The Risk in Trying to Trademark Your Small Business Name

March 22, 2013

Small businesses trying to trademark their names are being dragged into disputes that, if they lose, could sink their firms.

Small businesses beware – big organizations are going to increasingly extreme lengths to protect their brands. And they may come after you. Small businesses trying to trademark their names are now attracting the attentions of large companies’ legal eagles, and some are being dragged into disputes that, if they lose, could sink their firms. A Vermont T-shirt designer was sued by Chick-Fil-A, claiming that his garments bearing the motto “Eat More Kale” infringed on its own “Eat More Chickin” slogan. A microbrewery was told by the Monster Energy drinkmaker it would be sued unless it stopped selling its “Vermonster” beer, because consumers could confuse it with their own beverages. If you think you’re on safe ground because your company bears your name then think again. A Minnesota soapmaker called Amy Brooks, whose firm Bubbles by Brooks has been trading for the past 10 years, has been threatened with legal action by the giant clothing chain Brooks Brothers.

Cases such as these have led to the accusation that large corporations are turning to “trademark bullying” to defend their turf. This is where large, rich firms threaten to sue small companies in the expectation that most of the little businesses will cease their operations or give up their brand name because they cannot afford the cost of defending themselves in court – even though the law might be on their side. Trademarkia has developed a ranking of the country’s top “trademark bullies”, based on the number of claims they submit to the U.S. Patent and Trademark Office (USPTO) opposing another firm’s trademark application. The top three ranked companies in 2012 were TeleTracking Technologies in third, E & J Gallo Winery in second, with Monster Energy Company (makers of the Monster energy drink) coming top. The USPTO has acknowledged that the legal costs of defending a trademark case can be difficult for small firms to bear, but insists the existing trademarking system has sufficient checks and balances to deter companies from abusing it. The Minnesota state legislature is considering a draft proposal to introduce a less costly way for small businesses to resolve trademarks disputes than federal court. Others are using the court of public opinion: Monster dropped its opposition to Vermonster after a public outcry against its tactics, while Eat More Kale’s legal strife has been widely covered by the media, including the New York Times, NPR and Economist, and its founder Bo Muller-Moore has raised $90,000 on Kickstarter to film a documentary about his story. Companies can get some limited coverage for legal actions arising out of intellectual property disputes under their D&O or Professional liability policies, but firms can buy a specialist insurance policy that would pay their legal costs and any damages awarded against them. It’s worth thinking about if you’re worried your company might be accused of infringing a rival’s patents or trademarks. Every company insures its physical property, but they don’t often insure their intellectual property, even though, for many firms, that is how they make their money.