Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 1 of 40
`United States District Court
`Southern District of Texas
`ENTERED
`March 25, 2022
`Nathan Ochsner, Clerk
`
`
`United States District Court
`Southern District of Texas
`ENTERED
`March 25, 2022
`Nathan Ochsner, Clerk
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page2 of 40
`
`its proposed findings to file a response.? Viacom served Chand
`
`with its proposed findings of
`
`fact
`
`and conclusions of
`
`law on
`
`November 3, 2021,4 but he filed no response.
`
`Chand has since
`
`appeared,
`
`represented by Pixi’s
`
`counsel,
`
`but still
`
`has not
`
`responded to the pending Motion.® Chand’s failure to respond is a
`
`representation of no opposition. ®
`
`Having considered the parties’
`
`submissions,
`
`the verified
`
`evidence,
`
`and applicable law,
`
`the Court makes
`
`the following
`
`findings of fact and conclusions of law and orders as follows.
`
`3 See Document No. 21; see also Document No. 24 at 1; Document
`No. 26 at 1; Document No. 44.
`
`4 See Document No. 28.
`
`5 See Document Nos. 42-43.
`
`6 “Failure to respond to a motion will be
`representation of no opposition.” L.R. 7.4.
`
`taken as
`
`a
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD_ Page 3 of 40
`
`FINDINGS OF FACT’
`
`From a preponderance of
`
`the evidence submitted,
`
`the Court
`
`finds, for purposes of the pending Preliminary Injunction Motion,
`
`as follows:
`
`A. SpongeBob SquarePants
`
`1.
`
`Viacom is a major media company that owns and operates
`
`a portfolio of
`
`television networks,
`
`including Nickelodeon.§& In
`
`1999,
`
`the
`
`animated television series
`
`“SpongeBob SquarePants”
`
`
`premiered on Nickelodeon.’ Since then, SpongeBob SquarePants has
`
`aired consistently and continuously on
`
`television and other
`
`platforms.1°
`
`2.
`
`The SpongeBob SquarePants television series is the most
`
`widely distributed in Viacom history and has been the most-watched
`
`animated series for children for at least 17 years.!!
`
`3.
`
`For decades,
`
`the SpongeBob SquarePants entertainment
`
`franchise has been immensely popular
`
`among both children and
`
`’ The references below to APPX are to Viacom’s appendix at
`
`Document Nos. 9-15.
`
`8 APPX 173 @ 2.
`
`9° APPX 174 Q 4.
`
`i0 Td.
`
`ti Td. at @@ 5.
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page4 of 40
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`adults,
`
`and it has become an extremely valuable media franchise
`
`for Viacom that
`
`includes several spin-off series,
`
`three feature
`
`films, a Tony Award-winning Broadway musical, a comic book series,
`
`original music, video games,
`
`significant
`
`related merchandise,
`
`theme park rides, and theme hotels.!% The series has won numerous
`
`awards.13
`
`SpongeBob SquarePants
`
`is primarily marketed toward
`
`children ages six and older, but given the franchise’s tremendous
`
`success for more than twenty years,
`
`some of SpongeBob SquarePants’
`
`biggest fans are adults.!4
`
`4,
`
`“SpongeBob
`
`SquarePants”
`
`chronicles
`
`the
`
`nautical
`
`adventures of SpongeBob SquarePants, a sea sponge, and takes place
`
`
`in the fantastical underwater city of “Bikini Bottom.”15
`
`As
`
`the
`
`series’ opening song declares, SpongeBob SquarePants “lives in a
`
`pineapple under
`
`the sea,” as shown below.!® The flowery shapes
`
` floating in the background behind SpongeBob and his home in the
`
`
`images below are ubiquitous in Bikini Bottom and therefore appear
`
`in much of Viacom’s SpongeBob SquarePants~-related marketing.?’
`
`12 Id. at @ 6.
`
`13 APPX 175 4 7.
`
`14 Td. at @@ 9, APPX 197-198.
`
`15 APPX 175 q 10.
`
`1¢ Id. APPX 175-76
`
`10.
`
`7 Id. at G7 10-11.
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 5 of 40
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`
`
` B. Krusty Krab
`
`5.
`
`
`SpongeBob SquarePants famously works as a fry cook for
`
`
`
`the “Krusty Krab,” a fast-food restaurant
`
`in Bikini Bottom known
`
`for its “Krabby Patty” burgers.!® The Krusty Krab is so central
`
`to the SpongeBob SquarePants franchise that it has been featured
`
`heavily in more than 80% of the episodes of the animated television
`
`series, all three feature films, and the Broadway musical.!® For
`
`years,
`
`the Krusty Krab has been a household name, and instantly
`
`recognizable as being associated with Viacom and its SpongeBob
`
`SquarePants franchise. ?2?
`
`18 APPX 177 { 13.
`
`19 Td.
`
`Pixi admits that the “Krusty Krab has become a well-
`20 Td.
`among fans of
`the show.”
`Document No.
`26, Pixi’s
`known name
`Proposed Order at 2-3.
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD_
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`Page6 of 40
`
`6.
`
`Images depicting the Krusty Krab restaurant
`
`and its
`
`distinctive clamshell sign, menu,
`
`and interior decor are shown
`
`below. #21
`
`7.
`
`In a
`
`famous
`
`sequence
`
`
`from the first
`
`season of
`
`the
`
`animated television series, viewers are informed by a “Krusty Krab
`
`Training Video” that the Krusty Krab was originally a retirement
`
`home called the “Rusty Krab” before Mr. Krabs converted it into a
`
` fast-food restaurant. 2?
`
`8.
`
`Viacom has
`
`spent millions
`
`of dollars
`
`advertising,
`
`
`promoting, and marketing the KRUSTY KRAB mark in connection with
`
`a variety of goods and services in the United States and globally. ??
`
`9.
`
`Time Magazine named the Krusty Krab one of the eighteen
`
`most
`
`
`influential fictional companies of all
`
`time.?4
`
`The Krusty
`
`Krab has been featured in countless other unsolicited media,
`
`21 APPX 177-78 @ 14.
`
`22 APPX 179 qT 18.
`
`23 Id. @ 15.
`
`24 Id. 7 16.
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page7 of 40
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`including articles, newspapers, entertainment media,
`
`and others
`
`widely available throughout the United States.?5
`
`10.
`
`Due to the popularity of the franchise, Viacom has been
`
`able
`
`to
`
`sell
`
`or
`
`license many
`
`products
`
`bearing
`
`SpongeBob
`
`SquarePants-related trademarks,
`
`
`including the KRUSTY KRAB mark.?°
`
`Many of these products are associated with food and beverages, as
`
`shown below.27 ROEMB03
`
`
`
`25 Id.
`
`26 APPX 181 9 21.
`
`27 APPX 181-82 Q 21.
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page8 of 40
`
`il.
`
`Viacom and its licensees advertise and promote KRUSTY
`
`KRAB-branded products to fans in social media campaigns,
`
`including
`
`Twitter, Facebook,
`
`and Instagram,
`
`and on
`
`licensee websites.28
`
`Viacom and
`
`its
`
`affiliates
`
`also
`
`sell
`
`numerous
`
`items
`
`at
`
`SpongeBobShop.com, which includes
`
`a “Krusty Krab Shop” page.?9
`
`Viacom’s licensing regime in connection with the KRUSTY KRAB mark
`
`has generated millions of dollars for the company. ?°
`
`12.
`
`In 2019, Viacom brought the Krusty Krab to life at Comic-
`
`Con International: San Diego by creating an immersive experience
`
`featuring the restaurant,
`
`the clamshell sign,
`
`the floating flower
`
`shapes, and many other indicia of the franchise. 3!
`
`28 APPX 182 7 22.
`
`*9 Id., APPX 281-297.
`
`
`
`30 Ta.
`
`31 APPX 179 4 17.
`
`
`
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`C. Viacom’s Trademarks
`
`13. Viacom is the record owner of three valid and subsisting
`
`trademark registrations for the KRUSTY KRAB mark.34
`
`Viacom has
`
`actively and successfully policed the marketplace and enforced its
`
`rights against infringers of the KRUSTY KRAB mark.3
`
`14. Viacom uses other trademarks as well in connection with
`
`the
`
`SpongeBob
`
`SquarePants
`
`franchise,
`
`including
`
`SPONGEBOB,
`
`
`
`SPONGEBOB SQUAREPANTS, and KRABBY PATTIES.34 Viacom is the record
`
`owner of several valid and subsisting trademark registrations for
`
`the foregoing marks.*
`
`D. Viacom’s Copyrights
`
`15. Viacom is the sole owner of all copyrights in and to the
`
`creative aspects of
`
`the SpongeBob SquarePants
`
`franchise
`
`(the
`
`“Works”) .36 Viacom owns over 400 valid copyright registrations for
`
`see also Document No. 26,
`32, APPX 182 §{ 24, APPX 298-302,
`Pixi’s
`Proposed Order
`at
`3
`(“Viacom owns
`three
`federal
`registrations for the KRUSTY KRAB mark.”).
`
`33 APPX 182 @ 23.
`
`34 APPX 183 {@ 25, APPX 304-308.
`
`35 Td.
`
`36 APPX 183 FTF 26-31, APPX 310-407; see also Document No. 26,
`Pixi’s Proposed Order at
`3
`(“Viacom owns
`numerous
`copyright
`
`registrations for SpongeBob SquarePants related creative works.”).
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 10 of 40
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`
`the Works.37 This includes copyrights covering episodes from the
`
`animated
`
`television
`
`series,
`
`feature
`
`films,
`
`two-dimensional
`
`drawings,
`
`and stylebooks
`
`featuring extensive artwork from the
`
`franchise. 38
`
`Defendants’ Activities
`
`16. Defendant Chand owns and manages Defendant Pixi, which
`
`operates themed “pop-up” restaurants and bars in Houston, Texas.%9
`
`In May 2021, Viacom discovered that Defendants had recreated the
`
`Krusty Krab in the form of a pop-up restaurant and bar called “The
`
`Rusty Krab.40
`
`Defendants’ designer of
`
`the restaurant, when
`
`interviewed on a Houston television channel, stated the aim was to
`
`give the pop-up the feel of being in Bikini Bottom:
`
`Lifelong dream of mine to be able to recreate something
`that was
`so nostalgic to my childhood .
`.
`.
`I really
`wanted to give it a feel of people actually being in
`
`
`
`
`Bikini Bottom.
`And
`I believe we nailed it.
`-
`Everyone absolutely felt
`like they were
`in Bikini
`Bottom.
`.
`.
`. We wanted to make sure every single detail
`was absolutely correct.
`.
`.
`.
`I wanted to make people
`feel
`like they were
`in the infamous
`living room of
`SpongeBob. 4!
`
`37 Td.
`
`38 Id,
`
`39 APPX 023-024, APPX 155-56, APPX 171.
`
`40 APPX 002 7 2, APPX 029-34 | 2, APPX 087.
`
`41 APPX 049 J 16.
`
`10
`
`
`
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`
`
`17.
`
`Owner Chand says he got the idea for the pop-up from his
`
`9-year-old daughter,
`
`a huge SpongeBob fan.44
`
`The pop-up includes
`
`recreations of various iconic SpongeBob locals where customers can
`
`pose for photos,
`
`including SpongeBob’s living room and bedroom and
`
`Mrs. Puff’s Boating School.#
`
`The pop-up also includes a rendering
`
`of,
`
`and appearances by,
`
`SpongeBob for customer
`
`interaction and
`
`photographs. 4
`
`SpongeBob SquarePants
`
`video further plays
`
`on
`
`multiple screens throughout the pop-up. *
`
` Defendants’ Twitter page
`
`
`
`would show images such as this that depict the pop-up:*
`
`
`
`The Rusty Krab @kefihtx - Jul 20
`HOUSTON HAVE YOULIVED OUTYOURCHILDHOOD DREAMSYET!?
`
`FECCAETLUST BH sion #
`
`42
`
`43
`
`44
`
`45
`
`46
`
`APPX
`
`156, 160.
`
`APPX
`
`029-33,
`
`063-
`
`64, 069, 157,
`
`161.
`
`APPX
`
`061, 065,
`
`O67,
`
`070, 155,
`
`160.
`
`APPX
`
`059-60,
`
`Oo7,
`
`O71,
`
`158.
`
`APPX
`
`035.
`
`11
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 12 of 40
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`18. Defendants sold tickets to the public for entry during
`
`specific two-hour slots beginning in May 2021 at prices of $30.00
`
`for ages 15 and older, $20.00 for kids 5-14,
`
`
`and free for kids
`
`under 5.47 The ticket price was for admission only; food and drink,
`
`including the “Krabby Patties,” were sold separately.*
`
`19. Defendants’
`
`aim was
`
`nostalgic
`
`fun
`
`according
`
`to
`
`Defendants’ Facebook posts:
`
`
`
` THIS IS AN UNFORGETTABLE NOSTALGIC EXPERIENCE THAT YOU
`
`
`
`DO NOT WANT TO MISS!!!
`GET IN ON THE FUN NOW AND GRAB
`
`YOUR TICKETS TO THIS EVENT FOR ALL AGES NOW! 49
`
`
`
`
`
` In promoting the pop-up in May, 2021, Chand admitted:
`
`
`is for people to have
`thing for me
`important
`The most
`They spend a lot of money to come through.
`fun here.
`
`We have people traveling from out of state just
`to
`
`experience this[.]
`.
`.
`.
`I want
`them to be satisfied
`with the photo ops,
`the exhibits,
`the interactive games,
`the food and drinks — the whole enchilada.
`
`
`
`20.
`
`The pop-up is not a parody or caricature of SpongeBob,
`
`the Krusty Krab, or the SpongeBob SquarePants universe.?>!
`
`47 APPX 053, 158.
`
`48 APPX 052, 066.
`
`49 APPX 038-39 F 9.
`
`°° APPX 072-73, 158.
`
`Sl See, e.g., APPX 029-36 97 2-5, APPX 037-39 | 8-9, APPX 049
`@ le, APPX 051-53 TF 20-21, APPX 156.
`
`12
`
`
`
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`
`21.
`
`The pop-up does not mimic Viacom’s intellectual property
`
`for purposes of commenting upon, or criticizing,
`
`the SpongeBob
`
`SquarePants franchise (in whole or in part).
`
`22.
`
`The pop-up is not
`
`a
`
`joke nor
`
`is it a presentation of
`
`ridicule or satire.°?
`
`23. Defendants have
`
`intentionally copied significant
`
`and
`
`detailed elements of the SpongeBob SquarePants series to attract
`
`customers drawn by fan nostalgia and goodwill
`
`
`and to profit
`
`therefrom. °4
`
`24.
`
`Some consumers have publicly expressed confusion over
`
`whether The Rusty Krab is licensed by, or affiliated with, Viacom
`
`and the SpongeBob SquarePants franchise and have identified The
`
`Rusty Krab as the Krusty Krab.°°
`
`25.
`
`Some customers of Defendants’ pop-up have complained of
`
`horrible experiences at The Rusty Krab and expressed disgust at
`
`the purportedly unsafe and unsanitary conditions in the pop-up as
`
`well as the poor quality of the pop-up’s services and the SpongeBob
`
`SquarePants recreations.
`
`52
`
`Id
`
`°3 Td.
`
`Ia
`
`54
`
`°° APPX 036-39 FG 6-7, 10, APPX 048-49 {¢ 15, APPX 049 F 17,
`APPX 050-51 9G 18, APPX 054-57 { 23.
`
`°6 APPX 039-47 Ff 12-14, APPX 50 4 17.
`
`13
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 14 of 40
`
`26. When Viacom discovered this pop-up it demanded through
`
`counsel
`
`that Defendants
`
`cease
`
`operations
`
`using
`
`SpongeBob
`
`SquarePants
`
`intellectual
`
`property
`
`in
`
`connection with
`
`the
`
`restaurant,
`
`including
`
`all menus,
`
`signage, marketing
`
`and
`
`promotional materials,
`
`social media
`
`accounts,
`
`and websites
`
`associated with the restaurant.?’
`
`27. Defendants
`
`refused to discontinue their use of
`
`the
`
`SpongeBob intellectual property,*® and Viacom filed this suit to
`
`enjoin Defendants’ actions.°9
`
`CONCLUSIONS OF LAW
`
`The Court makes the following conclusions of law:
`
`Jurisdiction
`
`1.
`
`The Court has
`
`jurisdiction over
`
`the parties and the
`
`subject matter of this case.
`
`See 28 U.S.C. §§ 1331, 1367.
`
`Evidentiary Issues
`
`2.
`
`
`The Court finds credible for purposes of the Motion the
`
`°7 APPX 002 { 2, Appx O09.
`
`°8 APPX 002 GFW 2-9.
`
`59 Document Nos. 1, 9.
`
`
`60 See Document Nos. 1, 25, 42.
`
`14
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD_ Page 15 of 40
`
`Declarations of Dennis Wilson, H. Forrest Flemming,
`
`
`
`
`
`
`
`,
`
`and
`
`Claudia Spinelli.
`
`
`
`3.
`
`
`The Declaration of Megan Matthees,
`
`a paralegal for the
`
`
`
`
`law firm Lloyd & Mousilli, PLLC, states in Paragraph 7, “I have
`
`read the factual statements set forth in Defendant Pixi Universal,
`
`LLC’s Response
`
`to Plaintiff Viacom’s Motion
`
`for Preliminary
`
` Injunction.
`
`The factual statements set forth therein are within
`
`my personal
`
`knowledge
`
`and
`
`are
`
`true
`
`and correct.”
`
`Not
`
`surprisingly,
`
`the
`
`attorney-in-charge who
`
`signed Defendants’
`
`Response did not verify the factual statements therein. There is
`
`no basis shown in the evidence to suggest how her paralegal should
`
`have personal knowledge of all
`
`such matters as being factually
`
`true.
`
`The Court
`
`is not persuaded by Ms. Matthees’
`
`testimony in
`
`paragraph 7.
`
`
`
`4,
`
`After the parties filed their proposed findings of fact
`
`and conclusions of
`
`law, Counsel for Pixi filed a letter stating
`
`that as of October 31,
`
`2021, Pixi made
`
`the business decision
`
`permanently to close The Rusty Krab.® According to counsel “Pixi
`
`agrees to never operate any restaurant related to, based on, or
`
`
`parodying SpongeBob SquarePants in the future.”® This letter is
`
`61 Document No. 19-1 at FI 7.
`
`6&2 Document No. 29.
`
`63 Td.
`
`15
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 16 of 40
`
`not part of the evidentiary record.
`
`No evidence accompanied this
`
`letter. Moreover,
`
`there is no proof
`
`that Defendant Chand, who
`
`owns and controls Pixi, has in any manner foresworn his operation
`
`of pop-ups
`
`infringing Viacom’s
`
`intellectual property in the
`
`SpongeBob series by himself, or Pixi, or any other entity that he
`
`may use for business purposes. *®
`
`Preliminary Injunction Standard
`
`
`5.
`
`To
`
`obtain
`
`a
`
`preliminary
`
`injunction, Viacom must
`
`establish:
`
`(1) it is “likely to succeed on the merits,” (2) it is
`
`“likely to suffer irreparable harm in the absence of preliminary
`
`relief,” (3) “the balance of equities tips in [its]
`
`(4)
`
`“an injunction is in the public interest.”
`
`
`
`
`favor,” and
`
`McDonald v.
`
`Longley,
`
`4 F.4th 229,
`
`255
`
`(5th Cir. 2021), petition for cert.
`
`filed, No.
`
`21-800 (U.S. Nov. 30, 2021)
`
`(quoting Winter v. Nat.
`
`Res. Def. Counsel, Inc., 129 S. Ct. 365, 374 (2008)).
`
`6.
`
`The decision to grant or deny preliminary injunctive
`
`relief is left
`
`to the sound discretion of
`
`the district court.
`
`Miss. Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618,
`
`621 (5th Cir. 1985).
`
`7.
`
`
`An order of preliminary injunction can bind parties,
`
`
`
`concert
`
`or
`
`their officers,
`
`and others who
`
`are
`
`“in active
`
`64 See id.; see also Document No. 31.
`
`16
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 17 of 40
`
`participation” with those parties, but only those who
`
`receive
`
`actual notice of the injunction.
`
`
`FErEp. R. Civ. P. 65(d) (2).
`
`Likely to Succeed on the Merits
`
`
`
`8.
`
`Viacom predicates its preliminary injunction motion on
`
`two claims:
`
`federal
`
`trademark infringement under
`
`the Lanham Act
`
`and federal copyright infringement under the Copyright Act.
`
`A. Trademark Infringement
`
`9.
`
`To prevail on its trademark infringement claim, Viacom
`
`must
`
`show that
`
`(1)
`
`it
`
`owns
`
`a
`
`legally protectable mark
`
`and
`
`(2) Defendants’ use of the mark creates a likelihood of confusion
`
`as to source, affiliation, or sponsorship.
`
`See Viacom Int’l v.
`
`
`IJR Capital Invs., L.L.C., 891 F.3d 178, 185 (5th Cir. 2018); Elvis
`
`Presley Enterprises,
`
`
`Inc. v. Capece, 141 F.3d 188, 193 (5th Cir.
`
`1998).
`
`10. Viacom has demonstrated an uncontroverted likelihood
`
`that it will succeed on the first element.
`
`Viacom has produced
`
`three certificates of registration for the KRUSTY KRAB mark filed
`
`by Viacom in 2017.6
`
`In addition, Viacom has submitted evidence
`
`
`
`that it has continuously used the KRUSTY KRAB mark in commerce as
`
`65 APPX 182 4 24, APPX 298-302.
`
`17
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 18 of 40
`
`a
`
`source
`
`identifier
`
`and
`
`that
`
`the mark
`
`has
`
`acquired
`
`distinctiveness.®* See Viacom, 891 F.3d at 185, 189, 191.
`
`ll.
`
`The second element requires analysis of the digits of
`
`confusion to assess whether Defendants’ use of The Rusty Krab mark
`
`creates a
`
`likelihood of confusion as
`
`to the pop-up’s
`
`source,
`
`affiliation, or sponsorship.
`
`See id. at 191-92,
`
`These factors
`
`include:
`
`(1)
`
`the type of mark allegedly infringed;
`
`(2)
`
`(3)
`
`(4)
`
`(5)
`
`the similarity between the two marks;
`
`the similarity of the products or services;
`
`
`
`the identity of retail outlets and purchasers;
`
`the identity of the advertising media used;
`
`
`
`(6)
`
`the defendant’s intent; and
`
`(7) any evidence of actual confusion.
`
`id.
`
`The Court “must
`
`‘consider the marks
`
`in the context
`
`that a
`
`customer perceives them in the marketplace.’”
`
`Id. (quoting Scott
`
`Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 485 (5th Cir.
`
`2004)).
`
`This includes whether the mark is used in parody.
`
`See
`
`Lyons P’ ship v. Giannoulas, 179 F.3d 384, 389 (5th Cir. 1999).
`
`12.
`
`Parody is not a defense to trademark infringement, but
`
` a factor to be considered when analyzing a likelihood of confusion.
`
`Elvis Presley, 141 F.3d at 198. While the use of a mark in parody,
`
`66 See, e.g., APPX 177-79 @ 13-18.
`
`18
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 19 of 40
`
`weighs against a finding of a likelihood of confusion,
`
`the “cry of
`
`‘parody!’ does not magically fend off otherwise legitimate claims
`
`of trademark infringement or dilution.”
`
`Id.
`
`(quoting 4 J. TxHomas
`
`
`McCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 31:153).
`
` Fifth Circuit stated,
`
`there “are confusing parodies
`
`As the
`
`and non-
`
`
`
`
`
` aos
`
`confusing parodies.”
`
`Id. at 198-99 (citing cases).
`
`They have in
`
`common “an attempt at humor
`
`
`through the use of
`
`someone else’s
`
`trademark.”
`
`Id. at 199.
`
`A successful parody weighs against a
`
`likelihood of confusion because it sends the message that it is
`
`not
`
`the original and is a parody.
`
`
`Id. MThus,
`
`“A non-infringing
`
`parody is merely amusing, not confusing.” Id. (quoting 4 McCaRTHY,
`
`supra § 31:153)
`
`(emphasis in original).
`
`13.
`
`A parody’s need and justification to mimic the original
`
`derives from the parody’s targeting of the original for comment or
`
`ridicule.
`
`Id.
`
`(citing Campbell v. Acuff-Rose Music, Inc., 114 S.
`
`Ct. 1164, 1176 (1994)).
`
`
`“Tf the original is not a target of the
`
`parody,
`
`the need to ‘conjure up’
`
`the original decreases as the
`
`parody’s aim moves away from the original.” Id.
`
`14.
`
`As found in Findings of Fact Nos. 20-23 above, Defendants
`
`do not use the pop-up or The Rusty Krab mark in parody. Moreover,
`
`neither the pop-up nor its name
`
`is used to comment, criticize,
`
`ridicule, or poke fun.
`
`To the contrary, its target is to replicate
`
`Viacom’s intellectual property in such an authentic manner as to
`
`create--in the words of Defendants--“AN UNFORGETTABLE NOSTALGIC
`
`
`
`19
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD_ Page 20 of 40
`
`EXPERIENCE” that would attract paying SpongeBob fans. This is all
`
`to appropriate the goodwill of Viacom’s intellectual property for
`
`the exclusive profit of Defendants.
`
`i5. Neither the Krusty Krab nor SpongeBob and his universe
`
`are the target of any purported parody.
`
`16. Because parody is not a relevant factor here, it has no
`
`bearing on considering a likelihood of confusion in the analysis
`
`that follows. Compare Elvis Presley, 141 F.3d at 200 (finding the
`
`
`
`parody factor
`
`irrelevant where
`
`the defendants’ parody of
`
`the
`
`faddish bars of the sixties did not require the use of the Elvis
`
`
`Presley marks because the parody was not of Elvis but of cheesy
`
`sixties bars) with Lyons P’Ship, 179 F.3d at 388 (finding parody
`
`weighed against confusion where Barney (the purple dinosaur) was
`
`the “butt of
`
`a
`
`joke[,]” no other
`
`references were made
`
`to his
`
`mythical world, and “the humor came from the incongruous nature of
`
`[Barney’s]
`
`appearance
`
`[at
`
`a sporting event being ridiculed and
`
`assaulted by a chicken mascot], not
`
`from an attempt
`
`to benefit
`
`from Barney’s goodwill”).
`
`(1) The Type of Mark Allegedly Infringed
`
`17. This first digit
`
`refers to the strength of Viacom’s
`
`KRUSTY KRAB mark.
`
`Viacom,
`
`891 F.3d at 193
`
`(citation omitted).
`
`“The more distinctive a mark,
`
`the stronger
`
`the mark.”
`
`Id.
`
`Generally, a stronger mark is entitled to more protection “because
`
`20
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 21 of 40
`
`here is a greater
`
`likelihood ‘that consumers will confuse the
`
`junior user’s use with that of
`
`the senior user.’”
`
`Id.
`
`Pixi
`
`concedes that the KRUSTY KRAB mark is strong.®’
`
`Indeed,
`
`the KRUSTY
`
`KRAB mark 1s
`
`strong,
`
`having acquired distinctiveness
`
`through
`
`secondary meaning. ®®
`
`Id.
`
`This
`
`factor weighs
`
`in favor of
`
`a
`
`likelihood of confusion.
`
`Id.
`
`(2) The Similarity Between the Two Marks
`
`18.
`
`
`In assessing the similarity of
`
`the marks,
`
`the Court
`
`considers the “marks’ appearance,
`
`sound,
`
`and meaning” and asks
`
`“whether, under the circumstances of use,
`
`the marks are similar
`
`enough that
`
`a
`
`reasonable person could believe the two products
`
`have a common origin or association.” Viacom,
`
`891 F.3d at 193
`
`(citation omitted).
`
`Here,
`
`the marks as used are so similar in
`
`appearance
`
`(see pictures below),
`
`sound,
`
`and meaning
`
`that
`
`a
`
`reasonable person could quite well believe the two have a common
`
`origin or association.
`
`(“The marks held by Viacom
`67 See Document No. 19, Response 7 4
`are strong by virtue of the age and popularity of the SpongeBob
`SquarePants series.”); Document No. 26, Pixi’s Proposed Order at
`4
`(“Because The Krusty Krab is a strong Mark, .. .”).
`
`68 See, e.g., APPX 177-79 FI] 13-17, APPX 181-82 @T@ 21-22.
`
`21
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 22 of 40
`
`Defendants’ Use
`
`Viacom’s Use
`
`
`19. Defendants’ omission of “K” from the middle name in “The
`
`Krusty Krab,” as if it might simply be a mistake, does not dispel
`
`
`a high likelihood of confusion given Defendants’ use of the “K” in
`
`the distinctively misspelled last name, “Krab,” all of which is
`
`displayed in virtually identical clam-shell
`
`signage with red
`
`whimsical
`
`lettering.
`
`Viacom itself used “Rusty Krab”
`
`in its
`
`storyline before “Mr. Krabs” tweaked it to the almost
`
`identical
`
`“The Krusty Krab.”
`
`The
`
`second factor weighs
`
`in favor of
`
`a
`
`likelihood of confusion.
`
`(3) The Similarity of the Products or Services
`
`20. As to the third factor, both marks identify restaurants:
`
`one,
`
`a fictional eatery and the other, an actual eatery with the
`
`same motif as the first. The “danger of affiliation or sponsorship
`
`22
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 23 of 40
`
`confusion increases when the junior user’s services are in a market
`
`that
`
`is one into which the senior user would naturally expand.”
`
`
`Viacom, 891 F.3d at 194 (quoting Elvis Presley, 141 F.3d at 202).
`
`As
`
`
`recognized by the Fifth Circuit, “‘today’s consumers expect
`
`[cartoon character] endorsements and act favorably toward them’
`
`in
`
`the restaurant setting[.]”
`
`
`Id.
`
`(quoting Conan Props.,
`
`Inc. v.
`
`
`Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir. 1985))
`
`(alteration
`
`in original). Although Viacom has not developed the Krusty Krab
`
`restaurant based on the fictional eatery, Viacom or its subsidiary
`
`or
`
`licensee could quite naturally develop such a restaurant, as
`
`Viacom’s affiliate did when it licensed Bubba Gump Shrimp Co.,
`
`a
`
`fictional business in the movie “Forrest Gump,” to build a chain
`
`of actual seafood restaurants.®*
`
`See id. Given the success of
`
`SpongeBob and the thematic identity of the two restaurants,
`
`this
`
`third factor also weighs in favor of a likelihood of confusion.
`
`See id.; see also Elvis Presley, 141 F.3d at 203 (finding confusion
`
`likely where defendant enters a market
`
`the owner would naturally
`
`expand).
`
`(4) The Identity of Retail Outlets and Purchasers
`
`21.
`
`“The greater
`
`the overlap between retail outlets and
`
`purchasers,
`
`the greater the likelihood of confusion.” Viacom, 891
`
`6° APPX 173 Q 3.
`
`23
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 24 of 40
`
`F.3d at 194 (citation omitted). Here, no overlap has been shown
`
`as to the identity of retail outlets.
`
`However, The Rusty Krab
`
`targets SpongeBob fans,
`
`as does
`
`the show and its merchandise.
`
`Given this identity of purchasers, this factor also weighs in favor
`
`of a likelihood of confusion.
`
`(5) The Identity of the Advertising Media Used
`
`22.
`
`“The greater
`
`the
`
`similarity in the
`
`[advertising]
`
`campaigns,
`
`the greater the likelihood of confusion.” Viacom, 891
`
`F.3d at 195 (citation omitted)
`
`(alteration in original). Viacom
`
`advertises
`
`and promotes
`
`its
`
`SpongeBob SquarePants
`
`franchise
`
`through social media campaigns and on its websites,
`
`among other
`
`channels.79
`
`For example, Viacom and its licensees advertise and
`
`
`promote KRUSTY KRAB-branded products in social media campaigns,
`
`including Twitter,
`
`Facebook,
`
`and
`
`Instagram,
`
`and
`
`on
`
`licensee
`
`websites.’!
`
`In the same manner, Defendants employ social media to
`
`publish the
`
`SpongeBob
`
`likeness
`
`and
`
`name
`
`in advertising and
`
`
`promoting The Rusty Krab to SpongeBob fans.7*
`
`The image below is
`
`
`but one example of Defendants’ advertising on the internet.
`
`70 See, e.g., APPX 181 @ 20.
`
`71 See, e.g., 182 7 22.
`
`72 Compare, e.g., APPX 034-36 91 3-5, APPX 038-39 {I 9, APPX
`051-53 @ 20, APPX 059-61, APPX 075, APPX 165-66 with APPX 174 @ 6,
`APPX 181-82 9% 20-22.
`
`24
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD_ Page 25 of 40
`
`os
`Ress DID YOU KNOW ITS SPONGEBOB’S BIRTHDAY!? COME CELEBRATE WIT!
`
` ~ The Rusty Krab @kefihtx - Jul 14
`
`US H-TOWN! Shaustents tdowmouwnthouston Sn0pup
`
`23. This promotion of The Rusty Krab alongside Viacom’s
`
`SpongeBob makes confusion more likely. This factor also weighs in
`
`favor of a likelihood of confusion.
`
`(6) Defendants’ Intent
`
`24.
`
`The intent to confuse alone may justify a finding that
`
`there is a
`
`likelihood of confusion.
`
`Viacom,
`
`891 F.3d at
`
`195
`
`(citation omitted).
`
`The relevant
`
`inquiry is whether Defendants
`
`
`
`intended to derive benefits from Viacom’s reputation by using the
`
`mark.
`
`Id.
`
`at 195-96.
`
`
`Defendants here utilize the mark to
`
`capitalize on Viacom’s
`
`reputation and goodwill.”
`
`Although
`
` Defendants at
`
`some point
`
`in time placed an obscure disclaimer of
`
`affiliation in tiny print at
`
`the bottom of
`
`their website,
`
`the
`
`placement and type-size of the disclaimer was not designed to draw
`
`73 See, e.g., APPX 029-36 FF 2-5, APPX 037-39 F 8-9, APPX 049
`f@ 16, APPX 051-53 FIFI 20-21, APPX 094-95, APPX 155-56.
`
`25
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 26 of 40
`
`one’s attention and was highly unlikely to prevent
`
`consumer
`
`confusion.
`
`25. This tiny disclaimer at
`
`
`the end of Defendants’ website
`
`promoting their pop-up restaurant looking like the Krusty Krab and
`
`filled with Viacom’s SpongeBob images was not
`
`intended to prevent
`
`consumer confusion.’4 This sixth factor also favors a finding of
`
`
`
`
`a likelihood of confusion.
`
`(7) Evidence of Actual Confusion
`
`26. Evidence of actual confusion is the “best evidence of a
`
`likelihood of confusion.”
`
`Viacom,
`
`891 F.3d at
`
`197
`
`(citation
`
`omitted).
`
`This evidence may be anecdotal
`
`instances of consumer
`
`confusion, even if quickly dispelled.
`
`Id. The Fifth Circuit has
`
`set the bar low,
`
`requiring very little proof of actual confusion
`
`to prove infringement;
`
`just
`
`a single known incident of actual
`
`confusion can be enough.
`
`Id. at 198 (citation omitted); Streamline
`
`
`
`Prod. Sys.,
`Inc. v. Streamline Mfg., Inc., 851 F.3d 440, 457
`
`(5th
`
`Cir. 2017). Viacom has produced evidence of numbers of instances
`
`of
`
`actual
`
`consumer
`
`confusion
`
`as
`
`to
`
`the
`
`pop-up’s.
`
`source,
`
`74 Compare APPX 169 with APPX 036-39 "771 6-7, 10, APPX 048-49
`f§ 15, APPX 049 ¥ 17, APPX 050-51 9 18, APPX 054-57 {Y 23; see also
`APPX 085
`(evidence of another
`small print disclaimer
`in white
`font).
`
`26
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 27 of 40
`
`affiliation, or sponsorship.75
`
`This factor strongly supports a
`
`
`finding of a likelihood of confusion.
`
`4‘
`
`27.
`
` By creating a connection in the consumer’s mind between
`
`[The Rusty Krab] and The Krusty Krab from ‘SpongeBob SquarePants,’
`
`there is an impermissible likelihood of confusion as to source,
`
`affiliation, or sponsorship.”7§ Viacom, 891 F.3d at 198. Viacom
`
`has demonstrated a likelihood that it will succeed on the second
`
`element of its trademark infringement claim.
`
`28.
`
`The Fifth Circuit has previously recognized that “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.”
`
`Id. This holding applies
`
`no less to The Rusty Krab,
`
`a restaurant specifically conceived,
`
`
`designed and built intentionally to copy the SpongeBob SquarePants
`
`eatery. Viacom has demonstrated a likelihood that it will prevail
`
`on its trademark infringement claim.
`
`B. Copyright Infringement
`
`29. Copyright protection subsists
`
`in original works of
`
`authorship fixed in tangible mediums of expression,
`
`including
`
`7° APPX 036-39 947 6-7, 10, APPX 048-49 § 15, APPX 049 G 17,
`APPX 050-51 9 18, APPX 054-57 { 23.
`
`76 APPX 049
`
`16.
`
`27
`
`
`
`Case 4:21-cv-02612 Document 45 Filed on 03/25/22 in TXSD Page 28 of 40
`
`pictorial,
`
`graphic,
`
`sculptural, motion pictures,
`
`and other
`
`audiovisual works.
`
`17 U.S.C.
`
`§ 102(a).
`
`Subject
`
`to certain
`
`enumerated exceptions,
`
`the owner of a copyright has the exclusive
`
`right
`
`to reproduce copies,
`
`to prepare derivative works,
`
`and to
`
`perform publicly a copyrighted motion picture or other audiovisual
`
`work.
`
`Id. at § 106(1),
`
`(2),
`
`(4). Anyone who violates any of the
`
`exclusive rights of the copyright owner is an infringer.
`
`Id. at
`
`
`§ 501(a).
`
`30.
`
`To prove
`
`copyright
`
`infringement, Viacom must prove
`
`“(1) ownership of
`
`a valid copyright,
`
`and
`
`(2)
`
`copying [by the
`
`defendant] of constituent elements of the work that are original.”
`
`
`
`
`Inc. v. Rural Tel. Serv. Co., 111
`
`
`
`
`See Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 141 (5th Cir.
`
`2004)
`
`(quoting Feist Publ’ns.,
`
`S. Ct. 1282, 1296 (1991))
`
`(alteration in original). Neither of
`
`these elements is in dispute.”
`
`31. Viacom is the sole owner of all copyrights in and to the
`
`creative aspects of the SpongeBob SquarePants franchise and has
`
`™ See, e.g., Document No. 19, Response at 7 20 (“Pixi readily
`
`admits
`that Viacom holds valid copyrights
`for
`the SpongeBob
`SquarePants
`television series,
`films,
`character designs,
`and
`artwork.
`Defendant also admits
`to operating a
`restaurant
`in
`Houston, Texas bearing a substantial
`likeness to a
`restaurant
`featured in the SpongeBob SquarePants
`television series,
`the
`Krusty Krab.”); Document No. 26, Pixi’s Proposed Order at 3-4
`(admitting that “Viacom owns numerous copyright registrations for
`SpongeBob SquarePants-related creative works” and that “The Rusty
`Krab has taken SpongeBob Squa
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