IP Law Daily, TRADEMARK—N.D. Ill.: Restaurants that have not partnered with Grubhub state Lanham Act claims against the delivery service, (Aug 8, 2024)

By Robert Margolis, J.D.

Court denies motion to dismiss class action claims for false association, false advertising, and trademark infringement.

A putative class of restaurant owners and operators claiming that Grubhub has used their names and logos without authorization and in a manner likely to confuse customers has stated claims for false association, false advertising, and trademark infringement, the federal district court in Chicago has held. The court largely denied Grubhub’s motion to dismiss the claims against it, granting the motion only to the extent that eight of the named plaintiffs without registered trademarks failed to allege the requisite protectable trademark interest to support their claims. Those plaintiffs’ claims were dismissed without prejudice (Lynn Scott, LLC v. Grubhub Inc., No. 1:20-cv-06334 (N.D. Ill. Aug. 6, 2024)).

Alleged unauthorized use. Grubhub serves as an intermediary between restaurants and consumers looking to order food for delivery, providing an online platform with restaurant menus, pricing, and delivery timing estimates. Many restaurants partner with Grubhub as an additional way of generating orders, internet advertising, and a delivery infrastructure. They pay Grubhub a percentage of the takeout and delivery orders generated through the Grubhub platform. Since between its founding in 2004 and 2019, Grubhub only included restaurants on its platform that agreed to appear and gave Grubhub permission to use their names and logos. Consumers thus understood that restaurants listed on the Grubhub platform were working cooperatively with Grubhub.

After competition from service providers such as DoorDash and Uber Eats reduced Grubhub’s market share and revenue in 2019, Grubhub began adding restaurants to its platform without their permission, including the plaintiffs. Grubhub added more than 150,000 such restaurants.

The plaintiffs allege they are among the restaurants added without their permission and that the inclusion of their names and logos misleads customers into believing that the restaurants are willing partners working cooperatively with Grubhub. As a result, customers have erroneously blamed the restaurants for negative dining experiences. The plaintiffs brought claims on behalf of a class of restaurants whose names and logos have been used by Grubhub without authorization on the platform.

False association. The district court held that the named plaintiffs who have protectable trademarks stated a claim for false association because they sufficiently alleged that Grubhub’s use of their marks is likely to cause confusion. The court, however, dismissed without prejudice the false association claims of eight of the named plaintiffs who did not allege facts showing they have protectable marks.

Protectable marks. One of the plaintiffs that survived the motion to dismiss is the owner of a word mark MF TASTY, which it alleges is registered on the USPTO Principal Register. Grubhub argued that the allegations of ownership of that registration are “fatally flawed” because the trademark application is owned by a corporation and the plaintiff in the case is listed as an LLC. The plaintiffs argued that the discrepancy in the registration is the result of a typographical error in the application that is in the process of being corrected, and such a mistake does not override the presumption of validity that attaches to a registered mark at the pleading stage. The court agreed with the plaintiffs. At the motion to dismiss stage courts should not weigh evidence of invalidity.

The remaining eight plaintiffs assert generally that they own and operate restaurants with names and logos that Grubhub uses without authorization, but they do not identify in the complaint marks they claim are used in commerce and are entitled to trademark protection. The court rejected their argument that they need not show a protectable trademark interest. Their failure to do so led the court to dismiss their false association claims without prejudice.

Likelihood of confusion. The court reviewed seven likelihood-of-confusion factors applied in the Seventh Circuit and held that the complaint pleaded sufficient allegations for each. While Grubhub argued that the complaint’s lack of a specific discussion of the relevant factors renders the pleading inadequate, the court found “numerous allegations” that plausibly alleged the factors.

For the similarity-of-the-marks factor, the plaintiffs alleged that Grubhub uses “exact replicas” of their names and logos. For the similarity-of-the-products factor, plaintiffs alleged that they serve food and Grubhub is a food ordering and delivery platform, and the court deemed those allegations sufficient to show the products are closely related.

For area and manner of concurrent use, the plaintiffs alleged that Grubhub targets the same consumers (local diners) through the same channels (online) as the plaintiffs, by alleging that Grubhub “targets restaurants that local diners frequently search for online” and then “uses search engine marketing and optimization to divert those restaurants’ potential customers to its own business.” The court concluded that the “degree and care” consumers likely would exercise would be low, because the products and services of food and food delivery are inexpensive and widely available, so that factor also was plausibly alleged.

Because plaintiffs alleged that Grubhub uses exact replicas of their marks, the strength of their marks is of little import, the court held. Therefore, this factor also weighed in plaintiffs’ favor.

Plaintiffs alleged multiple instances of actual confusion in the complaint to satisfy the actual-confusion factor. For example, Grubhub posted outdated menus of two of the plaintiffs, resulting in customers making food orders that could not be fulfilled and then blaming the restaurants. The court rejected Grubhub’s argument that these instances were only of a “general confusion” that is not actionable, because it is plausible that the customers would believe the restaurants were associated with, sponsored, endorsed or otherwise were affiliated with Grubhub.

Finally, as to the intent factor, plaintiffs alleged that Grubhub’s intent to associate their products with the plaintiffs is manifested by the fact that Grubhub initially tried to convince restaurants to enter agreements with it, but when those efforts failed proceeded to use their names and logos anyway. The court found this sufficiently alleged this factor.

Damages, injunction. The court also held that plaintiffs sufficiently pleaded damages by alleging specific examples of customers who blamed the plaintiffs for poor experiences that were caused by Grubhub, and explaining how they have often had to spend time and money to remedy the negative perception. Grubhub’s argument that Plaintiffs failed to allege damages with requisite specificity failed.

Plaintiffs’ request for injunctive relief was not mooted by Grubhub’s removal of the plaintiffs’ listings from its platform, the court held, because the conduct could easily be resumed in the future. Further, while Grubhub removed plaintiffs from the platform, it has not discontinued the practice with respect to the class as a whole.

Infringement. Because the elements of the trademark infringement and false association claims are the same, the court denied the motion to dismiss the infringement claim for the same reasons as described above for the false association claim.

False advertising. The court denied the dismissal motion as to the false advertising claim. First, it rejected Grubhub’s argument that the plaintiffs’ failure to allege statutory language referring to a false advertising claim was fatal. Plaintiffs’ reference to Section 43(a) of the Lanham Act could be read to encompass a false advertising claim under Section 43(a)(1)(B) of that statute.

Plaintiffs also sufficiently alleged under Rule 9(b)’s heightened standards the requisites of the allegedly false representations: the who (Grubhub); the what (use of the restaurants’ names and logos in connection with Grubhub providing its services); the when (beginning in 2019 and continuing); the where (Grubhub’s platform); and the how (search engine marketing).

The Case is No. 1:20-cv-06334.

Judge: Hunt, L.

Attorneys: Elizabeth A. Fegan (Fegan Scott, LLC) for Lynn Scott, LLC. Isaac J. Colunga (Taft Stettinius & Hollister LLP) for Grubhub Inc.

Companies: Lynn Scott, LLC; The Farmer’s Wife; LLC; Old Crown, Inc.; 132 Degrees, LLC; MDR, LLC; Momobbq, Co., LLC; MF Tasty LLC; Iowa City Coffee Company; Grubhub Inc.

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