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SFG, Inc. v. Musk

United States District Court, N.D. Illinois, Eastern Division

October 10, 2019

SFG, Inc. Plaintiff,
v.
KIMBAL MUSK, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Andrea R. Wood, United States District Judge.

         Plaintiff SFG, Inc. (“SFG”) owns and operates a restaurant called Next Door Bistro (“NDB”) in Northbrook, Illinois. Defendants Kimbal Musk and The Kitchen Café, LLC (“TKC”) own a series of restaurants with the phrase “Next Door” in their names, including one that opened in April 2019 in Vernon Hills, Illinois. SFG takes issue with the Vernon Hills restaurant, which operates under the name Next Door American Eatery (“NDAE”), claiming that Defendants' use of “Next Door” in the restaurant's name infringes upon SFG's common law trademark in violation of the Lanham Act, 15 U.S.C. § 1125(a). Now before the Court is SFG's motion for a preliminary injunction prohibiting Defendants from using the “Next Door” identifier in connection with NDAE, pending resolution of the merits of its claims. (Dkt. No. 9.) For the reasons detailed below, SFG's motion is denied.

         BACKGROUND

         SFG is an Illinois corporation that owns and operates NDB, a restaurant in Northbrook, Illinois. SFG first opened an Italian restaurant called Francesco's Hole in the Wall in 1981. Then, in March 1995, SFG opened NDB physically adjacent to Francesco's Hole in the Wall. The two restaurants share a parking lot. NDB has been in constant operation since its opening. The restaurant often refers to itself and is known by some of its customers as “Next Door.” By all appearances, NDB is a successful restaurant; for example, during the time period 2015 through 2017, its annual gross receipts exceeded $2 million. (Hr'g. Pl.'s Exs. 6-8.)

         Musk first launched the TKC restaurant group in 2003 in Boulder, Colorado, naming the group's first restaurant “The Kitchen.” Subsequently, on June 13, 2011, Defendants opened a restaurant called “The Kitchen Next Door.” As Defendants expanded upon this “Next Door concept” and opened additional restaurants in Colorado, they began to refer to those restaurants as simply “Next Door.” TKC obtained a federal trademark registration for “Next Door” on May 5, 2015. TKC currently operates ten restaurants in Colorado, Illinois, Indiana, Ohio, and Tennessee employing the trademark “Next Door” in their names. (Hr'g Defs.' Ex. 5, Dkt. No. 30-5.)

         In Fall 2018, several news sources in the Chicagoland area published articles announcing the launch of NDAE in Vernon Hills, a suburb of Chicago, in the spring of 2019. (Hr'g Pl.'s Exs. 18-20, 22-24, 32-33.) According to the articles-and Musk's own blog post-Musk plans “to open 20 Chicagoland locations of his Next Door restaurant brand as part of a massive national rollout of the burgeoning chain that he hopes will replace TGI Friday's and Applebee's.” (Hr'g Pl.'s Ex. 19; see also Hr'g Pl.'s Exs. 18, 20, 22-24, 32-33.) NDAE eventually became TKC's first Next Door restaurant in Illinois. On October 29, 2018, SFG sent Defendants written notice of their claim to a common law trademark of the restaurant name “Next Door” and demanded that they change NDAE's name. (Hr'g Pl.'s Ex. 14.) Defendants responded with a letter on November 15, 2018, defending their use of the phrase and refusing to change the restaurant's name. (Hr'g Pl.'s Ex. 15.) On March 29, 2019, SFG initiated this lawsuit against Defendants. (Compl., Dkt. No. 1.) Meanwhile, on April 7, 2019, Defendants opened NDAE in Vernon Hills, approximately 12 miles away from NDB in Northbrook. Subsequently, on April 11, 2019, SFG moved for a preliminary injunction. (Mot. for Prelim. Inj., Dkt. No. 9.) After allowing the parties time to conduct expedited discovery, the Court held a five-day evidentiary hearing. Having heard the evidence and arguments of the parties, the Court now finds that preliminary injunctive relief is not warranted.

         DISCUSSION

         “An equitable, interlocutory form of relief, a preliminary injunction is an exercise of a very far-reaching power, never to be indulged in except in a case clearly demanding it.” Valencia v. City of Springfield, 883 F.3d 959, 965 (7th Cir. 2018) (internal quotation marks omitted). “It is never awarded as a matter of right.” Id. (internal quotation marks omitted). When faced with a motion for preliminary injunction, the court conducts an analysis with two phases: “a threshold phase and balancing phase.” Id. (internal quotation marks omitted). At the threshold phase, the party seeking the preliminary injunction must make three showings: “(1) absent a preliminary injunction, it will suffer irreparable harm in the interim period prior to the final resolution of its claims; (2) traditional legal remedies would be inadequate; and (3) its claim has some likelihood of succeeding on the merits.” Id. (internal quotation marks omitted). If all three requirements are met, the court then moves to the balancing phase and “weighs the irreparable harm that the moving party would endure without the protection of the preliminary injunction against any irreparable harm the nonmoving party would suffer if the court were to grant the requested relief.” Id. (internal quotation marks omitted). The court must also consider the public interest in denying or granting the injunction. Ty, Inc. v. Jones Grp., Inc., 237 F.3d 891, 895 (7th Cir. 2001).

         I. Likelihood of Success on the Merits

         The Lanham Act provides in relevant part that a plaintiff may bring a civil action against

[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin . . . which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activity by another person.

15 U.S.C. § 1125(a)(1). In order to succeed on its trademark infringement claim, SFG must establish (1) that its “Next Door” mark is protectable, (2) that Defendant used the mark in commerce, and (3) that Defendants' use of the term is likely to cause confusion. Ty, 237 F.3d at 897. Because the parties do not dispute that Defendants used the mark in commerce, the Court's analysis focuses the legitimacy of SFG's common law trademark and the likelihood of confusion.

         A. Whether SFG's Mark is Protectable

         A plaintiff may show that its mark is protectable in several ways. First, it may establish that it registered the mark with the United States Patent and Trademark Office's (“USPTO”) Principal Register, as “[r]egistration of a mark in the Principal Register is prima facie evidence of the validity of the registered mark.” 15 U.S.C. § 1057(b). When the plaintiff's mark is unregistered-as is the case here-the plaintiff has the burden to establish its entitlement to protection under the Lanham Act due to the “distinctiveness” of the mark. Platinum Home Mortg. Corp. v. Platinum Fin. Grp., Inc., 149 F.3d 722, 727 (7th Cir. 1998).

         “The first step in determining whether an unregistered mark or name is entitled to the protection of the trademark laws is to categorize the name according to the nature of the term itself.” Int'l Kennel Club of Chi., Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1085 (7th Cir. 1988). “Marks are often classified in categories of generally increasing distinctiveness . . . they may be (1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; or (5) fanciful.” Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992); see also Packman v. Chi. Tribune Co., 267 F.3d 628, 641 (7th Cir. 2001). A generic term is “one that is commonly used and does not identify any particular source and therefore, is not entitled to any trademark protection.” Platinum Home Mortg., 149 F.3d at 727. A descriptive mark “describes the ingredients, qualities, or characteristics of an article of trade or a service” and may be protectable. Id. (internal quotation marks omitted). A suggestive mark “stands for an idea which requires some operation of the imagination to connect it with the goods.” Id. (internal quotation marks omitted).

         Applying these definitions to the record in this case, the Court finds that “Next Door” is best considered a descriptive mark. SFG's current owner and sole shareholder, Suzanna Gallo, testified at the preliminary injunction hearing that the restaurant's name stemmed from its location next door to a formerly related restaurant called Francesco's Hole in the Wall. The Court need not use its imagination to connect the term “Next Door” with a restaurant, which indicates the mark is not sufficiently distinctive to qualify as a suggestive mark. See, e.g., Platinum Home Mortg., 149 F.3d at 728 (affirming district court's determination that “not much imagination is required” to associate the term “platinum” with plaintiff's mortgage business).

         While a term that is suggestive is automatically entitled to trademark protection, if a term is merely descriptive, the plaintiff must show that it has acquired “secondary meaning in the collective consciousness of the relevant community.” Id. Courts consider several factors when deciding whether secondary meaning has been established: “(1) the amount and manner of advertising; (2) the sales volume; (3) the length and manner of use; (4) consumer testimony; and (5) consumer surveys.” Id. (internal quotation marks omitted). SFG concedes that it does not advertise its business at all but rather relies entirely on word of mouth to grow its customer base. It also has not offered any evidence in the form of consumer surveys. However, NDB's sales volume is considerable: in 2015-2017, the restaurant's annual gross receipts exceeded $2 million. (Hr'g Pl.'s Exs. 6-8.) Also, SFG has used the Next Door mark as its restaurant name for almost 15 years. Finally, SFG has produced some testimony that its consumers refer to NDB as “Next Door.” In sum, the Court concludes that SFG has sufficiently established a likelihood of success on the merits of whether its mark has a secondary meaning and is therefore protectable.[1]

         B. Likelihood of Confusion

         As Defendants concede they used the Next Door mark in commerce, the Court turns its analysis to the third part of a Lanham Act claim: the likelihood of confusion. Likelihood of confusion is a “factual determination” based on an “equitable balancing test.” Barbecue Marx, Inc. v. 551 Ogden, Inc., 235 F.3d 1041, 1044 (7th Cir. 2000). Courts generally examine seven factors:

(1) similarity between the marks in appearance and suggestion; (2) similarity of the products; (3) area and manner of concurrent use; (4) degree of care likely to be exercised by consumers; (5) strength of the complainant's mark; (6) actual confusion; and (7) intent of defendant to palm off his product as that of another.

Id. at 1043-44 (internal quotation marks omitted). No single factor is dispositive, and this Court may assign varying weights to each of the factors, but three factors are considered “particularly important: the similarity of the marks, the defendant's intent, and actual confusion.” Id. at 1044.

         1. Similarity Between the Marks

         Both SFG and Defendants use the mark “Next Door” in their restaurants' names. Defendants make much of the fact that SFG's restaurant is “Next Door Bistro, ” whereas their restaurant is “Next Door American Eatery.” But where “one word or feature of a composite trademark is the salient portion of the mark, it may be given greater weight than the surrounding elements.” Ty, 237 F.3d at 898 (internal quotation marks omitted); see Bedrock Mgmt., Inc. v. Peoples Choice Entm't, Inc., No. 14-cv-06624, 2014 WL 4979270, at *5 (N.D. Ill. Oct. 6, 2014) (“[I]n assessing the similarity of competing marks, a court may focus on the ‘salient portion' of the mark rather than its surrounding elements.” (quoting Sullivan v. CBS Corp., 385 F.3d 772, 777 (7th Cir. 2004))). The salient portion of the mark is the phrase “Next Door, ” which the Court shall give greater weight than the surrounding elements of “Bistro” and “American Eatery.” In this sense, the parties' marks are essentially identical. See, e.g., Meridian Mut. Ins. Co. v. Meridian Ins. Grp., Inc., 128 F.3d 1111, 1115-16 (7th Cir. 1997) (finding Meridian Insurance Group confusingly similar to Meridian Mutual Insurance Company because “[a] person hearing the two parties' names would likely focus on the word ‘Meridian' and gloss over the other words, and the parties are therefore using essentially the same mark”). The Court's conclusion is further supported by testimony from multiple witnesses including Musk, Gallo, their employees, and even customers that at times, both restaurants have been referred to as simply “Next Door.”

         In determining the similarity between the marks, the Court compares the parties' marks in the context of what happens in the marketplace, not necessarily by looking at the two marks side by side. Ty, 237 F.3d at 898. Where “the public will encounter the marks in written as well as spoken form . . . it is essential to consider the marks' visual characteristics” as well. Barbecue Marx, 235 F.3d at 1044. Indeed, at the preliminary injunction hearing, Gallo and several of her customers testified that they discovered NDAE after seeing its outdoor sign.

         Both on NDB's awning and its roadside sign, SFG's mark is displayed as “Next Door BISTRO, ” with Next Door on one line and Bistro in all-capital letters below. (Hr'g Defs.' Ex. 33.) Next Door is spelled out in a neat sans-serif font, whereas “BISTRO” is spelled out in a bold, geometric font. As depicted in the following two images, the roadside sign has a soft yellow background and maroon letters and the awning has a maroon background and white letters:

         (Image Omitted)

         On NDB's website, nextdoorbistro.com, “Next Door Bistro” is displayed differently and in multiple styles: at the top of the page, a blue oval containing a plate and a wine glass is decorated with a waving banner reading “NEXT DOOR BISTRO” in all capital letters. Below the oval and banner, “Next Door Bistro” is again displayed but in one line of gold, curly cursive font, as depicted in the following image:

         (Image Omitted)

         Then, on the "Contact Us" section of the website sits a bright orange oval with a green border bearing another wine glass and plate, "Next Door" in a different cursive font and underlined, and "Bistro" in a simple sans-serif ...


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