Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Utah: Franchisor Rib City denied further injunctive relief against former franchisee, new competitor, (Nov 4, 2015)

By Peter Reap, J.D., LL.M.

Although barbecue rib restaurant franchisor Rib City Franchising had been previously granted limited preliminary injunctive relief against its terminated franchisee, its owner, and the operator of a competing rib restaurant in the location of the former franchise, it was not entitled to further requested injunctive relief that included cessation of all allegedly infringing names, including the competitor’s “Pig City BBQ Grill,” and complete cessation of the competitor’s operations, the federal district court in Salt Lake City has ruled. Thus, the remainder of the franchisor’s motion for a preliminary injunction was denied (Rib City Franchising, LLC v. Bowen, November 3, 2015, Waddoups, C.).

Background. Toni Jorgensen and her company Way Out West Restaurant Group, Inc. (“WOW”), allegedly entered into a Licensing Agreement with Rib City to operate a Rib City Grill franchise in American Fork, Utah. On July 13, 2015, Rib City terminated the Licensing Agreement, due to alleged breaches by Jorgensen and WOW in failing to pay to Rib City amounts owed under the agreement.

Rib City claimed that on or around the termination date, Jorgensen transferred the Rib City Grill franchise—including client and supplier lists, menus, recipes, décor, social media accounts, and the Rib City Grill telephone number—to Bowen. Bowen and her company, Culinary Designs, then began operating a barbeque restaurant in the same location under the name Pig City BBQ, keeping the same Rib City Grill telephone number and website. Rib City also claimed that Bowen began to promote Pig City BBQ using various social media sites, which were previously maintained to promote Rib City Grill. According to Rib City, rather than create new profiles, Bowen simply renamed these existing webpages, resulting in Rib City’s reviews, photos, and registered marks appearing under Pig City BBQ’s name. In addition, Rib City alleged that Bowen retained the same interior restaurant layout and décor. Rib City further alleged that Pig City BBQ’s menu remained substantially similar to Rib City Grill’s menu, and argued that Bowen continued using its trade secret information, including its trade secret ketchup.

Rib City filed suit against Jorgensen and WOW for breach of the Licensing Agreement, and against Jorgensen, WOW, Bowen and Culinary Designs for trademark infringement and unfair competition in violation of the Lanham Act. It also asserted claims for misappropriation of trade secrets against Jorgensen, Bowen, and Culinary Designs, as well as claims against Bowen and Jorgensen for civil conspiracy. On the basis of these alleged violations, Rib City asked the court to issue a preliminary injunction, enjoining all of the defendants to:

• “Cease any and all use of the Rib City [m]arks;

• “Disable and/or take down all websites, links, videos, and social media pages;

• “Permanently disconnect the restaurant telephone number, (801) 492-1744;

• Cease all use of the confusingly similar “Pig City Grill,” “Pig City” and “Pig City BBQ” names;

• “Remove all trade dress associated with the former Rib City Grill restaurant”;

• Cease any and all use of Rib City’s trade secret information; and

• “Cease operation of the competing and infringing” Pig City BBQ restaurant.

On September 29, 2015, the court granted the request for preliminary injunctive relief in part. Specifically, the court ordered the defendants to take any action reasonably necessary to remove or facilitate the removal of social media website pages currently using or referencing Rib City marks. It further ordered the defendants to take any action reasonably necessary to disconnect or facilitate the disconnection of the franchise telephone number and to take any action reasonably necessary to prevent that number from connecting to Pig City BBQ. The court took the remainder of the motion on submission and now denied the remainder of that motion.

Jorgensen and WOW

Rib City was not entitled to further injunctive relief against Jorgensen and WOW, the court held. Rib City offered no evidence to show that either Jorgensen or WOW is currently involved with the operation of Pig City BBQ. as counsel for Rib City conceded at the hearing, the majority of the injunctive relief Rib City requests was not directed at these defendants. To the extent Rib City sought to prospectively enjoin Jorgensen to return any Rib City recipes or other trade secret and proprietary materials, it presented no evidence to show that any of those materials are currently being used by the defendants, or that they are in fact proprietary or trade secrets.

Bowen or Culinary Designs

Rib City failed to establish its entitlement to the remaining relief sought in the preliminary injunction motion on its claims against Bowen and Culinary Designs for trade secret misappropriation, civil conspiracy, and trademark and trade dress infringement in violation of the Lanham Act, the court decided.

Likelihood of success—trade secret and civil conspiracy claims. Rib City failed to establish a substantial likelihood of success on the merits on its claims for trade secret misappropriation and civil conspiracy. As explained, there was no evidence to indicate that Bowen or Culinary Designs is using any of Rib City’s trade secret or proprietary information, or that any such information is trade secret. For instance, the mere allegation that Pig City BBQ currently uses Rib City’s “system” and trade secret ketchup was insufficient to show a likelihood of success on a trade secret misappropriation claim. Similarly, Rib City proffered nothing from which the court could find that Rib City is substantially likely to succeed on the merits of a claim for civil conspiracy. Mere allegations of conspiracy were insufficient.

Likelihood of success—trademark claim. Rib City alleged that Bowen’s and Culinary Designs’ use of the name “Pig City BBQ,” coupled with a picture of a flying pig, infringed on its registered marks in violation of the Lanham Act. To obtain an injunction on this claim, Rib City must show the Pig City BBQ name and logo are likely to cause confusion in the marketplace concerning the source of the restaurant.

The Rib City and Pig City BBQ marks are dissimilar in terms of sight, sound, and meaning, the court determined. The various logos differ significantly in terms of font, color, and overall visual appearance. Likewise, although both the Rib City and Pig City BBQ marks include the word “city,” the difference between the word “pig” and “rib”—both in sound, sight, and meaning—is significant.

The court further found that the strength of Rib City’s marks did not weigh heavily in Rib City’s favor. Although Rib City has registered its marks, its registrations specifically disclaimed any exclusive right to the words “Rib,” “Barbecue,” or “Grill,” “apart from the mark as shown.” Taken as a whole, Rib City did not establish that its marks are conceptually or commercially strong. On the spectrum of distinctiveness, Rib City’s marks are largely descriptive, advertising to a consumer that Rib City is in the business of selling barbecue ribs. Rib City also failed to put forward sufficient evidence to establish that its mark is commercially strong, pointing to little evidence of customer mark recognition, the court observed.

The court also noted the lack of credible evidence to show actual customer confusion. Rib City directed the court to several reviews on yelp.com. However, these reviews were not persuasive evidence of actual confusion, the court held. Rather, they illustrated that consumers are able to distinguish between Rib City Grill and Pig City BBQ and recognize there has been a change of ownership. This weighed against a finding of likely confusion.

Similarly, Rib City failed to present any direct evidence that Bowen intended to copy its particular marks for the purpose of deceiving consumers. Evidence indicating Bowen could have intended to produce a product similar to Rib City’s product, and sell it to similar consumers, was not enough. To the extent that Rib City asked the court to infer that Bowen intended such deception, the dissimilarity of the marks weighed against such an inference. Thus, at this stage of the proceedings, the evidence of intent to deceive was weak, the court explained.

Rib City also failed to offer any evidence with respect to the degree of care likely to be exercised by prospective patrons of barbeque restaurants. Thus, this factor did not weigh in Rib City’s favor.

Finally, the court acknowledged that the products and services provided by Rib City Grill and Pig City BBQ are similar, which could increase the risk of customer confusion. But considering the other relevant factors addressed above, including the dissimilarity of the marks, the lack of evidence of actual confusion, and the evidence that consumers are able to distinguish between the two businesses, there was not a substantial likelihood that Rib City would prevail on its claim that the Pig City BBQ mark is likely to cause customer confusion.

Likelihood of success—trade dress claim. Likewise, Rib City did not establish a substantial likelihood of success on the merits of its claim for trade dress infringement in violation of the Lanham Act. To establish a likelihood of success on the merits for this claim, Rib City must put forward sufficient evidence to show that (1) its claimed dress is either inherently distinctive or has acquired secondary meaning, (2) the operation of Bowen’s restaurant Pig City BBQ creates a likelihood of customer confusion, and (3) Rib City’s claimed dress is nonfunctional.

The court was not persuaded that Rib City’s trade dress is inherently distinctive or has acquired a secondary meaning. Nothing in Rib City’s standard decor—which features artwork, signs, images of pigs at play, hanging window frames, and antique tools and farm equipment—would intrinsically serve to identify a particular source in a way that almost automatically tells a customer that they refer to a brand signals a product source, the court reasoned.

Additionally, Rib City’s menu is not so distinctive that it deserved Lanham Act protection. Although the court noted the similarities between the Rib City Grill and Pig City BBQ menu, both contained items that would be standard at many barbeque restaurants.

Furthermore, Rib City presented insufficient evidence to show that its trade dress has acquired a secondary meaning. Rib City did not detail the nature and extent of its efforts to create, advertise, or promote Rib City through use of its trade dress. Other evidence in the record contradicted a finding that Rib City’s trade dress has acquired a secondary meaning. Indeed, Jorgensen submitted a declaration in which she explained that there are no Rib City Grill restaurants currently operating in Utah and that the closest Rib City Grill restaurants are located in Colorado.

The court was also unpersuaded by Rib City’s averment that there is a likelihood of customer confusion regarding its trade dress claim. Weighing against such a finding was the fact that Bowen significantly changed many of the elements of décor that Rib City claims infringe on its trade dress, greatly minimizing the potential for customer confusion or the need for injunctive relief to prevent any trade dress infringement.

Other preliminary injunction factors. Because Rib City did not show a substantial likelihood of success on the merits of any of its claims against Bowen and Culinary Designs, it was not entitled to a preliminary injunction on the remaining relief sought. Nevertheless, the court noted that the other preliminary injunction elements would weigh against issuing further injunctive relief against Bowen and Culinary Designs at this time. For instance, Rib City failed to show the harm it would suffer in the absence of a preliminary injunction was irreparable. There was not a substantial likelihood of customer confusion that would lead to the loss of Rib City’s reputation and good will.

Rib City sought an injunction that Bowen stop using the name Pig City BBQ and cease operating the restaurant all together, the court noted. Thus, the balance of harms weighed against Rib City and Bowen’s and Culinary Designs’ favor. Finally, the court concluded that where there was no great risk of customer confusion—particularly going forward—it was not in the public interest’s to grant the extraordinary relief sought in the remainder of Rib City’s motion.

The case is No. 2:15-cv-00636-CW-EJF.

Attorneys: Lewis M. Francis (Jones Waldo Holbrook & McDonough) for Rib City Franchising. Craig M. Bainum (Bainum Law PC) for Sarah Bowen a/k/a Sarah Epperson f/k/a Sarah Braegger and Culinary Designs d/b/a Pig City Grill. Robert L. Jeffs (Jeffs & Jeffs) for Way Out West Restaurant Group.

Companies: Rib City Franchising; Culinary Designs; Way Out West Restaurant Group; Culinary Designs d/b/a Pig City Grill

Cases: FranchisingDistribution UtahNews