Friday, June 10, 2022

ViacomCBS Wins Lawsuit Against 'SpongeBob'-Themed Pop-Up Bar in Houston for Trademark Infringement

Update (6/10/22) - A Texas federal judge has ordered an owner of a now-closed Rusty Krab pop-up restaurant and bar to fork over $6 million as part of an intellectual property suit from Viacom International over SpongeBob SquarePants. According to a Wednesday final judgment, U.S. District Judge Ewing Werlein Jr. awarded Viacom $6 million in copyright damages against Pixi Universal, which does business as Kefi HTX.

The decision — which ruled on a stipulated consent judgment and permanent injunction — said Pixi had to transfer certain website domain names to Viacom. For more on the outcome, visit Law360.

Houston pop-up restaurant and bar The Rusty Krab infringes ViacomCBS’s intellectual property rights in the SpongeBob SquarePants franchise, the company says in a lawsuit filed in federal court in Texas.

The SpongeBob SquarePants animated series has aired on Viacom’s Nickelodeon networks since 1999, and has spawned multiple feature films, a Broadway musical, video games, and more. ViacomCBS owns numerous federal trademark registrations related to the franchise, common law rights to character names and other series elements, and over 400 federal copyright registrations for SpongeBob-related works, the company says in its complaint.

The Rusty Krab bills itself as a SpongeBob SquarePants-inspired experience for the ultimate Bikini Bottom fan, complete with multi-room photo ops, daily activities like scavenger hunts, and tropical food and cocktails with names like chum nuggets (buffalo chicken bites) and Pinky the Star’s Hideaway, a drink make with peach Ciroc, Malibu and Sprite.

The Rusty Krab was opened by owner Sam Chand in the Capitol Loft area of Houston, Texas, the same space where a Harry Potter pop-up shop was opened years prior. The bar, by Pixi Universal, sells SpongeBob-themed food and drinks, but clarified that it was “not affiliated, associated, authorized, endorsed by, or in any way officially connected with Nickelodeon, or the SpongeBob brand directly,” according to a disclaimer. Instead, Chand describes it as an “artistic adaptation recreation of an amazing series that added value to our childhood.”

Pop-ups like the Rusty Krab try to circumvent copyright laws with sideways references to the original inspiration — Rusty Krab is of course a reference to Krusty Krab, the fictional fast food restaurant on the show. Instead of Squidward, the Rusty Krab’s dour cashier is named Octoword. Patrick Star is referred to as Pinky, and SpongeBob himself is known instead as “The Big Sponge.”

However, ViacomCBS, which owns the rights to all SpongeBob IP, is suing the Rusty Krab over allegations of trademark infringement by using names, images, characters and re-creations from the show throughout its restaurant and on its menu, and according to the suit, even advertises the place as "Houston’s VERY FIRST Spongebob Squarepants Inspired Pop Up Restaurant and Bar!".

In a lawsuit filed in the United States District Court on August 11, Viacom alleges that the pop-up is “a bad-faith attempt to capitalize on the success of the SpongeBob SquarePants franchise,” arguing that the restaurant’s branding is specifically targeted towards children despite serving a menu of mostly alcoholic beverages. According to Viacom, associating any SpongeBob marks with alcohol is a violation of its licensing terms for any product, much less an unauthorized pop-up.

The lawsuit further alleges that the Rusty Krab’s use of trademarked SpongeBob imagery on its social media pages has deceived parents into thinking that the bar is officially affiliated with the show, and that it has received “numerous public complaints from concerned parents who, after paying high ticket prices believing they would get an authentic SpongeBob SquarePants experience, voiced disgust at the Infringing Restaurant’s purportedly unsanitary conditions and unsafe food.”

The media conglomerate has also accused the pop-up of illegal cybersquatting for using the phrase “rusty krab” in its domain name.

Among the many alleged infringements, Viacom says Rusty Krab's drink menu uses numerous well-known hallmarks of the beloved animated series -- like "Pineapple Under the Sea," "Bikini Bottom," "Secret Formula" and "I’m Ready" -- to sell alcohol, which Viacom claims would violate its licensing policy for the trademarks on its kid’s show.

Numerous social media reviews of the pop-up refer to high ticket prices on top of additional charges for middling food and drinks, mandatory 18% gratuity even for small parties, plus worn and dirty costumes, soiled couches, insulation hanging from holes in the ceiling, and other issues.

Chand explained that he only opened the pop-up bar for people to have fun and enjoy the space that he created using the popular kids show properties.

“The most important thing for me is for people to have fun here. They spend a lot of money to come through. We have people traveling from out of state just to experience this,” he says. “I want them to be satisfied with the photo ops, the exhibits, the interactive games, the food and drinks — the whole enchilada.”

Viacom argues that these conditions harm the “trusted Nickelodeon brand,” and have asked that the pop-up’s parent company, Pixi Universal, immediately cease using any SpongeBob imagery, trademarks, or names affiliated with the show. The company also seeks $350,000 in compensatory damages, any profits from the restaurant’s sales, and a 10 percent royalty fee. The company is also suing to stop the pop-up shop from doing further business.

Viacom apparently first sent a cease-and-desist to Pixi on May 25, before the lawsuit was filed. The very next day, the restaurant announced it was extending its run through August 1. As of press time, tickets for the pop-up are now available through the end of 2021.

A disclaimer on the Rusty Krab’s website reads thusly: “We are not affiliated, associated, authorized, endorsed by, or in any way officially connected with Nickelodeon, or the Spongebob brand directly, or any of its subsidiaries or its affiliates. This is Kefi HTX’s artistic adaptation recreation of an amazing series that added value to our childhood!”

This isn’t the first time that Viacom has sued a Houston-area restaurant over its use of SpongeBob’s image. In 2017, the company sued a pop-up called the Krusty Krab before it could even open its doors in Kemah. In that case, the restaurant owner claimed that he’d never heard of SpongeBob, and decided it “wasn’t a big enough deal” to reconsider changing the name.

TMZ, who first reported on the lawsuit, spoke to Sanju “Sam” Chand, the owner of the pop-up. Chand said the bar was intended strictly as a parody, and that there has been no consumer confusion.

Chand’s company has not yet responded to the lawsuit in court.

The complaint can be read in full here.

Originally published: August 13, 2021.

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