Imagine you were being sued by a billion-dollar company. You'd probably be a little freaked out.

But when I reached out to the guys behind a small Australian burger chain called Down N' Out, which has only two restaurants and is being sued for trademark infringement by the exponentially larger American burger chain, In-N-Out, I heard a different reaction.

"Why would we be worried? Hah," co-founder Ben Kagan emailed me. He declined to talk more about the lawsuit, but he did want to be sure I knew something else: "[W]e're about to open 10 more stores across Australia."

Hmmm, I thought. Good for them. But I was surprised, and I had a sense something else was going on. 

Down N' Out was described when it opened as "an Australian tribute to the classic In-N-Out burger"--an unauthorized one, apparently. Of course, one person's tribute is another person's trademark infringement, and I understood why In-N-Out would want to to enforce its trademarks everywhere.

I stared at Kagan's email signature as I pondered his reaction. It didn't say "co-founder." (I got that from LinkedIn.) Instead it said he was the "creative director" for Hashtag Burgers, which owns Down N' Out, which means he's handling marketing and social media.

And that's when it suddenly occurred to me. Almost no matter what happens with this lawsuit, it's actually a brilliant win-win situation for both the giant In-N-Out and the tiny Down N' Out--before they even set foot in court. Here's why.

In-N-Out

We'll look at this from both perspectives: What In-N-Out gains, and what Down N' Out gains--and why neither company really risks losing much of anything.

First, In-N-Out. It's actually not that big a chain: only 329 locations, last time I checked. Unfortunately from my perspective, the company is famously parochial--meaning they're iconic and much-loved where they have stores, like in California, but they basically refuse to expand elsewhere. Heck, I'd love if they'd open just one in New York City.

But even though the odds are long that they'd ever open permanent restaurants in Australia, they also want to prevent anyone else from putting together a blatant rip-off of their brand in a foreign country. And since intellectual property law is largely defined by individual countries, they have to make a continual effort to find ways to defend their mark in every country they care about.

One way they've been doing this? Setting up "pop-up" burger shops for a day or so at a time, as they've done in Sydney and Melbourne, along with Japan, China, and England. And maybe by finding companies like Down N' Out to file trademark suits against. 

There's no doubt that Down N' Out is inspired by In-N-Out, but from looking at the menus and social-media accounts of the two companies, I don't think anyone who walked into the Australian chain would really think they were at the American company--any more than somebody who went to Outback Steakhouse in the U.S. might actually think they'd somehow wound up in Australia.

But, "the more robust an enforcement program a mark owner has, the more likely it is that third parties will stay away," says Marc P. Misthal of the New York law firm Gottlieb, Rackman & Reisman, which handles trademark issues in the U.S. and overseas.

I asked In-N-Out for comment on all of this strategy but haven't heard back. Still, all of this means the U.S. burger chain might not even really have to win in court against Down N' Out to succeed at its larger goal: demonstrating from a legal perspective that they're aggressive in protecting their name and other trademarks, which makes the marks themselves stronger.

Down N' Out

To understand why Down N' Out is potentially thrilled by the idea of being sued, you need to learn just a little bit about the company's history and take a look at the Down N' Out Instagram feed.

"Hashtag Burgers started as an events company," Kagan told me in another email. Among its events: pop-up burger restaurants for other brands.

"After seeing how much success we could bring other people and after learning a little bit more about the backend of the restaurant industry, we realised we could pull it off ourselves," he writes. "As a result, we launched Down N' Out in 2016." 

And man, those burgers. They're on social media, and they're insane. I can't imagine who'd even be able to eat some of them. Take this one, devoted to the 10th anniversary of the last episode of The Sopranos, that includes two Wagyu beef patties, fried gabagool, deep fried ravioli, meatballs, garlic aioli, and Parmesan and American cheese.

Also, as much as I love In-N-Out--I do--I've never seen anything like this burger at In-N-Out. So let's assume this small Australian burger chain is pretty confident that an Australian court is never going to find that they've been ripping off In-N-Out.

But the Instagram posts sometimes go viral. And now, for Down-N-Out, the whole thing is basically one big, free opportunity to get a heck of a lot more media. It's a company that's built on media as much as it's built on burgers--so why not expand? By getting sued, they're potentially winning pretty big.

Published on: Apr 19, 2018
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