Booming Ghost Kitchen Industry Raises Concerns Over Restaurant Brands’ Trade Dress Protections

Booming Ghost Kitchen Industry Raises Concerns Over Restaurant Brands’ Trade Dress Protections

Delivery-only restaurants existed well before the pandemic, as early as 2013 in New York City.^[1] The budding ghost kitchen trend, however, rapidly accelerated as people all around the world became confined to their homes.^[2] A shift to a ghost kitchen provides existing restaurants, forced to close its doors due to the pandemic, a solution to continue to service customers via contactless delivery and lowers the barrier of entry for new owners looking to launch a food service brand.^[3] This rapidly growing virtual restaurant industry is estimated to be a trillion-dollar business by 2030.^[4]

The ghost kitchen trend, with its many benefits, offers restaurateurs an attractive opportunity to forego the traditional brick-and-mortar dine-in location for a more cost-efficient delivery only service. However, the increasing popularity in ghost kitchens raises concerns over the ability to infringe on established restaurants’ intellectual property rights, specifically, “trade dress” infringement, a subset of trademark protection.^[5]

Trade dress, is a type of trademark law protected under the Lanham Act.^[6] Most trade dress is protected without registration.^[7] “While trademark law looks to a particular word, symbol, or logo, trade dress law concerns the total physical image or impression of the product or business, including, colors, designs, associated words and slogans.”^[8] Trade dress law is primarily intended to protect against consumer confusion.^[9]

To bring a suit for infringement of trade dress, a litigant must be able to show that an identifying mark is 1) inherently distinctive, or 2) has acquired distinctiveness through secondary meaning.^[10] Liability for trade dress infringement also requires proof of the likelihood of confusion caused by another’s use of it.^[11]

New technological trends such as ghost kitchens raise novel intellectual property questions. Though Congress has taken steps to modernize antiquated IP laws, traditional methods of intellectual property enforcement often lag behind the rapidly changing online environment.^[12] The increase in ghost kitchens on delivery apps, may present new difficulties for established restaurant brands to protect its overall impression or image against ghost kitchens trying to mimic the look of its brand to attract consumers’ attention.^[13] Ghost kitchens have the potential to “dilute the ‘distinctiveness’ of well-established restaurant brands if a number of slightly similar brands explode through the expansion of ghost kitchens.”^[14] If enough virtual restaurants offer the same signature menu items as a well-known restaurant, this could whittle away at customers immediate association between that signature menu item and the well-known restaurant.^[15] Dilution results when the distinctiveness of a famous brand’s mark is impaired by association with another similar mark or trade name.^[16]

A new ghost kitchen, which does not have a permanent brick-and-mortar location, needs to rely only on its branding and food menu items to attract consumer attention.^[17] This has the potential to create an even more competitive environment, where a ghost kitchen may “latch onto an establish brand to attract customer attention without having to create and market a new brand.”^[18] For example, in 2020, food delivery apps saw a surge in virtual restaurants offering only chicken wings.^[19] “Every success story seems to generate a new wave of copy cats.”^[20] The desire to capitalize on the success chicken wing restaurants had on delivery apps, coupled with the low barrier of entry, contributed to what is being called the “the great wing rush.”^[21] Several restaurants with names such as “Wing Shop” or ‘Wingstop,” popped up virtually overnight offering a single menu item that is on trend at the moment.^[22] The limited number of food delivery apps and the limited time brands have to grab a customer’s attention makes it attractive for a virtual brand to want to offer a trending menu item with the potential to appear in more search results.^[23]

The ease at which a ghost kitchen may join the market and later abandon its effort, may also make it harder to learn of instances of infringement.^[24] For example, by the time a brand notices a possible trade dress infringement, the ghost kitchen infringing on the IP may have already changed its name, branding or menu items. New strategies may be developed for popular restaurant brands to monitor and protect its trade dress.^[25]

Presently, supporting case law concerning claims of trade dress infringement of a popular restaurant brand primarily involve instances where one brand infringed on the overall impression of a restaurant’s physical location and menu offerings.^[26] In Two Pesos, Inc. v. Two Cabana, Inc., a District Court jury found Taco Cabana’s trade dress, described as “a festive eating atmosphere having interior dining and patio areas decorated with artifacts, bright colors, paintings, and murals” and an exterior complete with a “festive and vivid color scheme using top boarder paint and neon stripes,” to be inherently distinctive but had not acquired secondary meaning.^[27] The jury further found Two Pesos’ adoption of a theme similar to Taco Cabana’s created a “likelihood of confusion on the part of ordinary customers as to the source or association of the restaurants goods or services.”^[28] Judgement was entered in favor of Taco Cabana.^[29] In affirming the court of appeals decision, which affirmed judgement in favor of Taco Cabana, the Supreme Court held that proof of secondary meaning is not required to prevail on a claim of trade dress infringement, when the trade dress is inherently distinctive.^[30]

In Katiroll Co., Inc., v. Kati Roll & Platters, Inc., a New Jersey district court issued an injunction that prohibited continued use of a color scheme in the defendant’s establishment because it was too similar to the restaurant operated by the plaintiff.^[31] In doing so, the court stated that trade dress can include the color, shape, and general appearance of a restaurant/sign/interior or other identifying elements of a business.^[32] In both of these cases, the district court’s analysis focused an examination of the physical restaurants theme, such as its interior and exterior designs, when identifying whether a restaurant was entitled to trade dress protection.

Looking ahead, it is unknown how courts will treat instances of trade dress infringement of a popular restaurant brand by a ghost kitchen when there is “no physical location supporting any overall confusion” as courts have looked to in the past.^[33] As ghost kitchens continue to advance the restaurant industry into a digital age, its growing popularity may cause an expansion of trade dress infringement theories and litigation.^[34]

Established brands may look to test the limits of its trade dress protections. It will require finding innovative legal arguments that recognize the shift in the industry towards digital food services to defend against a ghost kitchens attempt to ride their coattails of established brands for brand recognition.^[35]

Many ghost kitchens that have entered the market have acquired their own trademark protections for their inherently distinctive names and logos.^[36] Building a branding plan with appropriate trademark and copyright protections similar to that of a conventional restaurant may be a viable strategy to ensure a successful and enduring ghost kitchen. It may include, among other things, trademark protections for a unique brand name, logo, and names of menu items.^[37] Such a plan may aim to not only protect the rights of the ghost kitchen but also avoid violating the intellectual property rights of others.