February 17, 2016—Calling all Spongebob fans: there is a company in Texas that wants to create a real life Krusty Krab restaurant. For those not “in the know,” Spongebob Squarepants is a Nickeloden cartoon featuring underwater sea characters. The main character, Spongebob, works at a fast food restaurant named The Krusty Krab, which is prominently involved in story lines in the show. The Texas company, IJR Capital Investments, is planning to open two “Krusty Krab” restaurants, presumably modeled after the cartoon version shown below. Adult fans will love it! Children will love it! Everyone will love it! Well, except for Viacom, the owner of the intellectual property rights in the Spongebob franchise.
The dispute began when IJR filed an application to register the mark THE KRUSTY KRAB in connection with “restaurant services” with the Trademark Office. The Trademark Office approved the mark for publication, no third-parties opposed, and a Notice of Allowance issued. IJR did not claim any use of the mark and it appears that they have not yet opened any restaurants.
At some point, someone in Viacom learned about the application and on November 23, 2015, sent a letter to IJR. The letter is short but written in a friendly tone, offering a “reasonable phase-out period” to IJR. In response, IJR questioned whether Viacom had any rights in the mark KRUSTY KRAB and “declined to cease use.” It appears the discussions ended there, with Viacom deciding to sue IJR, filing a complaint with the U.S. District Court for the Southern District of Texas on Jan. 29, 2016.
This is not the first time a third-party has attempted to create a restaurant based upon a television series or movie. We previously discussed one attempt to create a Ricky Bobby Sports Saloon (also in Texas). That restaurant is now known as Pole Position following a lawsuit from Sony Pictures.
Will the situation be different with the Krusty Krab? In its response letter, counsel for IJR argued that “consumers are likely to have a high degree of care when purchasing IJR’s goods and services” and that IJR was “unaware of any actual consumer confusion.” Neither of these arguments are likely to hold up in court as fast food services involve impulse purchases of cheap products, meaning that customers don’t do much research or due diligence when making their purchases. Also, the target customer will likely be children, making the potential for confusion even greater. The lack of actual confusion also means nothing when there has been no opportunity for confusion to arise. This is the case here, because IJR has not yet used its applied-for mark in commerce.
IJR suggested in an interview that it was being bullied by Viacom, stating that “Big guys always want to do what they can to the little guy.” It is true that there are numerous examples of big companies overreaching and attempting to enforce overbroad rights in their trademarks against small companies or individuals. However, this doesn’t seem to be that situation. The big company isn’t always the bad guy just because they’re “big.”
Spongebob Squarepants has been on the air since 1999. The franchise is very popular and has had immense success, with toys, feature films, comic books, and other products. In 2009, the franchise was valued at $8 billion. Given the widespread consumer recognition, IJR was well aware of Viacom’s rights. At best, IJR is a big fan of the cartoon and thought it would be fun to operate a real life Krusty Krab. At worst, IJR picked the name for the express purpose of capitalizing on the goodwill associated with the Spongebob Squarepants franchise.
The ever-optimistic Spongebob would likely say that “there’s always a chance,” but I think it’s unlikely Texans will be eating at a Krusty Krab any time soon. If that’s too big of a letdown for you to handle (and you’ve got the money and time for an international flight), there’s apparently a real life Krusty Krab in Palestine you can visit.
