Are trademark disputes worth it for new businesses? TEAL BAY v. SOUTHBOUND

Are trademark disputes worth it for new businesses? TEAL BAY v. SOUTHBOUND

A trademark is something that a manufacturer uses to brand the products it produces. A trademark lets consumers know that when they purchase a trademarked product, they can expect a consistent level quality. Traditionally a trademark is thought of as a symbol, word or short phrase, however anything that is used to brand products can be eligible for trademark protection.  The key to creating a claim to a trademark, is using the trademark in commerce.   The first person to use a trademark in commerce is considered the senior user of the trademark.  Subsequent users of the trademark are considered junior users.  The term “use in commerce” means the bona fide use of a trademark in the ordinary course of trade, and not made merely to reserve a right in a trademark.  The senior user of a trademark has priority over junior users, meaning that in a dispute between two users of a similar trademark the senior user’s activity will not infringe on the junior user’s activity.

In the United States a trademark can be registered with the United States Patent and Trademark Office.  Registration of a trademark strengthens the rights associated with a trademark, but registration is not a prerequisite to using a trademark in commerce and registration does not give a junior user priority over a senior user.  When a trademark user files an application to register a trademark, they must either submit evidence that they are using the trademark in commerce or that they intend to use the trademark in commerce.  After the initial filing, the applicant must file a Statement of Use once the trademark has been used in connection with the goods or services identified in the application.  Failure to file a Statement of Use will cause the trademark application to be abandoned.

When a new business is formed the owners of the company typically have a trademark that they want to use.  Sometimes a new business owner will engage a trademark attorney to perform a trademark search and begin the trademark registration process.  But frequently a new business owner will perform a simple internet search and assume that they can use a trademark because they couldn’t find the trademark on the internet.  This can lead to problems if another business believes they have a claim to the trademark.

Disputes between trademark users are difficult to predict because the facts of each case are unique.  Even when the facts of a case are clearly in favor of one side, trademark litigation is a time consuming and costly endeavor.  When a new business is presented with a trademark dispute sometimes it is better for the new business to choose a different trademark, even if the new business has a superior claim to the trademark.

Teal Bay Alliances, LLC v. Southbound One Inc. 13-cv-02180 ( D. Md. 2015) is a case which illustrates when it is better for a new business to choose a different trademark rather than engaging in costly litigation.  The defendant in this case is a brewery that chose the trademark SHOREBILLY for its products.  In 2012 the defendant attempted to trademark SHOREBILLY in connection with bars, breweries and restaurants.  The plaintiff already had registered the trademark in connection to clothing and non-clothing products.  The plaintiff opposed the defendant’s trademark application and eventually filed a lawsuit for trademark infringement.

The case was ultimately decided in favor of the defendant after years of litigation.  The court found that the plaintiff fraudulently applied for the trademark because the plaintiff never actually used the trademark in commerce.  The judge canceled the plaintiff’s trademark registration and awarded the defendant attorneys fees because of the plaintiff’s behavior.  However the years of litigation forced the defendant to choose another trademark while the court case was pending.  Despite all the facts of the case favoring the defendant and the defendant ultimately winning, the defendant would have probably been better off choosing a different trademark when they first learned of the plaintiff.

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