In November 2021, fast-food chain Jack in the Box sued FTX, a cryptocurrency exchange launched in 2019, over an allegedly infringing mascot named Lunar, referred to as “Moon Man”. FTX featured its Moon Man character in commercials running during MLB games. Jack in the Box is not happy.

In its complaint filed in Federal court in California, Jack in the Box references various tweets regarding the FTX Moon Man – “Oh look, it’s Walmart Jack in the Box!”, “Is it a dirty jack in the box thing?”, and “Jack in the Box’s drugged up cousin”.  One Twitter® user even tweeted a public post directly to FTX stating, “Hey, @FTX_Official, your mascot doesn’t look like the moon. He looks like Jack-In-The-Box with skin cancer.”

Jack in the Box claims that FTX’s Moon Man constitutes, among other things, trademark dilution.  The Federal Trademark Dilution Act of 1996, which was substantially revised by the Trademark Dilution Revision Act of 2006, addresses trademark dilution, including dilution by tarnishment and dilution by blurring.

A dilution by tarnishment claim addresses the reputational damage a junior mark causes to a famous mark caused by an association between the two. The argument is that the junior mark will damage the commercial value of the famous mark because consumers will associate it with the lack of quality or unwholesomeness of the goods or services offered under the junior mark. Supporting its tarnishment claim, Jack claims that FTX’s Moon Man is a poorer quality copy or derivation of the Jack in the Box character and that FTX’s use of its Moon Man in advertising has tarnished Jack’s reputation, and/or blurred consumers’ association of Jack’s “Jack” with FTX’s shoddy Moon Man.  In its complaint, Jack references various tweets regarding the FTX Moon Man such as “Oh look, it’s Walmart Jack in the Box!” and “Hey, @FTX_Official, your mascot doesn’t look like the moon. He looks like Jack-In-The-Box with skin cancer.”  The only wrinkle here is that Jack in the Box does not allege that FTX’s exchange is subpar or otherwise lacking in quality; Jack’s focus is on the Moon Man character itself.  It is questionable whether this would support a dilution claim

Jack also alleges dilution by blurring. This arises from the “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.” The Act sets out factors which are to be considered when determining whether dilution by blurring has occurred. Those factors are: (i) the degree of inherent or acquired distinctiveness of the famous mark; (ii) the degree of similarity between the mark or trade name and the famous mark; (iii) the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (iv) the degree of recognition of the famous mark; (v) whether the user of the mark or trade name intended to create an association with the famous mark; and (vi) any actual association between the mark or trade name and the famous mark.   Dilution by blurring focuses solely on the lessening of a distinctiveness of a mark even when consumers are not confused as to the source of the mark.  An example of this would be a soap bar named “Google”.

It would seem that Jack would be able to establish the famousness of its mark.  The question is whether Jack can establish that FTX’s Moon Man is similar enough to Jack’s marks and whether dilution is likely.

One case which may give some insight into how this may go is Starbucks Corp. v. Wolfe’s Borough Coffee, Inc. In that case, Starbucks sued a coffee shop in New Hampshire that was using the trade name “Mr. Charbucks” on a coffee blend sold in-store and over the Internet. While the court found the “Starbucks” mark both famous and distinctive (no surprise there), Starbucks failed to show a likelihood of dilution. The court said that the allegedly diluting mark must be viewed in the commercial context in which consumers are likely to encounter it and that “Mr. Charbucks” was “playfully dissimilar” to the “Starbucks” mark.

The commercial context in which consumers encounter FTX Moon Man is to to promote FTX’s status as the official cryptocurrency exchange brand of the MLB.  FTX’s commercials humorously tie the Moon Man character to a “moon blast” which is what a long home run (more than 425 feet) is called in the MLB. Also, relevant here is the fact that “moon” is a term used by cryptocurrency traders to identify a coin they believe will skyrocket.

Also relevant to Jack’s dilution claim is the recent holding in VIP Products LLC v. Jack Daniels Properties.  This case raises the question whether FTX’s use of its Moon Man character could be considered noncommercial use which is expressly excluded from being actionable as blurring or tarnishment.  In VIP, the court stated that “speech is noncommercial if it does more than propose a commercial transaction” and that the “use of a mark may be noncommercial” even if it is used to “sell” a product”.   How is this holding applicable to the FTX commercial which is a mix of commercial speech and creative expression?  Some commentators have taken the position that this type of mixed speech should be considered noncommercial speech for the purposes of a dilution claim.  Was that what the 9th Circuit was saying in VIP?  Since Jack filed its lawsuit in California Federal court, we may get the answer to this question.


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