Nasir Pasha & Matt Staub

Why In-N-Out Burger Chose A Lawsuit Over More Business [e239]

Nasir and Matt get in the Thanksgiving spirit by discussing In-N-Out Burger suing DoorDash for delivering their food and recreating their logo.


NASIR: Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha and, joining with me is our food delivery expert.
MATT: Matt Staub. All right, I’d take that. I mean, I don’t know about expert but at least it’s more accurate than normal. Off to a good start, I guess.
NASIR: By the way, I don’t know how I’m going to finish this episode. Not only am I hungry again, of course, but I haven’t eaten anything today. I think I had some gummy bears and I just got done with a run so this is going to be a tough episode for me.
MATT: I don’t know how you did that.
NASIR: You don’t know or why?
MATT: Running without having any sort of… so, you’re working on, like, negative calories for now?
NASIR: I don’t like running on a full stomach. That’s ideal for me, anyway.
MATT: Well, there is a middle ground where you eat at normal times during the day and then go running at a more reasonable time after but…
NASIR: That’s true. That requires reasonableness.
MATT: Yeah, I guess so. That’s definitely not what DoorDash did in this recent lawsuit that was filed and it was even worse than I first thought that was reported actually. I did a little bit deeper digging.
NASIR: Even when we first recorded this episode?
MATT: Yeah. Well, yeah.
NASIR: This is our second try. I mean, I was so sick last week that I don’t know what… I think I did record the episode, I just didn’t save it. So, this is our round two of it but bigger and better, right?
MATT: Yeah, hopefully. I mean, I don’t remember how the last one went.
NASIR: Yeah.
MATT: I’ll just assume it’s better.
So, DoorDash, what they are is…
NASIR: Wait, wait, wait, should I record this episode, too?
MATT: Yeah.
NASIR: Let me hit record.
MATT: Yeah, preferably.
They’re a food delivery service. Think of it as Uber but for food, I guess, in a way. I guess people can figure out what a food delivery service is. I don’t need to explain it.
NASIR: Yeah, that’s better out for a while. That’s an independent third-party food delivery service.
MATT: I think, actually, the last time we got a delivery, it was a pizza delivery. We found out later they used a third party and it went so poorly that I have since not had a food delivery. I mean, it’s been at least three years, I think.
NASIR: Really?
MATT: I would just prefer to go out and do it myself as opposed to relying on somebody and have to pay them extra. It’s not that difficult to go do it, in my opinion.
NASIR: Well, this is definitely a side-track but getting deliveries in buildings are always complicated. And then, if you order it in the evening, it can take, like, two hours sometimes – at least in this area. You’re right, there are some complications, but I guess that’s what DoorDash is trying to solve – that problem.
MATT: I think the idea is that all these restaurants, the majority of restaurants don’t have a delivery service through their restaurant so DoorDash is acting as an intermediary between the two saying, now, every restaurant or mini-restaurants can now deliver food to the customers – apparently, whether they agree to it or not which seems to be the issue here with In-N-Out, amongst a couple of other things. Basically, what they did was put In-N-Out as one of their possible delivery restaurants without In-N-Out’s consent and started delivering their food. In April of 2014, In-N-Out asked DoorDash to not only stop delivering their food but stop using their logo. I’ll get into that in a minute but just keep that in mind. No response. May of 2014, In-N-Out sent a follow-up letter.
NASIR: By the way, that no response is a big deal.
MATT: Yeah.
NASIR: I mean, when you get a cease and desist letter from a national corporation, maybe if it’s a rinky-dinky law firm or business or whatever, but you should definitely take something like that seriously.
MATT: Yeah, I would imagine that In-N-Out, in terms of all the different restaurants they have up there on DoorDash, it has to be one of the largest ones – pretty big.
NASIR: Yeah.
MATT: So, you had no response. A follow-up in May 2014, finally got a response in October from the CEO of DoorDash saying that they’re going to remove them as an option, stop delivering the food, et cetera. At some point, they got back up there on the site and, in July 2015, again asked them to stop using their so-called logo and stop delivering. No response. August 2015, cease and desist letter, no response. September 2015, second cease and desist, no response. Lawsuit filed in November.
NASIR: Yeah.
MATT: Over this – what? One and a half year period, they had five different times they tried to reach out to them. They got one response and who knows whether and how long they actually took it down for. Right off the bat, we’re dealing with a company that’s probably not run very efficiently – or at least correctly at least from a legal standpoint.
NASIR: Well, I think, by far the worst part, if I followed your story right, they first contacted DoorDash in April of 2014 then again in May 2014. And then, October, they responded saying it was going to be removed but then, in July 2015, they get another letter because, apparently, DoorDash replaced the In-N-Out logo with their own worse logo that is almost exactly like In-N-Out. It uses the same colors, similar font at least and similar arrangement. Somehow, they think that that’s not going to be trademark infringement in the sense that, okay, well, if using their logo is infringement, using a logo that’s similar is not. I don’t know who made that decision on DoorDash’s part but it just seems so silly that there’s just no way that a lawyer was involved in that decision, you know?
MATT: It couldn’t have been. Give DoorDash a little bit of credit, I guess, and say maybe these letters were sent and someone else dropped the ball, some lower level person dropped the ball, but the fact that they’ve got five different correspondences from In-N-Out should mean something. I’m trying to look, just to go back, the first time they reached out to them, In-N-Out requested that they remove their trademark. It looks like the logo was theirs the first time. Once it got back up at some point, that’s when they started using that created logo. They had to pay somebody to make this fake logo – whether it be an employee or they contracted it out. Just think about that for a minute. That’s so ridiculous.
NASIR: Yeah.
MATT: Somebody prepared this logo at some point which just doesn’t make any sense to me at all.
NASIR: You know, I get that sometimes people in business may not realize exactly what infringement is but it seems as though people in graphic design at least understand some basics of trademark law and copyright law. Most likely, they have an in-house designer and you go to the designer, “Hey, draft me a logo or design me a logo that’s like In-N-Out but different.” You’re right. I can’t picture it. It’s goofy.
MATT: “That also says In-N-Out.” Like, it’s not even, like, “Draft me something that looks like it. I just want to copy it,” and someone’s like, “Okay, I can do that, it seems like a good idea.”
NASIR: Yeah.
MATT: It was clearly infringement on that part. Actually, In-N-Out goes through quite a bit of detail on all the different trademarks that they have. You can read that in a complaint if you want but, in addition to the infringement case, we have this unfair competition that’s happening and let me get to In-N-Out’s argument. Their whole problem is, once their product leaves their store, they have no control over the quality that’s maintained of it. Obviously, they have no control of how long it takes to get to the customer. And so, they basically want that quality control period to be all through In-N-Out which people come to their restaurant and get it. Once it leaves their store, they lose that completely and it’s compounded by the fact that they never even consented to this deal in the first place.
NASIR: Whether or not In-N-Out is really concerned about meeting up the same standards or that kind of argument, it seems a little shaky to me. I think, at the end, what they’re worried about is their brand and they don’t want to be diluted. They want people in the restaurant. I think they like it when it’s busy. I mean, you’ve seen In-N-Out.
MATT: Yeah.
NASIR: I don’t know if you’re a fan or not but there’s always a huge line with the drive-thru and inside.
MATT: Always.
NASIR: And they take forever. They actually don’t have In-N-Out in Houston. My go-to alternative which I think I like better is Elevation Burger and I’m looking at DoorDash and actually Elevation Burger and my other favorite restaurant in Houston, Istanbul Grill, are both on there. I don’t know if by permission or not but they’re both kind of not conveniently close so, actually, this would be nice to get.
MATT: The idea of DoorDash, it’s all in under an hour from the time you place the order?
NASIR: They list the restaurant and they give the estimate. I mean, some of them are above an hour, but most of them are just under an hour – 50, 60 minutes. But I think their main customers are Taco Bell and 7-Eleven. I think they even advertise that they’re trying to do 45-minute turnaround for 7-Elevens.
MATT: Yeah, that’s two pretty big companies that I believe are owned by the same company.
NASIR: They may have an affiliation.
MATT: Taco Bell KFC is.
NASIR: Definitely, Taco Bell KFC.
And so, you know, this lawsuit with trademark infringement, we covered a while back, They were sued because they were taking advantage of some loophole in the airline industry and he was putting actual logos of Skiplagged and it looked like there was some kind of affiliation. Of course, these airlines sue him for trademark infringement because they didn’t like what he was doing, frankly, but I think, ultimately, they worked something out, and maybe something like that would happen here but it seems like In-N-Out is not too keen on having a delivery service nor a third-party delivery service.
MATT: No, not at all. I mean, that would make sense. To me, fast food – well, pretty much any food, but particularly fast food – goes down in quality every second.
NASIR: That’s true.
MATT: It goes down at a higher rate than I think a pizza would, for example.
NASIR: I wouldn’t say that with In-N-Out, my humble opinion but definitely other fast food, for sure.
MATT: You don’t even go there so you already made that clear – can’t value that opinion.
NASIR: I haven’t been there in a while but it’s definitely one of my favorites.
MATT: I don’t even get what DoorDash was thinking in this despite the fact they just seemed to ignore everything. You know, once they got that initial request and do it a couple of times and agreed to take it down, they put it back up, I think that’s going to be the biggest issue other than not responding at all. In-N-Out tried to make things fairly easy and DoorDash, you know, I don’t know if they lied about it.
NASIR: There might be a reason why they didn’t take it down. I don’t know why but the whole different logo thing is weird to me. One reason they may not have taken it down is that I bet you – I’m looking at Houston here – I mean, some of my favorite restaurants are on here, there’s no way that these guys have a contract with each of these restaurants.
MATT: Yeah.
NASIR: My assumption, that is – maybe I’m wrong – but DoorDash’s model is such that they’ll order it for you and they’ll go pick it up and so forth. Hey, what’s wrong with that? Why do I need the restaurant’s permission to do so? If In-N-Out withdraws its consent and I follow suit, that means that I have to do that with every single restaurant that does that and maybe, for DoorDash, they’re thinking, “Well, why would they want to take DoorDash away, especially if they don’t have a delivery service?” But, at the same time, there’s going to be chain restaurants like In-N-Out, it’s going to be a huge staple for their website that, if they just remove it, it actually may hurt their business. Maybe they don’t want to give in in that respect.
MATT: Putting that aside, I mean, the liability aspect for In-N-Out has to be there, too. If there’s some sort of issue with the food that the people get, I mean, if you want to really stretch it out, I guess, if there was some sort of car accident and I don’t know if they can sue In-N-Out but they could get pulled into it. I mean, I don’t think anything would happen but it’s just something they’d have to deal with.
NASIR: But it’s the same thing. I think In-N-Out may make that argument but I think it’s not a very strong argument.
NASIR: And, as you know, I think you know that.
MATT: Yeah.
NASIR: But, if I hire someone to go pick me up some Taco Bell – which I’m starting to think about right now – whether it’s DoorDash or somebody else – and somehow I get sick from the food, if that person that got the food caused the sickness and I prove that, of course, I can’t sue Taco Bell for that and same with vice versa if Taco Bell was the cause of the sickness which is not unheard of.
MATT: Yeah.
NASIR: You know, some kind of food poisoning or what-have-you, then the delivery driver is not going to be responsible for that.
MATT: Yeah. Another thing with them too, going back to a thing you said a few minutes ago, supposedly a spokesman for DoorDash says that most of the businesses listed on the site have been informed and are willing partners.
NASIR: Okay.
MATT: Declined to prove actual numbers but I guess, for some of the ones that aren’t listed – maybe for some of the ones that are, who knows? But definitely for some of the ones that aren’t, they are taking some of the menu items, DoorDash is, and upping the price on them a couple of dollars here and there. You know, the restaurant prices are going to stay the same. DoorDash is tacking on a little bit of money in addition to whatever fees they have. Maybe that’s built in, I don’t know, but, I mean, that’s another issue, too. They’re making these unknowing or unwilling companies or restaurants’ prices look inflated. I mean, I don’t really get the point of that. Just have the normal prices and add on whatever fee you’re going to add on. I mean, I guess it makes it look better for them because a customer is going to say, “Oh, I don’t have to pay a fee. I’m just paying the menu price,” when, in fact, that might not be the case.
NASIR: I’m trying to see if that’s the case with some of these restaurants – not that I have their prices memorized but I really hope they don’t do that because, if they do, that’s shady, right? Because, from a customer’s perspective, not only are you assuming that there’s some kind of affiliation – or it can be assumed that there’s some kind of affiliation between the restaurant and this delivery service – but, all of a sudden, DoorDash is representing other prices and it may not be aware that these prices are delivery prices. It may not be clear.
MATT: Yeah, that’s a problem. This one example, they’re claiming they have cheesesteak, sells for $11.00 and on DoorDash it was $16.95. It’s quite the upcharge on that so that’s a big problem, if true.
NASIR: Wow, yeah, and it looks like, if you go to their website, the top section, it says “DoorDash Select” and then the bottom section are all merchants. My assumption is that the DoorDash Select are the ones that maybe are aware and have permission and, the bottom ones, the opposite? Hard to tell.
MATT: Yeah, and another thing too, you know, you said it is a start-up but supposedly they’re worth $600 million according to some sort of valuation that came about somehow. You know, if you’re worth that much, you probably should respond to cease and desists from companies that are pretty big, I would think, but I don’t know.
NASIR: I was going to say, also, at what point do you stop being called a start-up? At that point, right? I mean, I’m sure they’re making revenue so they’re post-revenue and I’m pretty sure they’re more than a couple years old. So, when does that definition go away? What’s the rule?
MATT: Intermediary? I don’t know. Usually, these just end up settling out for whatever but DoorDash has made it pretty clear they don’t want to do anything so who knows? They’ll probably default on answering.
NASIR: In reality, if In-N-Out wins or they cave on this, this is really part and parcel to their business because, think about it – and I guess I’m kind of repeating myself but – if they give up here, that means that any time another merchant or another restaurant says, “No,” they’ve set a precedence that they’re going to remove it. Most restaurants would want this service but I think it’s the case where In-N-Out is worried about their image or branding or maybe there’s a restaurant that wants to have their own delivery service and charge for that and they don’t want to be competing with their own service – you know, competing with somebody else – in those cases, there’s going to be people that say, “No.” If DoorDash can pull one out here and find some exception to this trademark infringement because, I think, on its face, I think it’s very clear that, you know, when it says “DoorDash Select” and then it gives another bunch of logos that says “All Merchants” as a consumer, I think there’s still a likelihood of confusion between whether or not there’s an affiliation between these merchants and DoorDash. I think they meet that infringement test. Now, the question is whether there is some kind of exception to the rule that somehow DoorDash can prove and I think that’s going to be a tough one.
MATT: Yeah, and this was just, I mean, I guess, by the time this episode comes out, it’ll have been filed for a couple of weeks so we’ll have to keep an eye on this one, I guess.
NASIR: When this episode is coming out, Turkey Week which is very fitting as how hungry I am.
MATT: Yeah, I actually thought about that earlier, this was a perfect story for right before Thanksgiving.
NASIR: You can get your turkey delivered if you want.
MATT: I’m getting my whole Thanksgiving dinner DoorDashed to my house.
NASIR: Yeah, or Subway. You heard about Jared, right? He just got sentenced for a number of years. He’s definitely doing jail time.
MATT: More years than the prosecutors recommended.
NASIR: Really? I didn’t know that. Yeah, it looks like he gets fifteen years. Oh, fifteen years in prison.
MATT: Yeah, prosecutors recommend twelve or twelve and a half.
MATT: It didn’t go well for him.
NASIR: That’s okay or not.
MATT: Yeah, you don’t really hear anyone complaining.
NASIR: Exactly. All those three and a half extra years, why did they give that to him? Or I should say two and a half.
All right. Well, I think that’s our episode, end on a positive note with Subway.
MATT: Yeah, the most positive story.
NASIR: Thanks for joining us, everyone.
MATT: Keep it sound, keep it smart.


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