FIRAC (fact, issue, rule, application, conclusion) FOR THE FOLLOWING CASE:

Viacom International, Inc. (Viacom) sued IJR Capital Investments, L.L.C. (IJR) for infringing on its common law trademark of The Krusty Kraba fictional restaurant in the popular "SpongeBob SquarePants" animated television seriesafter IJR took steps to open seafood restaurants using the same name. The district court granted summary judgment to Viacom on its trademark infringement and unfair competition claims. IJR appeals, asserting that Viacom does not have a valid trademark for The Krusty Krab and that its seafood restaurants would not create a likelihood of confusion between the two marks.

In 1999, Viacom launched the animated television series "SpongeBob SquarePants" on its Nickelodeon network. The show revolves around SpongeBob SquarePants, a sea sponge that wears square shorts, lives in an underwater pineapple, and works at the fictional The Krusty Krab restaurant as a fry cook with an array of characters including a cranky co-worker and the owner of The Krusty Krab. The show has become the most-watched animated television series for 15 consecutive years, with over 73 million viewers in the second quarter of 2016 alone. While the audience is predominately comprised of children, one-third of all viewers are 18 or older.

The fast food restaurant The Krusty Krab played a prominent role in the pilot episode of the series and has appeared in 166 of 203 episodes. The Krusty Krab was featured in two "SpongeBob SquarePants" feature films that grossed $470 million (and incurred $197 million in promotional expenses). The Krusty Krab Restaurant is also an element of Viacom's mobile app "SpongeBob Moves In" (seven million global downloads), appears in a play called The SpongeBob Musical, and is frequently mentioned in the franchise's advertisements and online outreach (approximately seven million page views across platforms per week). The press has referenced The Krusty Krab many times when discussing the show.

In 2014, IJR's owner, Javier Ramos, decided to open seafood restaurants in California and Texas. Ramos asserts that he was describing the crusted glaze applied to cooked seafood when his friend Ivan Murillo suggested naming the restaurant Crusted Crab, which quickly became The Krusty Krab. Because Ramos's search did not find an actual restaurant that used the mark, IJR filed a trademark application with the United States Patent and Trademark Office (USPTO) for THE KRUSTY KRAB. Viacom had not previously registered The Krusty Krab mark. The USPTO approved IJR's mark and published the application for opposition. Viacom did not oppose at this time, and the USPTO issued a notice of allowance for the mark authorizing issuance once IJR filed a statement of use.

In November 2015, Viacom sent a cease-and-desist letter that demanded the withdrawal of IJR's trademark application and alleged infringement of The Krusty Krab mark. IJR promptly responded, declining to cease use and asserting that Viacom does not actually use The Krusty Krab as a trademark and that there was no likelihood of consumer confusion. However, IJR postponed opening any restaurants. Viacom then filed suit in January 2016.

While registration of a mark is "prima facie evidence of ... the registrant's ownership of the mark,"ownership "is established by use, not by registration."An ownership right "accrues when goods bearing the mark are placed on the market."Viacom's mark clearly appears on goods in the market, such as The Krusty Krab playsets and aquarium ornaments. The question in this case, however, is whether Viacom uses The Krusty Krab to indicate originbecause the purpose of trademark law is to "prevent[ ] competitors from copying 'a source-identifying mark.' "

IJR does not dispute the underlying facts but asserts that they merely establish that the public recognizes "SpongeBob SquarePants" as a distinct source of products; according to IJR, The Krusty Krab is just a cartoon restaurant. This is not a reasonable inference from the undisputed evidence. The record clearly shows that The Krusty Krab is a focal point in the "SpongeBob SquarePants" television series and films, The Krusty Krab has continually been depicted in the advertising and promotion of the franchise over the past eighteen years, and it is used in the sale of products. The factors lead inescapably to the conclusion that in the minds of consumers, The Krusty Krab identifies the source of products, which is Viacom, the creator of the "SpongeBob SquarePants" fictional universe and its inhabitants. Viacom's mark has acquired distinctiveness through secondary meaning as a matter of law.

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The record shows that there is no genuine issue of material fact as to likelihood of confusion. The digits of confusionparticularly the strength of Viacom's mark, the identical spelling and pronunciation of the marks, both marks' identification of restaurants, and evidence of actual confusiondictate that IJR's use of the mark infringes on Viacom's trademark. By creating a connection in the consumer's mind between IJR's restaurant-in-development and The Krusty Krab from "SpongeBob SquarePants," there is an impermissible likelihood of confusion as to source, affiliation, or sponsorship.

While this 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. This case squarely falls within the protection of the Lanham Act and consumers would affiliate Viacom's legally protectable The Krusty Krab mark with IJR's seafood restaurant by the same name.

We affirm the judgment of the district court.

Answer rating: 100% (QA)

Fact Viacom International Inc Viacom sued IJR Capital Investments LLC IJR for infringing on its common law trademark of The Krusty Krab a fictional re... View the full answer