The Fine Line Between Trademark Enforcement and Trademark Bullying

The Fine Line Between Trademark Enforcement and Trademark Bullying

In 2011, trademark bullying was a hot button topic among the trademark legal community.  The United States Patent and Trademark Office (USPTO) was tasked with examining litigation tactics in the context of trademark protection and enforcement.  What the USPTO was really asked to explore is whether there was a disproportionate level of trademark bullying compared to other areas of laws.  The USPTO found there was insufficient evidence to recommend that Congress take legislative action, and that there was sufficient protections within the existing framework (e.g. Rule 11 sanctions for bad faith actions) to deter and punish trademark bullies.  As explained below, these protections are inadequate, and a trademark misuse defense with teeth is a better alternative

The Fine Line

Companies and individuals dedicate significant time, resources and money into brand development and protection strategies.  So it stands to reason that one should do whatever it takes to proactively protect this investment by stopping third party trademark infringement.  And there are consequences if one fails to be proactive in terms of legal defenses to a trademark infringement claim due to failure to enforce trademark rights.

However, a fine line exists between bona fide enforcement and overreaching, the latter of which is trademark bullying.  The quintessential trademark bullying is a party with more power and resources exerts its will against small businesses and other less heeled folks by expanding its trademark rights beyond what is provided for under the Lanham Act or the common law.  And well beyond what they’d ever be able to prove in federal court or before the Trademark Trial and Appeal Board.  The party on the receiving end of the bullying simply folds because defending such an action or taking the offensive, such as seeking declaratory judgment, is expensive, time consuming and emotionally draining.  Simply put, it’s easier to cave into the trademark bully’s demands rather than punch the bully back.

Trademark bullying can take many different shapes and forms, but typically the trademark bully asserts these rights though a cease and desist letter on a large law firm’s letterhead. The trademark bullying may manifest in different ways like:

  • A trademark bully may demand that the small business owner cease using the small business’s creatively developed mark that has very little similarity to the trademark bully’s mark or is being used with significantly different goods or services.
  • A trademark bully has a misguided belief that it has a monopoly over the mark and employs a protection strategy to try and stamp out all uses of its mark, even when the small business or individual is using the bully’s mark in a descriptive manner rather than functioning as a trademark.
  • A trademark bully may try and expand its trademark rights by asserting claim to particular goods or services despite the fact if one pulls back the curtain, the trademark bully would be unable to prove it has established rights through actual use.
  • A trademark bully disingenuously claims that its mark is “famous” and therefore is able to prevent use in connection with entirely unrelated good or services under the guise that such use will tarnish, dilute or blur the famous mark.

Trademark bullying is not limited to multi-national corporations with infinite resources.  In the e-commerce sphere, sellers take advantage of loopholes in the Trademark Manuel or Examining Procedure to obtain trademark registrations for non-trademark uses of slogan through what are essentially “sham tags and labels.”  This registration essentially provides the seller a monopoly over this particular slogan on Amazon, eBay, Etsy and other e-commerce sites.  Unfortunately, these e-commerce sites aren’t in the business of deciding trademark and other intellectual property disputes, defer to the registration, and shut down competing listings (as well as putting seller privileges at risk of being revoked).

Choose Your Poison

Especially when confronting a large trademark bully with infinite resources and a team of lawyers, a small business faces a conundrum.  Take a stand and be launched into the financial and emotional draining experience that is federal litigation.  Or alternatively face the financial and emotional draining experience of being forced to rebrand.  Under either scenario, a small business faces dire consequences, possibly at risk of ceasing operations.

As mentioned above, the USPTO and other professional trademark organizations have theorized that the existing framework has sufficient protections against trademark bullying.  Specifically, that the Court can award attorneys fees under the Lanham Act in “exceptional cases” and the threat of Rule 11 sanctions against the company and lawyers for what are lawsuits brought in bad faith.  First, under the Lanham Act attorneys’ fees is discretionary and awarded based on the plain language in the most “exceptional” cases.  Second, despite unfavorable odds, a small business has to “pay to play” by incurring significant attorneys fees.  Third and last , even if the trademark bully is on the wrong side of what are unfavorable odds, an award of attorneys fees and/or sanctions is simply a drop in the bucket and does little to deter future conduct.  This rationale would hold water if the trademark bully was also a small business where such an award of substantial attorneys’ fees or sanctions would have dire consequences.

Misuse Defense

A trademark misuse defense, along with the built in protections, and perhaps a mandatory attorneys fees award if a trademark misuse defense is successful, would have a much greater deterrent to trademark bullying.  Now, this assumes the litigation is occurring in federal court rather than an opposition or cancellation proceeding before the Trademark Trial and Appeal Board.  However, where the trademark misuse defense could potentially be very potent is cancelling the trademark registration, stripping away some of the protections, or requiring court approval to bring a lawsuit, similar to a vexatious litigant.  Such a potent defense would no doubt cause the trademark bully to tread more carefully and more even the disparity of power that exists under the current system.

Contact Paul Ticen if your small business needs help in dealing with a trademark bully.