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Have you worried about going into a store to look for, say, a camera, only to accidentally bring home a refrigerator? Even worse, what if you set out to buy your mother a birthday card and end up cheering athletes in Athens by mistake?
Ridiculous scenarios, right? Indeed they are, but when an entrepreneur steps into the weird world of trademark law, it can be a bizarre and logic-defying experience. Fridges and cameras? That example dates back to 1963, when Polaroid successfully sued a refrigeration outfit called Polaraid -- Polar Aid, get it? -- whose line of business was installing cooling systems. The names weren't spelled the same way, each operated in a different field, and no reasonable person could have mistaken the two companies. Yet the court upheld Polaroid's contention that the tradenames' phonetic similarity was enough to weaken Polaroid's distinctive brand.
And the greeting cards? Well that is a somewhat more recent and better-known example, dating back to the Eighties, when the International Olympic Committee insisted that it had the sole right to the trade name "Olympic." Businesses all over the world, such as long-established greeting-card company Olympic Sales of Enfield, Conn., had to change their names. Today, the family-owned business is know as Olympia Sales.
Those examples should serve as a cautionary lesson: When it comes to filing and protecting trademarks, small businesses are generally the ones with the most to lose, both in terms of disruption to their business routines and because of the onerous legal costs. That's the message from intellectual-property and patent attorney Michael S. Neustel of Fargo, N.D., who has created an online tool called TrademarkHunter to help lawyers and business owners research and protect their trademarks and company names. Neustel spoke recently with BusinessWeek Online's Katie DeWitt, and edited excerpts of their conversation follow:
Q: How aware do you think entrepreneurs are of the dangers of trademark disputes?
A: It's amazing to me though how many entrepreneurs don't know much about trademarks. They'll worry about patent infringements and stuff like that, but they'll just come up with a trademark name without even doing a trademark search or any prescreening on an Internet search engine for any similar trademarks.
And I think we're going to see more of a trend towards it, because we're seeing companies that have become a lot more aggressive in the last 5 to 10 years...you're seeing big corporations really start to protect their trademarks. I think the Internet, with people copying domains and cybersquatting and all that stuff, has really forced big companies to get tough on people infringing on trademarks. In the past, they were probably a little more lenient, but because the Internet made everything so global, it's really changed the way the large companies are going after the small companies for trademarks. It will be interesting to see if entrepreneurs start catching on to this trend. I am seeing it happen slowly, but it's still not at the level where it probably should be.
Q: Why are the big guys so much more active in pursuing trademark cases?
A: With the big companies, brand recognition is everything these days. Your intellectual property rights are your most valuable asset. For a company like Coca-Cola (KO
), two-thirds of its value is in its intellectual property. You can't have somebody starting up a company that makes hammers called Coca-Cola, because before you know it, you'll have a company making desk products called Coca-Cola, and before you know it, there's going to be so many companies called Coca-Cola that the original soda company loses its distinctiveness. So these companies have the right to come in and stop that. And it does make sense -- you don't want other people to benefit from the good will that you've generated.
That's why trademark protection is so important for small entrepreneurs. They need to be very nimble and proactive in figuring out what trademarks they're going to use. Unfortunately, they're the worst group. They're the ones that just pick a trademark and don't really think about it. They don't even hire a professional. And they're the ones who can't afford to have a lawsuit filed against them. I've had clients who have spent years marketing the name of their product, and they literally have to change it overnight because of a potential lawsuit or an actual, filed lawsuit. Companies will sue them because the large corporations know that the small businesses cannot afford to defend themselves legally in court because it's cost-prohibitive.
Q: Does the smaller party generally go to court, or does it tend to give in rather than shoulder the cost of an onerous court case?
A: If you're up against a company that really wants to come after you and they're very big and you're a small entrepreneur, unfortunately about 90% of the time I would say, you will just agree to change your name. I hate to say it as an attorney, but the practice of law is so expensive that it's cost-prohibitive for small entrepreneurs, even for some midsize companies. Not only is it a financial cost, but you have to look at the distraction from your business. Usually when there's a lawsuit against a small company, the owner or owners are the ones that are really involved in the litigation. They can't palm it off on managers and people like that, and it's very stressful and very time-consuming.
Q: What are the financial consequences for a business that has to change its name?
A: It can be very costly and disruptive, especially if the company has spent a number of years building up its business. Recalling, renaming, and redistributing all its goods is a major setback...the process can take months or even years to complete. I have heard of companies going out of business altogether as a result.
Q: What other, non-financial effects do trademark cases have on small companies? Can you give me any examples?
A: I have a case right now for a potential lawsuit where my client is 100% in the right -- I've never had a case where it was so clear that my client wasn't infringing on a big corporation's trademark. But he's a small-business owner from North Dakota and it's a big corporation in California. My client has been using his trademark for over 10 years, he's established his rights, he was using it before they even started using it, and now they want to come in and get him to stop using his trademark. You see this stuff and you start wondering about the attorneys and the corporations who are using those kinds of tactics, and it gives us all a bad name.... Here's a [small-timer] , and he have to take a pill shoved down his throat by these big corporations and law firms, and for not much of a good reason.
Q: Is low-cost arbitration available to settle trademark disputes?
A: Trademark arbitration, if you can do it, is great. In fact it's probably the best solution. But the problem is that both parties have to agree to it. And if you're a big company, you're not going to agree to arbitration because that really only benefits the little guy. Unless it's in a contract signed between the parties, you're not going to see it happen, and that's pretty rare.
Q: What steps would you advise an entrepreneur to take in order to avoid a trademark dispute?
A: ...I'd hire a professional to do a formal search for you because you may not have done the entire search correctly. I don't recommend that people rely upon TrademarkHunter entirely because unless you're a trademark searcher yourself, I think you're prone to make mistakes, even with our software product. But it's an excellent first step.
Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.
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