What’s in a Name? Protecting a Brand Trademark

Whatabrands, the company behind the Texas-based chain Whataburger,  recently filed a lawsuit against a North Carolina restaurant group, What-A-Burger #13, in North Carolina's Middle District federal court claiming What-A-Burger #13 infringed on a federal trademark, unfairly competed with Whataburger, breached a contract, committed unfair and deceptive trade practices, and unfairly competed under common law. 

To learn more about how this case might mean for other chains navigating intellectual property concerns as they plan to expand, Modern Restaurant Management (MRM) magazine received insights from Nate Quirk, a North Carolina-based intellectual property partner at Burr & Forman, who works closely with food and beverage brands. 

Can you briefly go over the facts of this case?

Whatabrands LLC (“Whatabrands”) operates over 1,000 restaurants across 16 states under the well-known WHATABURGER trademark, which has been used to identify its restaurants since 1950 when the first restaurant was opening in Corpus Christi, Texas.  The restaurants operated under unregistered/common law trademark rights until 1957, when a US Federal Trademark Registration for the trademark WHATABURGER was secured by Whatabrands.

In 1969, What-A-Burger #13, Inc., in association with other related entities, (collectively “WAB13”) opened a restaurant in North Carolina under the trademark What-A-Burger #13, and currently operates two restaurants in North Carolina under the What-A-Burger #13 trademark.  Although not currently in the court records, there are public allegations that an entity within the ownership of WAB13 entered into an agreement with Whatabrands in 1970 that would permit WAB13 to operate in two North Carolina counties without interference from Whatabrands.

The restaurant companies operated in this manner, seemingly without further incident, until 2020 when Whatabrands announced that it would be moving into North Carolina with its first North Carolina restaurant.  Clearly, this gave rise to an imminent trademark issue between the companies, and in reliance upon the priority date granted to Whatabrands under the Federal Registration, Whatabrands notified WAB13, in 2022, of the likelihood of customer confusion and associated trademark infringement being caused by the use of the What-A-Burger #13 trademark.  Ultimately, the companies again reached a coexistence agreement that limited WAB13’s use of the What-A-Burger #13 trademark in a variety of ways for the brick-and-mortar locations and a food truck.  Whatabrands contents, in an effort to circumvent the agreement to be signed the next day on May 19, 2023, WAB#13’s owner formed a company, WAB #13, LLC, that would not be subject to the coexistence agreement.

After this attempt at circumventing the coexistence agreement and other breaches include use of the food truck outside the authorized region, Whatabrands brought suit against WAB13 on June 11, 2024 for trademark infringement.

It does involve long-standing agreements.

While we do not yet know the details of the alleged 1970 agreement between Whatabrands and an entity that has some ownership relationship to WAB13 or even whether this agreement will be relied upon in the lawsuit, it will be interesting to understand if this agreement will have the reach to encompass the activities WAB13 and if Whatabrands claims of infringement in 2022 amount to a breach of the 1970 agreement.  Moreover, the more recent 2023 agreement was allegedly made in bad with a plan to circumvent its terms by WAB13.  Again, it will be interesting to see how stringent the use requirements for the What-A-Burger #13 and whether they amount to any meaningful coexistence where WAB13 could be a profitable business under the What-A-Burger #13.

What do you think the next steps are and what can operators take away from this suit?

The next steps for Whatabrands is to continue to pursue to the lawsuit.  At this point, any reputational risk of using its registered trademark right is water-under-the-bridge.  From WAB13’s perspective, the next steps would be determine whether fighting to continue to operate under the What-A-Burger #13 trademark worth the cost of the litigation and the risk of an ultimate defeat.  In the absence of the agreements, Whatabrands’ registered trademark rights should carry the day since the registration provides Whatabrands with a 1957 priority date for use of the WHATABURGER trademark in North Carolina. 

What are some best practices an operator should follow when naming a restaurant, particularly if they are intent on growing the brand?

Since these marks have been in use for some time, it is not a particular issue in this case.  However, the term WHATABURGER could easily be considered descriptive and would therefore be given weak trademark rights.  Here, however, the marks have been in use long enough to enjoy at least a presumption of “secondary meaning” and therefore the marks would be not be descriptive, weak trademarks.  With that said, when adopting a new trademark, it is best to avoid such descriptive terminology because the ability to enforce a descriptive trademark in court is limited.  More unique marks, such as terms that would have no obvious relationship to restaurant services, are stronger trademarks and less likely to be infringed.

Additionally, if there is any plan to expand the business to multiple locations, filing for a US Federal Trademark Registration at the United States Patent and Trademark Office is important.  Whatabrands has the upper hand in this case because of their registration.  The registration provides the owner is a priority date of use throughout the US.  As such, expansion into a new geography is more available, because the registration allows the owner to enforce their rights as if they been operating in a given geography since the registration was awarded.  The registration therefore greatly reduces the uncertainty associated with geographic expansion of the trademarked brand.

However, flip-side of this issue is also important to consider when adopting a mark.  While a restaurant may rely on geographic distance as an argument against infringement with an owner of a registration, if that registration owner later choses to place a restaurant close by, the registration owner can then bring suit due to their earlier priority date.       

How important has the protection of a brand’s name and IP become, especially as so many brands have extended into offering products in supermarkets and on merchandise, increasing the value?

In most instances, protection of the trademarked brand is of utmost importance.  Trusted brands can demand higher prices and maintain customer loyalty, which are both keys to a profitable business.  The cost of a US Federal Trademark Application for a growing business is very small relative to the value of the trademark and the goodwill that can be developed in the trademark.  Further, trademark law considers confusion that can arise from expected entry into other lines of business that have become predictable.  With the increase in restaurant brands moving into products sold in a supermarket becoming more common, the protection afforded to a trademark also expands in the same way.  For this reason, it is imperative to protect a trademarked brand to the fullest extent that the law will provide.