Trademark BullyingTrademark Bullying

By Catherine RajwaniThe Harbor Law Group

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Trademark BullyTrademark Bully

Definition: A trademark owner that uses its trademark rights to harass and intimidate another business beyond what the law might be reasonably interpreted to allow.

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Trademark Technical Trademark Technical Conforming Act (2010)Conforming Act (2010)

• Main Purpose: Harmonized filing procedures between trademarks filed in US directly and those filed abroad pursuant to Madrid Protocol.• Also, Secretary of Commerce must report to House and Senate Judiciary Committees on “the extent to which small businesses may be harmed by litigation tactics by corporations attempting to enforce trademark rights beyond reasonable interpretation.”

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Trademark Technical Trademark Technical Conforming ActConforming Act

Created by Senator Leahy of Vermont• “I am concerned that large corporations are at times abusing the substantial rights Congress has granted them in their intellectual property to the detriment of small businesses.”• “We saw a high-profile case like this in Vermont last year involving a spurious claim against Rock Art Brewery. When a corporation exaggerates the scope of its rights far beyond a reasonable interpretation in an attempt to bully a small business out of the market, that is wrong.

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Rock Art BreweryRock Art Brewery

• Rock Art Brewery, a local craft brewery in Morrisville, Vermont. In 2010, Rock Art Brewery had 9 employees that worked in a plant of 10,000 square feet and produced 3,500 barrels of beer annually, mostly sold in Vermont.• Hansen Natural Corporation sold and distributed Monster Energy Drinks globally through a partnership with Anheuser-Busch. Hansen Natural had in excess of $600 million in net sales for the first half of 2010 and a market capitalization of $7.4 billion in 2011.

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Disputed MarksDisputed Marks

• Rock Art came out with a new beer to celebrate its tenth anniversary and called it “the Vermonster.”• Rock Art registered the name “VERMONSTER” in Vermont and with the U.S. PTO.• Hansen sent a cease and desist letter to Rock Art claiming that its “VERMOSTER” trademark was confusingly similar to and/or dilutive of the distinctive quality of the Hansen’s “MONSTER” marks.

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Bullying?Bullying?• Rock Art claimed that confusion was unlikely because it did not make alcoholic drinks and the products’ packaging were dissimilar.

• Legitimate enforcement of trademark rights or bullying?

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Duty to PoliceDuty to Police

• Purpose behind trademark law is to protect consumers from brand confusion.• Distinction afforded to well known trademarks is essential to an owner’s success and can be lost if comparable marks come to be associated with the trademark owner’s goods and services• If a brand owner does not take legal action against potential infringers and such infringing use(s) become sufficiently rampant, the owner’s mark will be stripped of its distinctiveness and could be considered abandoned.

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Trademark LitigationTrademark Litigation

• Trademark holders are increasingly filing infringement suits, but there is a decline in cases that are prosecuted to a conclusion on the merits.• Mitchell Study on Trademark Litigation (2008) indicates that if filed lawsuits were prosecuted to a conclusion on the merits, the trademark holder (plaintiff) would likely lose.• Growing trend shows that bullying is being used by owners to expand their trademark rights and raise market entrance or continuation costs to competitors.

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Why Most Cases Are Why Most Cases Are Not LitigatedNot Litigated

• “For many claims, trials by the adversarial contest must in time go the way of the ancient trial by battle and blood. Our system is too costly, too painful, too destructive, [and] too inefficient for a truly civilized people.”-Former Chief Justice Warren E. Burger

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Small Business Small Business ConcernsConcerns

• Small business owners often feel defeated before litigation begins due to cost concerns, length of time until dispute is resolved, uncertainties regarding discovery and trial, and the likelihood of appeal.• Regardless of the merits of a small business owner’s case, the seemingly endless resources of his opponent will undoubtedly intimidate him.• For the average small business owner, resolution of the underlying issue lies outside of the litigation process.

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Large Business Large Business ConcernsConcerns

• Large businesses also have concerns regarding the trademark litigation process. • Number of potential infringers is large and could include both small and large businesses.• Larger businesses put their reputation on the line and can be under strict scrutiny when filing lawsuits against infringers.• Outcome of litigation is uncertain (judge, jurors, excluded evidence, etc.).

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Rock Art’s Rock Art’s ConsiderationsConsiderations

• Hansen’s cease and desist letter demanded Rock Art Brewery stop using the “Vermonster” mark and asked that Rock Art pay for its legal expenses incurred in connection with the infringement matter.• Rock Art’s attorney felt that its use of the mark was proper and its federal registration legitimate but nonetheless advised his client to change the beer’s name.• Rock Art was warned that Hansen could prolong litigation long enough to bankrupt Rock Art.

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Rock Art’s DecisionRock Art’s Decision

• Rather than succumb, Rock Art contacted its client base to inform them of Hansen’s actions.• In support, one of Vermont’s largest beverage centers protested by pulling all Hansen products off the shelves.• Rock Art gained over 18,000 supporters through social networking sites used to promote its cause.• Largely due to public support for Rock Art, Hansen settled quickly and allowed Rock Art to continue to use the “Vermonster” mark as long as it did not make energy drinks.

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Considerations When Considerations When Asserting RightsAsserting Rights• Solid Due Diligence

• Realistic Scope of Rights• Assert Realistic Claims• Revisit Enforcement Strategy • Carefully Craft Letters• Engage Business Interests• Weigh Cost Benefit Analysis• Calm and Persistent Negotiation

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Practices in Receiving Practices in Receiving TM DemandsTM Demands

• Competent TM Counsel• Solid Due Diligence• Realistic Analysis of Claims (Merits and Costs)• Best Defense-Good Offense • Right to Use v. Registration • Public Relations Campaign• Social Media Campaign• Calm and Persistent Negotiation

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