Judge Says Restaurant Can’t Be Called ‘Krusty Krab’

HOUSTON (CN) – Viacom has rights to The Krusty Krab, the fictional restaurant where cartoon character SpongeBob SquarePants serves burgers, so an aspiring restaurateur can’t trademark the name, a federal judge ruled.

Starring a hyperactive yellow sponge who lives in a pineapple in the seafloor village of Bikini Bottom, where he works the grill at The Krusty Krab for its skinflint owner Eugene H. Krabs, the cartoon series “SpongeBob SquarePants” has developed a cult following of children and adults since it premiered on Viacom’s Nickelodeon network in 1999.

The cartoon has garnered more than $12 billion in merchandising revenue for Viacom, which also owns the film studio Paramount Pictures and the TV networks MTV, Comedy Central and Black Entertainment Television.

Though Viacom has never registered The Krusty Krab trademark with the U.S. Patent and Trademark Office, it noticed when Houston-based IJR Capital Investments LLC filed an application in December 2014 to use the mark for restaurant services.

Viacom sent IJR Capital a cease-and-desist notice 11 months later asking the company not to use any “SpongeBob SquarePants” trademarks for its restaurants and to withdraw the trademark application.

To win a trademark-infringement claim in federal court, a company must prove use of the mark “creates a likelihood of confusion as to source, affiliation, or sponsorship.”

IJR claimed in response to Viacom’s letter that its services “are distinguishable” from Viacom’s, so there is no danger of people mistakenly believing its restaurants are affiliated with the cartoon.

IJR’s attorney Karen Bryant Tripp said its owner Javier Ramos planned to open two seafood restaurants named The Krusty Krab, one in Houston and another in Los Angeles, and he even got the blessing of the U.S. Patent and Trademark Office.

“The trademark office allowed my client’s trademark application, so the trademark office didn’t find a likelihood of confusion,” she said in an interview.

A trademark isn’t registered until the applicant begins using the name, Tripp said, and Ramos’ plans to open the restaurants were delayed when Viacom sued his company in January 2016 for trademark infringement and eight other claims.

Tripp said Ramos feels like he’s been bullied by the deep-pocketed Viacom because it could have sought alternate resolutions outside of court.

“Viacom could have opposed the registration at the trademark office,” Tripp said. “The trademark office has a procedure for that instead of filing a lawsuit and accusing my client of nine different counts of infringement. That would have been a much more economical proceeding for my client and it would have been a faster proceeding.”

IJR argued in court filings that it should be able to trademark The Krusty Krab because Viacom has not, and Viacom can’t claim rights to the name of a fictional restaurant.

However, U.S. District Judge Gray Miller sided with Viacom on Wednesday, citing Fifth Circuit precedent that “ownership of a trademark is established by use, not by registration.”

“The ‘Krusty Krab’ backdrop is regularly featured in the television show and was also depicted in two SpongeBob SquarePants feature films released in 2004 and 2015, that had total gross receipts of over $470 million. Examples like these support Viacom’s argument that it has a valid mark based on its use of the mark in commerce,” Miller wrote in an 18-page opinion.

The judge also agreed with Viacom that fictional names can establish trademark rights,

“Courts have held that made-up words like ‘Kryptonite,’ (a fictional radioactive compound in the Superman series) and the ‘Daily Planet’ (a fictional newspaper where Superman works) have a common law trademark based on use,” he wrote. (Parentheses in original.)

IJR’s attorneys argued that SpongeBob isn’t as well-known as Superman.

“In my opinion, the Krusty Krab isn’t a famous mark. I appreciate that SpongeBob has niche fame,” Tripp told Courthouse News.

Though Miller agreed with Viacom that IJR is violating its trademark, he denied Viacom’s trademark-dilution claim. He said the dilution claim is not ripe because IJR has not used the mark.

The judge declined to rule on Viacom’s state and federal unfair competition and false designation claims because Viacom didn’t brief them in its summary judgment motion.

Tripp said she will likely appeal the trademark infringement finding.

“My personal view is it seems to stretch trademark law further than it’s been before,” she said.

Viacom’s attorney Tyson Smith with Pirkey Barber in Austin didn’t immediately respond to an email Friday morning asking for his reaction to the ruling, and why Viacom chose to sue IJP, rather than challenging it before the U.S. Patent and Trademark Office.