Protecting Their Property

Minimize your risk of an intellectual property lawsuit by covering all your bases

By:  Lynn Celmer

In a humorous knock at our sometimes overly litigious society, Coca-Cola launched an ad campaign where two actors playing representatives from Coca-Cola talk to real lawyers about the possibility of suing Coca-Cola Zero for taste infringement—the joke being that Coca-Cola and Coca-Cola Zero are produced by the same company, hence they would be suing themselves.

Unfortunately, in the real world, there is nothing funny about a small business getting hit with an intellectual property lawsuit. Intellectual property encompasses copyright, patent, trademark trade dress (the physical appearance of a product), and trade secret issues. Under intellectual property law, the holder of one of these abstract "properties" has certain exclusive rights to the creative work, symbol or invention that is covered by it.

Recent legislation has made it even easier for big corporations to sue smaller businesses over trademark dilution. The Trademark Dilution Revision Act of 2006 allows for brand owners to show only a "likelihood of dilution," rather than having to demonstrate that their mark has suffered "actual dilution." This basically means that big companies with famous trademarks can now sue businesses with even the slightest similarity to their name.

Dog lovers around the world watched as luxury powerhouse Louis Vuitton took on Haute Diggity Dog, a small Las Vegas pet product business in a real life David vs. Goliath battle. Louis Vuitton sued Haute Diggity Dog, its principal owner Victoria Dauernheim and retailer Woofie's Pet Boutique in Ashburn, Virginia, in 2006, claiming their "Chewy Vuiton" dog toys violated trademark, trade dress and copyright infringement laws. The toys are shaped like the famous handbag and featured an interlocking CV logo in place of the trademarked LV logo.

Judge Paul V. Niemeyer ruled that although the toys bear a resemblance to the famed Parisian handbags, it is unlikely that consumers would be confused into thinking the toys were made by the luxury retailer. "The juxtaposition of the similar and dissimilar—the irreverent representation and the idealized image of an LVM handbag—immediately conveys a joking and amusing parody," Niemeyer wrote. "The funny little ‘Chewy Vuiton' imitation, as something to be chewed by a dog, pokes fun at the elegance and expensiveness of a Louis Vuitton handbag, which must not be chewed by a dog."

Although they won their case, Haute Diggity Dog has yet to recover financially, as the case ended up costing the tiny three-person company over $200,000 in legal fees. "We still haven't been able to recover as of yet, because we haven't been able to spend all of the money that we usually do on products and marketing, going to trade shows and getting new stuff out there," Dauernheim said.

In order to avoid the possibility of a lawsuit, it is advisable that small business owners, with the exception of the exceedingly local business that's reputation based, such as a plumber of contractor, do some trademark research, according to intellectual property attorney and blogger Martin Schwimmer. "A recurring misconception that most corporate lawyers are aware of is that availability for use of a corporate name is not the same thing as availability for use as a trademark," he said.

Schwimmer continued, "Let's say that I am starting a small business and tell my lawyer that I want to be Marty, Inc. in New York and they tell me that Marty, Inc. is taken. But, I can be Marty, Inc. Group or Marty Ltd, because the state is only interested in the name. They don't look to see if there is a Marty, Inc. in California or a Marty, Inc. in Missouri and that is important information if I am going to incorporate and sell my goods nationwide." He added, "You also don't want to take investors' money and two days after launch you receive a demand letter requiring you to repackage because you didn't spend several hundred dollars on a trademark search."

Although Schwimmer doesn't recommend it, for the startup business that is completely cash strapped, they can go to the trademark office website or Google and try their best to determine whether a business name is available. "This is one of those things where expertise makes the difference," he added.

Also be aware of overlapping intellectual property protections. This means that a product might be protectable under trade secrets, trademark, copyright and patent. However, there are certain things that have been defined to be not complimentary. An example of that would be a patent and a trademark dress law, Schwimmer said. This issue arose in a recent lawsuit brought against Eco Manufacturing by Honeywell. Eco Manufacturing was looking to make a thermostat similar in appearance to Honeywell's well-known circular model. Honeywell's round thermostat formerly was protected by two patents that had expired. Honeywell then made a trade dress argument and the court held that because the thermostat was round for functional reasons, anyone in the field should be able to copy that design.

While some small businesses have had major victories in the courtroom, litigation may be avoided all together if entrepreneurs do their research and make sure their intellectual property is protected.