Trademark monsters: tackling Lanham Act bullies 16 Feb 10
Monster Cable is known for more than its high-quality electrical equipment. Over several years the California company built up a reputation as something of a trademark bully. But last year, after a deluge of bad publicity, the company changed tack. It dropped a pending lawsuit and pledged to re-evaluate its trademark enforcement strategy. Monster Cable's chief executive wrote to the defendants to say: “This is a landmark kind of situation, as public opinion wins over what is the right thing to do for trademark protection of a famous mark. We have made the decision that public opinion, and that of our valued customers, is more important than the letter of the law that requires us to prevent the dilution of our mark or risk losing it.” (For background, see "US mark owner bows to public opinion in MONSTER dispute").
Now another unrelated 'monster' case has prompted a study into whether some brand owners are taking advantage of trademark law to stifle innovation and squash competitors. After hearing about Monster Energy's pursuit of the Vermont microbrewery that produces the Vermontster beer, Senator Patrick Leahy sponsored a new bill which provides for a study into "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".
The proposal has reopened the debate on whether trademark bullies pose a serious threat to US trademark practice and how the Lanham Act could be amended to stamp out ugly enforcement tactics. "Trademark bullies definitely exist," says Michael Atkins, attorney and shareholder at Graham Dunn and author of the Seattle Trademark Lawyer blog. "We're seeing more and more trademark filings but fewer and fewer trademark trials, which arguably suggests that trademark owners are using demand letters and trademark filings to exercise their might and to extract something that they may not legally be entitled to by the court process."
But resourceful brand owners will always have the advantage over small businesses, suggests Ryan Gile, author of the Las Vegas Trademark Attorney blog and an attorney at Weide & Miller. "One person's trademark bully is another person's attempt to protect their brand," he observes. "The only thing this study will show is that there are a lot of small businesses that are having to change their names or marks because someone out there feels that they have superior rights."
This is the goal for most clients that hire specialist investigative and IP enforcement outfit Continental Enterprises. The firm receives a great deal of criticism for its unique business model. Unlike a conventional law firm, which may act on either side of a dispute, Continental represents plaintiffs only. Its sales team scours the Web for possible infringements, then contacts the senior mark owner to offer Continental's services. Darlene Seymour, Continental's general counsel, told WTR that she sees no problem with the US enforcement regime. "Often the public misunderstands intellectual property," she said. "All they see is a large company going after a small company on an issue that they don't understand."
And after all, Seymour notes, "the law creates an obligation for trademark holders to protect their rights". That is where a lawyer's skill comes in: some brand owners do bring questionable lawsuits. "You don't need to sue everyone in the world to maintain the rights in your brand," says Atkins, "That's just not the law, but I don't think everyone realizes it."
The trick, therefore, is to pick the right battles. A brand owner must shrewdly weigh up whether the later mark poses a serious risk of a likelihood of confusion. Brand owners with deep pockets can afford to be less discriminating - but this might be dangerous. "All brand owners should think like small brand owners with limited resources," Atkins advises. "Brand owners should fight only legitimate battles that have realistic goals."
Nevertheless, any system is always open to abuse. If successful, Leahy's study may highlight sections of the Lanham Act that could be tightened to prevent overly aggressive behaviour. But Atkins is unconvinced by this suggestion. "I cannot foresee an amendment to the Lanham Act to address the problem," he says. "I don't know what that language would look like. It's unrealistic to believe that the Lanham Act could be amended to stop overzealous brand owners without radically changing the landscape of trademark law."
One proposition made to WTR by several commentators is that the Lanham Act be amended to provide for payment of the attorneys' fees of the prevailing party. "That's what Leahy's study ought to look at," suggests Atkins. But Gile does not believe that a loser-pays clause would kill off the trademark bullies. "It would not necessarily help either party," he argues. "A defendant would need money even to hire a lawyer in the first place. And most cases settle anyway."A 'loser pays' system could even have a chilling effect, as a small brand owner may be dissuaded from suing a large corporation even if it believed the law was on its side.
If commenced, the study would certainly have plenty to examine. The US Patent and Trademark Office (USPTO) is already on side. Lynne Beresford, commissioner for trademarks at USPTO, wrote to WTR to say: "If the USPTO is asked to participate in conducting the study we will, of course, do so."
Adam Smith, World Trademark Review, London
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