(Tony’s note: this post is a guest post from a friend who shall remain nameless)

Two years ago our corporation was sued by a larger company over trademark infringement. My business partner and I have chatted post-mortem about the experience many times since. I thought I’d try to document and share the lessons we learned in the hope that it will help other small startups who encounter the wrath of a bigger fish.

One morning we were milling around the house. My wife checked the mail - she’s the organized one - and saw a letter on a fancy envelope that looked like a law firm. She opened it and it was a cease and desist notice from a law firm telling us to stop using our company name and to hand it over to them.

Big Mistake #1:

At that point I called up a law firm who’s domain name was something like ‘domainnametrademarklawsuitlawyerattorneyguy.com’. I found him via Google (obviously). I had a chat over the phone with the guy and didn’t get much useful information but he was happy to take my money. He was very reasonably priced - he offered me a package that included a response letter and some basic negotiation for what most law firms bill per hour.

Big Mistake #2:

He sent me the first draft of the response letter and it was a letter that suggested we’d go belly up without a fight. I called him back. I still didn’t get much legal advice. But I told him to go out and buy himself a spine and rewrite the letter. So he did.

The letter came back fairly aggressive and my thought was that we’d let these guys know they can’t just push us around.

When I eventually got a good law firm working for us (more on that in a moment) my new trademark attorney couldn’t believe we sent something that aggressive to them. It set a very bad tone for negotiating.

Big Mistake #3:

After having my $2 attorney send opposing council a f***k you note, I decided to call them up. The CEO wouldn’t take my call but referred me to his attorney who I learned from the receptionist was a litigator and was on permanent retainer. I also got the impression he was based on-site. I got the litigator on the line and laughingly asked him if he thought his case actually had any merit. He said he did. The conversation quickly ended.

Later I got several calls from the CEO himself. Instead of referring him to my attorney, I got chatty with him too.

I had succeeded in making the case personal.

Big Mistake #4:

After a few weeks I got rid of domainnametrademarklawsuitlawyerattorneyguy. I posted a message on a webmaster business discussion forum and made contact with a very competent and reasonably priced trademark attorney based in SF.

Even after retaining a great law firm to deal with this, the only knowledge I was gaining about the case and trademark law was through osmosis from my attorney. I never bothered to gain a deep understanding of what I was up against.

We went through weeks of negotiating via my new attorney trying to undo the damage my previous attorney and I had caused. She did a spectacular job but we were still drafting motions and steadily heading to court.

If I’d done my homework quickly and understood what we were really up against I would have done whatever I could to bring this thing to closure much sooner.

Closure

I wont bore you with the details of how this played out and confidentiality agreements prevent me from sharing the interesting details with you. But at the 11′th hour I repaired my relationship with the plaintiff’s CEO sufficiently to talk a deal.

OK children, what have we (I) learned?

  1. When you receive a cease and desist notice, take it very seriously because it may be the beginning of a very long and expensive lawsuit.
  2. 2. Find a very good attorney who specializes in the relevant field. Don’t go for a big name law firm. Preferably find someone who was working for a big name law firm and recently started their own practice. You’ll get big name experience and someone who is lean and hungry - and reasonably priced. Many attorneys are happy to spend an hour with you on the phone for free chatting about your case. Use this hour wisely and you can get a ton of free legal advice. Set up conference calls with as many law firms as you can and get lots of free hours and a free education.
  3. Go to school. Drive down to your local Barnes and Noble and start learning as much as you can about the problem you’re facing and the claims that have been made against you. If you’re an entrepreneur this won’t be a problem because you’re used to absorbing fantastic amounts of information in short periods of time.
  4. Lawyers are notoriously shy about responding to direct questions like “Should we settle or should we go to court?”. It’s in their nature because they’re worried about getting sued. They’ll simply present you with the facts and leave the decision up to you. But if you have a good working relationship with your attorney, ask them this question and keep pressing and they’ll probably give you some advice off the record.
  5. Take any advice you get from an attorney in context. If they’re a litigator, they’re just itching to battle it out in court. Even if they aren’t, if you choose to fight it means they’ll get to draft fun motions and make exciting filings and do what lawyers do. And of course they will generate many many billable hours and while many lawyers defy their field’s reputation and are in fact well meaning good people, it’s tough to turn away tens of thousands in billable hours. That’s why you need to learn as much as you can about what you’re up against and make your own decision.
  6. NEVER EVER call up opposing council directly and NEVER NEVER NEVER EVER call up anyone who works for the company that’s suing you - especially the CEO. No matter how many times dad told you to deal with issues like this man-to-man, don’t do it. You’ll risk turning this from a cost-of-doing-business issue into a personal proving-a-point issue. The only reason I negotiated directly with the opposing CEO when settling was because I’d already made it personal and had to repair the damage.
  7. Make sure you don’t take the fact that you’re getting sued personally. One of the things I learned is that companies who own trademarks are obliged to enforce their trademark rights or they risk losing them. The company you’re dealing with may have no choice but to ask you to change your name - or take whatever legal action they’re taking.

When making your final decision about whether or not to comply with the demands of the C&D, or whether or not to go to court, consider this:

After doing all your research you may still be unsure about whether or not you’re right and they’re wrong. Make the decision a financial one. Look at your company’s revenue and how much you would lose by complying (changing your name in my case). Then look at the cost of litigation if you went to court.

If you’re just starting out it’s very likely that you’ll make the decision to avoid the legal bills and get on with your business.

If all your research tells you that you’re in the right and the financial data says you should fight the good fight, then go for it. But know that it’s going to take a long time and it risks demoralizing the management team and staff if they’re not shielded from the process. View it as a simple cost of doing business, don’t discuss it with staff unless you have to and get on with building a successful business.

What we do now to avoid tradmark lawsuits:

I wrote this in the hope of providing some general advice on dealing with early stage lawsuits, but here are a few tips to help you avoid getting sued over trademark infringement specifically:

  1. Do a search on USPTO.gov for your future name using their trademark search engine
  2. Do a simple Google search for your name. The best names I’ve found have 2 or three results come up and usually it’s someone’s nickname on a discussion forum used years ago or something inconsequential like that.
  3. NOLO provides many great books on trademark law, many of which we’ve bought and studied. Reading a few of these will give you a good basic understanding.
  4. Do a full trademark search using a trademark attorney or search service including federal, state and local. We use trademarkexpress.com which we recommend.
    If you plan to be around for a few years, file your trademark with the USPTO using a reputable trademark attorney.

I hope you’ve found this useful.

DISCLAIMER: I am not a lawyer (ed: neither am I!) and this article is my personal opinion. It should not be construed as legal advice, in part or in whole, in any way, shape or form.

(Tony’s note: Pretty sobering experience. I’ve never been involved in any lawsuits– knock on wood– but virtually every one that I’ve personally witnessed has been a result of someone taking something personally. It’s not a game. It’s not about egos. It should be about finding the fairest compromise that allows everyone to get back to the business of making money ASAP. Heck, you can expand that truism to just about ANY business negotiation.)