If you’re a fan of Nickelodoen’s popular cartoon series SpongeBob Squarepants, then you probably wouldn’t be surprised if Plankton, the nemesis of SpongeBob’s boss, Mr. Krabs, tried to use some ruse or another to make use of Mr. Krab’s valuable “Krabby Patty” trademarks. Plankton is always on the hunt for the secret formula to Bikini Bottom’s favorite burger recipe (while Mr. Krabs, usually with SpongeBob’s unwitting assistance, is always able to foil him at the last minute). So, why wouldn’t Plankton try just as hard to make off with a Krabby Patty trademark or two?
Well, a recent case from the real world of the 9th Circuit Court of Appeals involving SpongeBob provides some useful lessons about trademark licensing and potential liability for infringement.
Viacom owns the SpongeBob franchise, including multiple copyrights and trademarks to the SpongeBob character. A few years back, Viacom licensed SpongeBob and the Nickelodeon trademark to JHS so that JHS could market and sell a ukulele called the SpongeBob Squarepants “Flying V.” The “Flying V,” as the name suggests, is shaped like the letter V. Unfortunately for both JHS and Viacom, Gibson already owned several trademark and trade dress registrations for the V-shape of its own line of guitars, also known as the “Flying V” shape. So, when Gibson learned of the SpongeBob guitar, it promptly filed suit, naming JHS for “direct” trademark infringement and naming Viacom for “Secondary” trademark infringement.
Few people other than IP attorneys even realize there is such a thing as secondary trademark infringement. Secondary trademark infringement can take the form of either “contributory infringement” or “vicarious infringement.” Contributory trademark infringement occurs (1) when a defendant intentionally induces a third party to infringe the plaintiff’s mark, or (2) when a defendant supplies a product to a third party with actual or constructive knowledge that the product will be used to infringe the mark. Vicarious trademark infringement occurs when a party has the right to supervise the infringing conduct and holds a direct financial interest in that infringing activity.
In the SpongeBob ukulele case, the trial court found that Gibson had failed to introduce insufficient admissible evidence to establish either theory of infringement and held for Viacom (it remanded the case against JHS to the trial court for retrial). On appeal, the 9th Circuit affirmed the lower court opinion.
In analyzing the facts, the trial court determined that the mere fact Viacom licensed its marks to JHS was not sufficient to establish the requisite “direct control and monitoring” over the means of infringement that is necessary to establish contributory infringement. Likewise, the trial court found no vicarious infringement because there were no facts showing that Viacom “directly controlled the body shape or name of the ukulele.” Further, “the degree of control necessary for a trademark licensing agreement did not, by itself, provide the degree of control necessary to impose vicarious liability with respect to any aspect of the allegedly infringing product.”
Why It Matters. Should you ever find yourself facing a similar situation, it is important to understand that the mere existence or a license agreement, even one providing financial benefit to the licensor, will not be sufficient to establish secondary liability for trademark infringement. Instead, you will need to prove that the licensor exercised meaningful control over the licensee such as by directing how the licensed product is designed or manufactured. Otherwise, the next time you’re in Bikini Bottom you’ll find yourself eating at Plankton’s Chum Bucket fast food restaurant instead of Mr. Krab’s fine dining establishment, the Kruty Krab.
