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Viacom International Inc. v. IJR Capital Investments, LLC

United States District Court, S.D. Texas, Houston Division

January 11, 2017

Viacom International Inc., Plaintiff,
v.
IJR Capital Investments, LLC, Defendant

          MEMORANDUM OPINION & ORDER

          Gray H. Miller United States District Judge.

         Pending before the court are plaintiff, Viacom International Inc.'s (“Viacom”) motion for summary judgment (Dkt. 19) against defendant IJR Capital Investments, LLC (“IJR”), and defendant's motion to exclude the expert report and expert testimony of Dr. Edward Blair (Dkt. 17). On December 20, 2016, the court held a combined hearing regarding the two motions and ruled that IJR's motion to exclude the expert report and expert testimony is DENIED. Dkt. 31. After considering the parties' arguments, motion, response, reply, and applicable law, the court is of the opinion that the motion for summary judgment (Dkt. 19) should be GRANTED IN PART and DENIED IN PART.

         I. Background

         This is a trademark infringement dispute over the name for IJR's proposed restaurant, “The Krusty Krab, ” which is the same name and spelling of a fictional restaurant in the animated television series, “SpongeBob SquarePants, ” that airs on Viacom's Nickelodeon network. Dkts. 19, 26. Since 1999, Viacom has used “The Krusty Krab” in its television show. Dkt. 19 at 4. The restaurant appeared in 166 of 203 aired episodes. Id. On December 3, 2014, IJR filed a federal trademark application for the mark, “THE KRUSTY KRAB, ” under restaurant services.[1] Dkt. 19 at 7; Dkt. 21, Ex. 1 at 11-12 (U.S. Trademark Application Serial No. 86470477 (filed Dec. 3, 2014)). On November 23, 2015, Viacom sent IJR a cease and desist letter requesting that IJR change the name of the restaurant, refrain from using any of the SpongeBob marks in connection with the restaurant, and to withdraw the pending trademark application. Dkt. 1, Ex. 1. On November 25, 2015, IJR responded to the letter, stating that it “rejects Viacom's claim of likelihood of consumer confusion and respectfully declines to cease use.” Dkt. 1, Ex. 2.

         On January 29, 2016, Viacom filed the instant lawsuit with nine claims against IJR under the Lanham Act (15 U.S.C. § 1125 (a), (c)) and state common law. Dkt. 1. On September 30, 2016, IJR filed its motion to exclude the plaintiff's expert report and testimony of Dr. Edward Blair. Dkt. 17. While IJR did not dispute the qualifications of the expert himself, IJR made eleven objections to the expert report, alleging “flawed” reasoning and methodology in reaching the survey results. Dkt. 17 at 5. After reviewing the parties' briefs (Dkts. 17, 23), record, evidence, and applicable law, the court held that Viacom has shown by a preponderance of the evidence that the challenged expert report by Dr. Blair is admissible.[2] Dkt. 31. Therefore, IJR's motion to exclude the expert report and testimony was DENIED. Dkt. 17. Viacom moves for summary judgment on eight of nine claims, which the court will now consider. Dkt. 19.

         II. Legal Standard

         A court shall grant summary judgment when a “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). “[A] fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548 (1986). If the party meets itsburden, the burden shifts to the non-moving party to set forth specific facts showing a genuine issue for trial. Fed.R.Civ.P. 56(e). The court must view the evidence in the light most favorable to the non-movant and draw all justifiable inferences in favor of the non-movant. Envtl. Conservation Org. v. City of Dall., Tex., 529 F.3d 519, 524 (5th Cir. 2008). The court must review all of the evidence in the record, but make no credibility determinations or weigh any evidence; disregard all evidence favorable to the moving party that the jury is not required to believe; and give credence to the evidence favoring the non-moving party as well as to the evidence supporting the moving party that is uncontradicted and unimpeached. Moore v. Willis Ind. Sch. Dist. , 233 F.3d 871, 874 (5th Cir. 2000).

         However, the non-movant cannot avoid summary judgment simply by presenting “conclusory allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation.” TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). By the same token, the moving party will not meet its burden of proof based on conclusory “bald assertions of ultimate facts.” Gossett v. Du-Ra-Kel Corp., 569 F.2d 869, 872 (5th Cir. 1978); see also Galindo v. Precision Am. Corp., 754 F.2d 1212, 1221 (5th Cir. 1985).

         III. Analysis

         Viacom has nine claims against IJR. Viacom moves for summary judgment on eight of those claims: false designation, unfair competition, and dilution under Texas common law and the Lanham Act; trademark infringement under Texas common law; and refusal of recognition under the Lanham Act. Dkts. 1, 19.

         A. Trademark Infringement (Count 4)

         To prevail on a claim of trademark infringement under the Lanham Act, a plaintiff must show: (1) it possesses a valid mark; and (2) defendant's use of its mark creates a likelihood of confusion as to source, affiliation, or sponsorship. 15 U.S.C. § 1051; Elvis Presley Enter., Inc. v. Capece, 141 F.3d 188, 193 (5th Cir. 1998). It is important to remember that a “mere reproduction of a trademark does not constitute trademark infringement if there is no likelihood of confusion.” 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 25:28 (4th ed. 2009). And, “likelihood of confusion” is not possible confusion, it is probable confusion. Bd. of Supervisors for LSU A&M Coll. v. Smack Apparel Co., 550 F.3d 465, 478 (5th Cir. 2008). In this respect, “[c]ontext is especially critical, ” and a court is required to “consider the marks in the context that a customer perceives them in the marketplace.” House of Vacuums, 381 F.3d at 485.

         Additionally, ownership of a mark is established by use in the market, not by registration. See Smack Apparel, 550 F.3d at 475; Union Nat'l Bank of Tex., Laredo v. Union Nat'l Bank of Tex., Austin, 909 F.2d 839, 842 (5th Cir. 1990). Thus, the “senior user” who first uses the mark in the marketplace “is entitled to enjoin other ‘junior' users from using the mark, or one that is deceptively similar to it.” Union Nat'l Bank, 909 F.2d at 842-43.

         1. Valid trademark

         To succeed in a trademark claim, the first element that Viacom must demonstrate is that it possesses a valid mark. While a registered mark with the U.S. Patent and Trade Office comes with a presumption of validity, the Fifth Circuit has held that ownership of a trademark is established by use, not by registration. Id. at 842; Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 237 (5th Cir. 2010). Although Viacom did not register “The Krusty Krab, ” it argues that it has a valid mark because it has used “The Krusty Krab” continuously since 1999 when the iconic restaurant was featured in 166 of 203 aired “SpongeBob SquarePants” episodes, including the pilot episode.[3]Dkt. 19 (App. A ¶ 10, Ex. 5). 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. Dkt. 19 (App. A ¶ 11, Ex. 6; App. B ¶ 3, Ex. 2). Examples like these support Viacom's argument that it has a valid mark based on its use of the mark in commerce. Further, Viacom has established ownership through its sales and licensing of consumer products. Dkt. 19 at 13 (citing Turner v. HMH Pub. Co., 380 F.2d 224, 229 (5th Cir. 1967) (“[A] trade or service mark may be acquired through its use by controlled licensees.”)).

         IJR does not dispute these facts. Rather, IJR argues that Viacom never registered the mark for “The Krusty Krab, ” and that Viacom cannot have a trademark right in a title of a fictional restaurant. Dkt. 26 at 7-9, Ex. A (Notice of ...


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