An entrepreneur wrote to me about an online business he started last year. “We’ve had an amazing run so far, with more than 10,000 unique hits every day on our Web site and a 30 percent gross profit margin on sales of more than $250,000 in our first year. Our site has been written up in major magazines and we’re getting attention from industry bloggers, who have rated our site very favorably. Recently, we received a letter from a law firm in a faraway state representing a company we’ve never heard of, accusing us of infringing the company’s trademark. They object to the use of one word in our company name, to which they claim they have exclusive trademark rights. The word is a very common one in the English language. We checked the federal trademark registry online at www.uspto.gov and no one has claimed either the single word or our entire company name as a trademark. We contacted a trademark lawyer when we started the business and he told us the name could not be trademarked by anyone because it was too descriptive of the type of merchandise we sell. The company that’s complaining about our name is a Fortune 1000 corporation with tons of money. Our attorney doesn’t think this company has a valid claim, but he suggests we change our name to avoid a ‘David and Goliath’ fight. Frankly, we’ve put a lot of time and energy into building a successful brand and are afraid of losing tons of business if we change our name now. Can this company get away with doing this?”
What you are dealing with here is called a “trademark bully”— someone who sends out nasty, threatening letters to smaller companies with similar names ordering them to “cease-and-desist” using their names, or else…. They’re usually a lot bigger than you and can pack a wallop even though they’re not in the right. Even a frivolous lawsuit can knock out a small business that can’t afford the legal expenses to mount a proper defense. Still, there may be some hope.
First, check the letterhead of the law firm that contacted you for the firm’s location. If it’s in the same state as the faraway company, they are probably sending out tons of these letters every week and you may be able to get away just by ignoring it. If the law firm is in your home state or city, that’s a lot more serious. It means the company has singled you out for special attention and has hired local counsel specifically to deal with you.
Check out the size of the law firm on legal referral websites such as www.martindale.com. If it’s a one- or two-person firm, they probably don’t have the resources to mount a lengthy legal battle in a faraway state. A client of mine once received a cease-and-desist letter from a trademark bully and when I checked the firm’s website, it stated very clearly that the firm did not do intellectual property or litigation work! If it’s a “Top 10” law firm with hundreds of lawyers with not enough work to do, be very worried.
Compare your business with the one the big company is engaged in. Many companies send these letters out to merely put companies “on notice” that they are being watched. As long as you are not engaged in the same or a similar business as the big company, it may be that nothing will come of it. If that’s the case and you want to sleep better at night, talk to your trademark attorney about negotiating a “co-existence agreement” with the law firm that contacted you. A co-existence agreement allows you to use your current name without risk of a lawsuit as long as you stay out of the big company’s industry.
Contact the government. The U.S. Commerce Department, in co-operation with the Trademark Office, is conducting a study on “the extent to which small businesses may be harmed by litigation tactics by corporations attempting to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner,” and is seeking input from small-business owners who have been victimized by trademark bullies. For information on how to participate in the study, go to www.uspto.gov (United States Patent and Trademark Office). Send a copy of your contribution to your elected officials, along with a copy of the cease-and-desist letter you received.
As in most schoolyards, buddying up with someone even bigger than the bully is sometimes the best defense. And the government is the biggest kid on the playground.