Trademark Disputes: Merit or Muscle?

November 11, 2010, 3:44 PM

Trademark owners and lawyers have a unique chance right now to voice their concerns about a practice described as trademark bullying, the phenomenon where large mark owners use their greater financial resources to force smaller mark owners into settlements or adverse judgments, even where it is far from clear that the smaller owners marks are infringing.

It is a fair criticism of our legal system generally that, in litigation, financial leverage can matter at least as much as the merits. Little guys sometimes dont stand a chance, even when they have reasonably good claims or defenses, just because they dont have the resources to fight the fight. To some, at least, bullying is particularly egregious in trademark disputes. Both in infringement litigation in the courts, and in administrative disputes heard by the Trademark Trial and Appeal Board of the Patent and Trademark Office (PTO), small mark owners facing aggressive, well-financed adversaries find they would rather switch than fight (to contort a very old advertising slogan). The costs and uncertainties of pressing a matter to a final decision just dont allow otherwise, even if they think they would win. Large mark owners know this, and use their financial leverage to their advantage in an effort to broaden the scope of rights in their marks.

Trademark bullying is a phenomenon that most trademark lawyers have seen, sometimes often. Some companies have a reputation for extreme aggressiveness. The question is whether it is a systemic problem that can be fixed, or just another example of an uneven playing field in life.

The perception that the problem is endemic is so broad that Congress mandated the PTO to study the question. The PTO is now inviting comments from trademark owners and practitioners. Click here to see the PTOs invitation and instructions for offering comments. Frankly, I am not sure what the PTO can do to solve this problem, but good ideas may surface, and the discussion itself should help. The deadline for responses is January 7, 2011.

Why is bullying seen as a special problem in trademark law? A big part of the answer has to do with the nature of infringement disputes. Trademark infringement occurs when someone uses a name or mark that is likely to cause confusion with anothers mark. Trademark litigation is very expensive, for many reasons but especially because whether two marks are confusingly similar is a very subjective and contextual question, one calling on judges and juries to read the minds of consumers. Since only a likelihood of confusion must be shown (and only among some consumers), disputes arise when there is little or no evidence of confusion and, from the defendants perspective, no damage has been done. Even having a federal trademark registration does not immunize one from an infringement claim (registered marks can even gain incontestable status over time, but I once counted more than 20 ways incontestable marks can be challenged).

Thus, frequently there is plenty of room for argument about whether two marks are confusingly similar. Even simple trademark cases are messy, hard to handicap, and not often decided in the early stages of litigation. Because of the risks, the costs, and the uncertainty of outcome, smaller mark owners are hard pressed to defend against claims by larger companies, regardless of the merits.

Another reason for perceived bullying is that trademark owners want their marks to be as strong as possible: a mark that stands out, is unique and not similar to anything else, and is more effective and more valuable. And mark owners risk a weakening of their marks (and in extreme cases, even the loss of rights) if they fail to stop others from using similar marks with related goods. As a result, large trademark owners in particular have strong business and legal incentives to enforce their rights vigorously, and to make those rights as broad as possible. Some have active enforcement programs where they systematically act against a multitude of suspected infringers, often securing settlements or judgments from weak defendants to build a track record for later actions against stronger adversaries. Knowing that small adversaries will have to settle or agree to a consent judgment, large mark owners (and, yes, their lawyers) sometimes press for results more favorable than they might get in a full trial or administrative proceeding.

Smaller trademark owners, those who may complain of bullying, also contribute to the problem. It certainly is the case that many small businesses adopt names and marks without the advice of trademark counsel, without any searching (much less thorough searching) to ensure that their new marks dont infringe others rights, and without any appreciation of the legal standards for infringement. Businessmen often think, quite mistakenly, that their names do not infringe because they were able to incorporate under the names, because their marks are slightly different from their adversaries, or because their opponents are not direct competitors.

So, while I believe most trademark lawyers would agree that trademark bullying occurs, not all disputes between David and Goliath are examples. For an informative discussion of the causes and extent of the problem, see the dialogue taking place on the TTABlog, a good blog discussing practice before the Trademark Trial and Appeal Board. --Christopher J. Mugel