). We buy retail from Trader Joe’s then import everything legally and add Canadian compliant ingredient and nutrition facts labels. We have to pay the rent and the help (and the label supplier), so prices are about 30-40 percent higher than at Trader Joe’s. We also import other brands Canadians are duped out of. If you have a request we can usually get it for you within a week (no cheese – call your representative in government).”

In addition, the website states “We love a good Fight! (Hey TJ’s, we love you too).  In order to bring the Trader Joe’s goods into Canada he had to comply with NAFTA, which made most of the goods duty free.  However, he had to create a barcode system to summarize the products because he brought so much into Canada.  He also had to print out new nutrition labels for the products to meet Canadian regulations.

After the first Trader Joe’s found out what Hallett was doing he was banned from that store so he started shopping at the Seattle Trader Joe’s.  There is currently a sign in his store that states “We pay sneaky people to shop for us at TJ’s.  (Mike has been Banned)”.   Mr. Hallett even put an advertisement on Craigslist seeking a “co-pirate for undercover work” with a “well-established international grocery smuggling operation.” Additionally, after he was sued Hallett remove the letter p from his sign so that it now reads “Irate Joes”.

His defense in this case would seem to be the concept of the first sale doctrine and grey market goods.  Once you buy something you are free to resell it to someone else so long as you do not alter the product in a way that confuses consumers

If Trader Joe’s were to open in Canada it could sue him there for trademark infringement – but this has apparently not happened yet.