Sweetgreen stock falls after Chipotle sues for trademark infringement over burrito bowl

Sweetgreen‘s stock fell 10% in morning trading Wednesday after Chipotle Mexican Grill filed a lawsuit against the salad chain alleging trademark infringement over its new “Chipotle Chicken Burrito Bowl.”

Chipotle filed the suit in California federal court Tuesday, less than a week after Sweetgreen launched the menu item.

When the new bowl was announced on Thursday, Sweetgreen co-founder and Chief Concept Officer Nic Jammet said in a statement that the name was inspired by its use of “bold chipotle spices.” Chipotle said in its complaint that it sent Sweetgreen a cease and desist notice and asked the company to drop “chipotle” from the name when it heard about the Chipotle Chicken Burrito Bowl, but Sweetgreen never responded.

Chipotle’s lawsuit also claims that Sweetgreen advertisements for the menu item feature “Chipotle” in a font similar to the burrito chain’s stylized logo and sometimes use a shade of red similar to Chipotle’s trademarked Adobo Red. Sweetgreen’s website features the product name larger than any other identifying feature that ties it back to Sweetgreen, Chipotle argues in the complaint.

The complaint also notes multiple times that Chipotle and Sweetgreen are both competitors in the fast-casual sector.

In addition to asking the court for an injunction against Sweetgreen, Chipotle is also asking for the profits that Sweetgreen earns from the Chipotle Chicken Burrito Bowl.

“We don’t typically comment on litigation, but we will say generally that we’re committed to protecting our valuable trademarks and intellectual property,” Laurie Schalow, Chipotle chief corporate affairs officer, said in a statement to CNBC. “Consistent with that, we will take appropriate actions whenever necessary to protect our rights and our brand.”

A representative for Sweetgreen said the company is aware that Chipotle filed the lawsuit but declined to comment on pending litigation.

As Sweetgreen investors fret over the chain’s ability to become profitable, shares of the company have fallen 23% in 2023, dragging its market value down to $731 million.

Chipotle, on the other hand, has seen strong sales despite macroeconomic concerns. Its stock has climbed 22% in the same period, giving the fast-casual giant a market value of $47.1 billion.