Companies both large and small devote significant time, money, and resources into brand development and protection strategies. So, it is of no surprise that trademark owners would be resolute in their attempts to protect their investments. In fact, the trademark law requires owners to police their marks and take appropriate action against infringers. Failure to do so could result in loss of trademark rights.
While trademark owners are legally permitted and are required to enforce their trademark rights against infringers, a fine line exists between bona fide enforcement and overreaching. A trademark owner that abuses their trademark rights to harass and intimidate another business beyond that which is permitted by law is nothing more than a BULLY! These “bullies” take their protective measures far beyond the mere threat of litigation and will file suit against an unsuspecting small business in an attempt to exhaust their financial resources and deter that small business from rightfully utilizing their trademark in commerce. Litigation requires a significant devotion of time, money, and effort. And, most small businesses generally do not have the resources to defend themselves against large entities.
According to a 2015 American Intellectual Property Law Association (“AIPLA”) survey, if a trademark infringement case proceeds to trial, the costs on average totals:
$354,000 when < $1 million in dispute;
$670,000 when $1-10 million in dispute;
$1.1 million when $10-25 million in dispute; and
$2.1 million when > $25 million in dispute.
As the study suggests litigation can be extremely expensive and cost-prohibitive for a small business. The larger entities can afford the financial sacrifice and time spent. And, many of the larger businesses that resort to bullying tactics will take advantage of the fact that small businesses lack the resources to defend and infringement action in court. With the knowledge that it is highly unlikely that a small business will challenge the claim, some of the most egregious cases of bullying have been instances in which the larger businesses without warning have instituted suits against anyone they deem to be their competition irrespective of whether their claims have any merit. These baseless suits are not limited to cases of actual infringement, but some large businesses resort to litigation even when the marks are only vaguely similar. Other examples of bullying include instances where a small business is legitimately re-selling authentic products, but at a reduced price. The bully will file suit in order to eliminate the competition. The bully doesn’t care that the small business has a legitimate defense; they just want the competition eliminated. The most common instances of trademark bullying commonly involves a large business sending a cease and desist letter to a small business in an attempt to force the small proprietor to cease use of their mark or face imminent litigation. As mentioned earlier, it is often the case that the mark is only vaguely similar. Alternatively, other cease and desist demands are issued in an effort to extract license payments, rapid settlements, or seek co-existence agreements from the small proprietor. Because of the limited financial resources of the small business, these threats are typically sufficient economic pressure to force an unsuspecting smaller business owner into complying with the demand.
If you are a small business and you believe that you might be a victim of bullying there are steps that you should consider in your attempts to protect your rights.
Upon receiving a cease and desist letter or being sued, you should consider:
Whether your acts are infringing or diluting
If you are clearly in violation, the company is not bullying you – STOP IT!
If you believe that your use of the mark is legitimate and cessation of any use is likely to cause significant damage or loss, you should consider the following approaches:
Explain to the sender that why you believe your use is legitimate/state your defenses.
Negotiate a consent or co-existence agreement
As a last resort, negotiate an agreement to rebrand, but request a reasonable transition time-frame and reimbursement of all or some rebranding costs.
If an amicable resolution is unlikely, your alternatives may require more contentious actions such as:
Instituting a public relations campaign in the press, on the internet, and social media and other outlets to increase pressure on the bully to stop their tactics.
Petition the court for a declaratory judgment.
In sum, although trademark bullying occurs often, a small business that receives cease and desist letter should not ignore the claims or demands. However, the small business owner should not automatically assume that they are out of luck and without recourse. Evaluate the claims and proceed accordingly. All is not lost for the small proprietor defending themselves against a corporate giant. There are creative non-legal responses that can be effective in protecting your legal rights in your marks. By shifting the disparity in bargaining power and employing methods such as public shaming campaigns many small businesses have been successful in overcoming overreaching and meritless infringement claims. Trademark bullying is unethical, but unfortunately, it is a frequent occurrence. However, by arming yourself with the necessary knowledge to protect your rights, your business can survive the wrath of a trademark bully.
If you're small business that believes it is being bullied, contact Cooper Legal for a case or strategy evaluation.
This blawg is provided by the firm for informational purposes only and may not be relied on as legal advice. If you have any questions related to your specific business needs, schedule a legal consultation today.