Viacom's Victory in 'SpongeBob' Restaurant Dispute Upheld by Appeals Court

The SpongeBob SquarePants Movie Still 2004 - Photofest - H 2018

If SpongeBob SquarePants' fictional workplace The Krusty Krab ever becomes a real restaurant, it will require the blessing of Nickelodeon's parent company.

A federal appeals court on Tuesday affirmed Viacom's victory in a dispute over the trademark, finding the company owns a legally protectable mark and there is a likelihood of confusion if another seafood restaurant were to use the name.

Viacom in 2016 sued IJR Capital Investments over its efforts to open a real-life Krusty Krab, claiming the Texas company's use of the moniker was likely to confuse consumers. 

The media giant prevailed on a motion for summary judgment with regard to its common law trademark infringement and unfair competition claims last June when U.S. District Judge Gray Miller found that cartoon fans could mistakenly believe Viacom had endorsed the restaurant — especially since its subsidiary Paramount Pictures has licensed its Bubba Gump Shrimp Co. marks for a seafood restaurant chain inspired by Forrest Gump.

IJR appealed, arguing that Viacom doesn't have a valid trademark for The Krusty Krab.

A 5th Circuit Court of Appeals panel found, however, that the fictional restaurant's presence in the fictional world and its lucrative licensing record is enough to establish a valid ownership claim.

The court notes that specific elements from within a television show can receive trademark protection, citing examples like The Daily Planet from Superman and the General Lee from The Dukes of Hazzard, and that The Krusty Krab is analogous to other protected marks.

"The mark is integral to 'SpongeBob SquarePants,' as it appears in over 80% of episodes, plays a prominent role in the SpongeBob films and musical, and is featured online, in video games, and on licensed merchandise," writes circuit judge Priscilla R. Owen. "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."

The panel also found that The Krusty Krab mark is distinctive enough to warrant protection. (Read the full decision below.)

"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," writes Owen. "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."

The court also found a Krusty Krab restaurant, especially one that uses the unconventional spelling of those words, is likely to confuse consumers — even if that wasn't IJR's intent.

Viacom on Tuesday sent The Hollywood Reporter a statement in response to the decision: “We are pleased with the decision to affirm the lower court’s ruling that Viacom’s rights in The Krusty Krab mark are strong and deserve protection from infringement.”