Atari Breaks Out its Registrations in Kit Kat Attack

August 24, 2017

On Thursday, August 17, 2017, Atari Interactive, Inc. filed suit against Nestlé based on an advertising campaign that began in 2016 for Nestlé’s Kit Kat brand chocolate bar. The campaign allegedly infringed on Atari’s video game, Breakout.

The iconic Breakout game, a sequel to the revolutionary game, Pong, was designed and engineered by the now famous co-founders of Apple, Inc, Steve Jobs and Steve Wozniak, who sold the chip technology to Atari and used the project profits as the seed money to help found the then-new company, Apple. The game features a movable, player-controlled “paddle” that the player uses to bounce a ball up and down the game screen. The top of the game screen is traditionally covered in “bricks” that break when the ball hits them. The bottom of the screen does not contain a floor and the player loses when the ball falls below the paddle platform. The goal of the game is to break all the bricks without losing the ball below the paddle platform. The game is covered by several different intellectual property registrations including both trademarks and copyrights.

The Kit Kat advertising campaign allegedly uses the same game play, with what appears to be identical rules, but where the bricks at the top of the screen have been replaced by Kit Kat bars. Additionally, Atari alleges that the heavy use of the work “breakout” in the various advertisements in the campaign infringed upon their trademark. While the campaign ran in multiple countries, the allegations are focused on the US registrations only.

The complaint alleges (1) trademark infringement (15 U.S.C. § 1114) (2) copyright infringement (17 U.S.C. §§ 101 et seq.) (3) false designation of origin (15 U.S.C. § 1125(a)) (4) dilution (15 U.S.C. § 1125(c)) (5) Unfair competition (CAL. BUS. & PROF. CODE § 17200) and (6) common law unfair competition.

While the complaint focuses on United States law, it goes to extreme lengths to point out that Nestlé contested this choice of law, and instead believes that United Kingdom law should apply. This is based on the fact that the ad campaign was originally run in the United Kingdom, primarily in television and print advertisements that did not have any circulation in the United States.

However, the complaint alleges that these adverts were then uploaded to multinational social media websites like YouTube, Facebook and Twitter. Atari contends that these are the actions that open Nestlé to both liability and jurisdictional claims under United States law, and additionally suggests that the Kit Kat advertising campaign has eliminated Atari from the ability to compete via licensing of a similar ad campaign to a Nestlé competitor.

The complaint also paints a picture concerning Nestlé’s status as a sophisticated entity with a great deal of experience in intellectual property licensing and registration as well as including information about Nestlé’s poor international reputation to further support the idea that the actions both harmed Atari and that Nestlé should have known better.

Nestlé has not yet answered the complaint, but game play will likely continue between the two companies.

Docket: 3:17-CV-04803

Complaint: here

Breakout: FEDTM 2553961


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