Affirming a district court ruling, the U.S. Court of Appeals, Fifth Circuit agreed with Viacom International that a fictional underwater restaurant named The Krusty Krab featured in SpongeBob SquarePants is entitled to trademark protection by virtue of its continued use and secondary meaning.

Viacom has never registered The Krusty Krab mark, but the burger restaurant has been featured prominently in the antics of SpongeBob and friends in the animated series’ 18-year run on television, as well as in two feature films that grossed $470 million, a recent Broadway play and associated merchandise.

When IJR Capital Investments (IJR) filed a trademark application for its proposed restaurant The Krusty Krab under the U.S. Patent and Trademark Office’s restaurant services category, Viacom filed suit under the Lanham Act and Texas common law. A U.S. district court judge granted summary judgment to Viacom on its trademark infringement and unfair competition claims, and IJR appealed.

The federal appellate panel affirmed, finding that Viacom demonstrated it owned a legally protectable mark in The Krusty Krab and that IJR’s use of the mark created a likelihood of confusion as to source, affiliation or sponsorship.

As a threshold matter, the Fifth Circuit held that specific elements within a television show—as opposed to the title of the show itself—are entitled to trademark protection. Citing decisions from the Second and Seventh circuits for support, the court said that extending trademark protection to elements of television shows that serve as source identifiers can serve the purposes of the Lanham Act to protect consumers against confusion, to foster investment in products that have trade names.

“The mark is integral to SpongeBob SquarePants, as it appears in over 80 percent of episodes, plays a prominent role in the SpongeBob films and musical and is featured online, in video games and on licensed merchandise,” the court wrote. “The Krusty Krab’s central role in the multi-billion dollar SpongeBob franchise is strong evidence that it is recognized in itself as an indication of origin for Viacom’s licensed goods and television services.”

Although Viacom has never registered the mark, the company established ownership by its use, the court added, and the mark has acquired distinctiveness through secondary meaning.

“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 last eighteen years and it is used in the sale of products,” the Fifth Circuit said. “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.”

Finally, the court agreed with Viacom that IJR’s use of The Krusty Krab mark created a likelihood of confusion. The defendant’s mark has identical spelling and pronunciation, including the unconventional use of K’s instead of C’s, the court noted, and a chance existed that Viacom could launch its own Krusty Krab restaurant. One of its subsidiaries has done just that, licensing the Bubba Gump Shrimp Co. chain of seafood restaurants inspired by the movie Forrest Gump.

While the panel said the “core consumers of each mark are dissimilar,” the court found it reasonable to infer that some child SpongeBob fans would influence the decisions of their parents or caretakers to eat at a Krusty Krab restaurant and that adult SpongeBob fans might well dine at the real Krusty Krab at least once due to the name. The plaintiff also pointed to a consumer survey it commissioned that found 30 percent of respondents thought The Krusty Krab was connected with Viacom and 35 percent of respondents associated the hypothetical restaurant with Viacom.

The strength of Viacom’s mark and the consumer survey evidence tipped the scales in favor of the plaintiff, leading the Fifth Circuit to conclude that no genuine issue of material fact remained as to the likelihood of confusion. The court therefore affirmed summary judgment in favor of Viacom.

“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,” the court said. “This case falls squarely 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.”

To read the opinion in Viacom International Inc. v. IJR Capital Investments, click here.

Why it matters: The Fifth Circuit joined two other federal appellate courts in recognizing trademark protection for a specific element within a television show, as opposed to just the title of the show itself. The panel also had little difficulty in finding Viacom’s use of the mark over the past 18 years (not just in the TV show, but in movies, a play and associated merchandise) established ownership and that The Krusty Krab acquired distinctiveness through secondary meaning. Relying heavily on the strength of Viacom’s mark as well as the consumer survey evidence, the court found a likelihood of confusion with IJR’s proposed restaurant.