Atari files suit against Nestlé for Kit Kat ad campaign that infringed on Breakout video game

On Thursday, August 17th, New York City-based video game entertainment company Atari Interactive Inc. filed a lawsuit alleging trademark and copyright infringement claims against Swiss food and drink company Nestlé SA (VTX:NESN). The suit targets a worldwide and multi-platform advertising campaign produced by Nestlé for the company’s Kit Kat candy bars, which uses elements of Atari’s Breakout video game. The suit is filed in the Northern District of California.

Atari’s suit alleges that Nestlé leveraged the look of Breakout for its Kit Kat ad campaign 40 years after Steve Jobs and Steve Wozniak created the game for Atari. “To be clear, this is not a case where a good faith dispute could exist between the rights holder and alleged infringer,” the complaint reads. “Instead, Nestlé simply took the classic Breakout screen, replaced its bricks with KIT KAT bars, and invited customers to ‘Breakout’ and buy more candy bars.”

Atari alleges that, up to the time of filing the suit, Nestlé continued to exploit the Breakout name and imagery in advertisements published on Twitter and Facebook. Atari’s suit also notes a Vimeo link where the Kit Kat ad was available for all Internet users worldwide to view, but that video appears to have been taken down since the filing. A link to a Facebook ad cited in Atari’s suit also appears to have been taken down.

Although four decades have passed since Breakout was first released on the Atari gaming console, it remains available on various console platforms including Xbox 360, PlayStation and mobile platforms. The iPhone version of Breakout, for example, has been downloaded more than 2 million times since its 2008 release on the iTunes store. Atari notes that Breakout has had a great deal of brand recognition since becoming the best-selling video game of 1978 and that licensing the intellectual property covering Breakout to major corporations has generated substantial revenue for the company.

There are multiple Nestlé advertisements for its 2016 Kit Kat ad campaign which infringe on the Breakout IP, Atari alleges. The advertisements first appeared in the UK on television and Internet and was later made much more visible to a global audience after ads were uploaded to YouTube. Not only do the advertisers use the Breakout title but they include game simulations which are substantially similar to the Atari game property. Atari also alleges that Nestlé has translated the Kit Kat ads infringing the Breakout IP into Spanish to capture a wider audience.

Atari argues that Nestlé’s infringement has hurt Atari’s licensing business in multiple ways. First, Atari has been denied the licensing fees it would have earned from Nestlé had the Breakout IP been properly licensed for the Kit Kat ads. Further, Nestlé’s infringement significantly reduces Atari’s ability to license the Breakout IP in markets which are related to Kit Kat bars. Given Nestlé’s position as a giant corporation with a great deal of marketing experience and its own extensive IP portfolio, Nestlé cannot claim innocence in its infringement. “ Nestlé knew exactly what it was doing,” the complaint reads.

Atari’s suit includes six causes for action including federal trademark infringement, copyright infringement, false designation of origin, dilution by blurring as well as unfair competition under both California state law and common law. Atari is seeking permanent injunctive relief, a recovery of actual damages, profits or statutory damages, as well as three times the profits which are attributable to Nestlé’s infringement.