Trademark Bullies Force Small Businesses to Give up More than Their Lunch Money

By Jason Weber *

Scut Farkus

Scut Farkus

After a successful National Bullying Prevention Month in the books, parents can rest assured that classic bullies like O’Doyle and Scut Farkus will no longer be stalking the halls and playgrounds of the nation’s schools.  But there is another breed of bandit out there that terrorizes small businesses instead of small children – the “trademark bully.”  While typical bullies might hurl insults or twist your arm until you scream “Uncle,” these trademark bullies engage in even more sinister tactics: driving their victims out of business with meritless trademark infringement claims.

There is obviously nothing wrong with bringing trademark infringement suits.  Businesses, large and small, are entitled to protect their intellectual property rights under § 1114 of the U.S. Trademark Act.  Trademark bullying, however, is when a large business with unlimited resources tries to enforce its trademark beyond a reasonable interpretation of the rights granted to it by the U.S. Trademark Act.  Basically, trademark bullies use trademark law as a guise to harass smaller competitors by sending cease-and-desist letters and using other threats, regardless of the spurious nature of their claims.  These larger corporations, with deep pockets and powerful attorneys, bank on the fact that many small businesses simply cannot afford to defend themselves because of the exorbitant costs of intellectual property suits.  Instead of fighting back, most defendants are forced to give in to the bully’s demands or face the possibility of going bankrupt during the litigation process.

Monster Energy & Vermonster BeerWhile some trademark infringement suits certainly represent valid claims, see Lady Gaga’s suit against a fictitious British children’s character – Lady Goo Goo, others are more questionable.  Some prominent examples of alleged bullying include the multiple lawsuits filed by Facebook against social networking sites that use the prefix “face” or suffix “book;” Proctor and Gamble’s suit against Willa, a small U.S. children’s skin care company, for allegedly infringing on P&G’s German hair care line – “Wella;” Apple’s claim that it owns “pad;” and Monster Energy Drink’s lawsuit against small, Vermont-based Rock Art Brewery for its Vermonster beer.

After the Vermonster lawsuit, Senator Patrick Leahy (D-VT) suddenly became concerned about the issue of trademark bullying, and in 2010, Congress unanimously mandated a study on the merits of these claims.  Section 4 of the Trademark Technical and Conforming Amendment Act of 2010 ordered the Secretary of Commerce to study the issue and make a report with recommendations on how Congress can help protect small businesses from harassing litigation.  The report, published in April of 2011, failed to find enough hard evidence of trademark bullying to recommend any legislative fix.  Its only major recommendation was to encourage the private sector to step in and provide pro bono services to small businesses engaged in trademark disputes with larger companies.

editorial cartoon depicting bullyingSome commentators immediately blasted the Commerce Department’s findings and recommendations, arguing that the simple solution is to award attorney’s fees to the prevailing party in questionable trademark disputes.  This would presumably provide a greater deterrence for accused trademark bullies, and encourage small businesses to defend themselves without having to worry about the costs of litigation.  But given the inconclusive findings of the study and lack of subsequent congressional action by Senator Leahy, trademark bullying victims will have to find other ways to protect themselves.  One solution is to be extremely careful when deciding what trademark to register and to conduct an extensive search of any similar marks to avoid future lawsuits.  Another solution is to fight back.  Willa successfully forced P&G to settle its claim, but racked up $750,000 worth of attorney’s fees in the process.  For businesses that cannot afford this price tag, publicizing the harassment and using social media can also be a successful strategy, as evidenced by Rock Art Brewery’s defeat of Monster energy.

* Jason Weber is a second-year law student at Wake Forest University School of Law and a staff member on the Journal of Business and Intellectual Property Law.  He holds a Bachelor of Arts in Political Science from Hope College and served with Teach for America prior to entering law school. After graduating in 2013, Mr. Weber intends to practice in the areas of education or community and economic development law.