"I started an online business last year. We've had an amazing run so far, with over 10,000 unique hits every day on our website, and a 30 percent gross profit margin on sales of over $250,000 in our first year. Our site has been written up in some major magazines, and we are getting attention from industry bloggers who have rated our site very favorably.
"Maybe we have been getting too much attention ...
"Last week we received a letter from a law firm in a faraway state representing a company we have never heard of, accusing us of infringing the company's trademark. Specifically, they are objecting 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 have 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. In fact, we contacted a trademark lawyer when we first 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.
"We checked out the company that's complaining about our name, and, unfortunately, they are very big — a Fortune 1000 corporation with tons of money. Our attorney does not think this company has a valid claim, but he is suggesting we change our name to avoid a 'David and Goliath' type fight. Frankly we have 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?"
One of the reason we love David and Goliath stories is because in real life, Goliath almost always wins.
You are dealing with 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.
Sadly, like most schoolyard bullies, they are usually a lot bigger than you and can pack a wallop even though they are not in the right. Even a frivolous lawsuit — one having no basis in law — 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, look at the letterhead of the law firm that contacted you. Where is it located? If it's in the state where the faraway company is located, it is probably sending out tons of these letters every week, and you may be able to get away just by ignoring it. If the letter is from a law firm in your home state or city, that's a lot more serious. It means the company has singled you out for special attention and hired local counsel to specifically deal with you.
Check out the size of the law firm as well — you can do this on legal referral websites such as www.martindale.com. If it's a one- or two-person firm, it probably doesn'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's lawyers, 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 who don't have enough work to do, however ...
Next, compare your business with the business in which the big company is engaged. Many companies send these letters out to companies merely to put them on notice that they are being watched. As long as you are not engaged in the same or a similar business as that of 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 coexistence agreement with the law firm. A coexistence 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.
Lastly, contact the government. In 2011, the U.S. Commerce Department, in cooperation with the Patent and Trademark Office, released a detailed 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. To review the entire study, go to https://www.uspto.gov/sites/default/files/trademarks/notices/TrademarkLitigationStudy.pdf. Appendix A contains a list of government resources that can help you fight a lopsided trademark battle, including the toll free hotline 1-866-999-HALT.
Yes, dealing with the government will be painful and time-consuming. But as with a schoolyard bully, buddying up to someone even bigger than the bully is sometimes the best defense. And the government is the biggest kid on the playground.
Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.