Thursday, December 8, 2011

Off the Mark: The Lessons of RIM’s Trademark Fiasco Are to Search and Register Your Brand Before You Go to Market With It

RIM just withdrew the name it had announced a couple of months ago for its new operating system – BBXand substituted “Blackberry 10.”  Although the tweet announcing the new name doesn’t acknowledge it, the reason for the change is that RIM had just been enjoined from using the name at its upcoming BlackBerry DevCon Asia developer conference.  The basis for the injunction?  Basis International, the owner of the federally registered trademark on BBX, was slightly upset that RIM decided to infringe its mark.  Basis has the mark registered in Class 9 for “computer programs and associated documentation providing tools and programming language to enable software developers to create and prepare business, internet, and applications software” with a first use in 1985.  A cursory search of the PTO’s database would pull up this registration immediately.

RIM isn’t talking about this, but it seems obvious that RIM’s fiasco resulted from one of the following stupid mistakes:  RIM either (1) failed to conduct even the most basic a trademark search, (2) failed to have a minimally competent lawyer review the results, or (3) allowed some idiot to override any legal advice it did get.  I don’t know which it was, but the fact that RIM apparently didn’t even try to register the trademark in the U.S. makes me think the incompetence was pretty basic.  Yes, RIM is based in Canada and the court’s order says that RIM did apply for a trademark in Canada.  Theoretically, that gives RIM six months to apply in the U.S., but the U.S. market is hardly an afterthought for RIM.  So if there wasn’t a U.S. trademark application already pending when they announced the brand, that makes me suspect that someone completely dropped the ball.

Embarrassing as this is, it’s worth noting that RIM lucked out.  It was sued and enjoined early, forcing it to come to terms with its error and change names before it had actually rolled out the product.  So it probably won’t owe much (if anything) to the trademark owner and rebranding won’t be too expensive.

The reason I’m posting on this is not to make fun of RIM and its marketing and legal departments, but to bring this to everyone else’s attention as an object lesson.  Trademark searches are cheap (the search itself is cheap, a skilled analysis of the results is pricier) and trademark applications even cheaper.  If you’ve come up with the perfect name for your company or your product, there’s just no excuse not to conduct a search and, assuming it doesn’t come up with anything too ugly, to apply for a federal trademark registration.

RIM discovered its mistake early and isn’t (yet) insolvent, so it can easily afford to rebrand.  Your startup might not be so lucky.  Using the wrong name could sink you.  Defending a trademark infringement lawsuit takes cash.  So does rebranding.  And you’re very unlikely to get new investments as long as there’s a cloud over your brand and the potential for legal costs and liability.  A good VC or angel investor will have lawyers conduct their own trademark search as part of diligence, especially if you can’t produce one and haven’t applied to register your mark.  So you don’t even need to be sued for trademark issues to prevent funding.

‘Nuff said for those of you who already have a pretty good grasp of trademarks.  It’s a good reminder to us all of what can happen if we cut corners.

For those of you still a bit confused about trademarks, here’s a quick review of the basics:  trademark law mostly exists to protect the public from confusion as to the source of goods and services in the market (yes, there are some aspects that can only be justified as protecting the trademark owner’s goodwill).  So trademark rights mostly turn on actual use.  Whenever someone using a potentially protectable mark in commerce, there is automatically some federal and state protection.  Use of the mark is also necessary to maintain a registered trademark (you can apply on the basis of a plan to use the mark, but you’ll eventually have to show evidence of use).

There are several advantages to taking the next step and applying to the U.S. Patent and Trademark Office and/or the equivalent offices in the EU and other countries.  In many countries, registration is the only way to get trademark rights.  In the U.S., there are three main benefits to federal registration:

First, a federal registration puts others’ on notice of your mark.  Although RIM may not have been aware of Basis’ mark, it had no excuse for that ignorance.  Although the court that enjoined RIM’s use of the mark noted that RIM and Basis weren’t really competitors, it nonetheless assumed that “it is highly unlikely that RIM was unaware of BASIS’s BBX software development products before RIM’s adoption of its BBX mark,” apparently because the registration made it so obvious, and concluded that RIM probably infringed with “bad faith.”

Second, federal registration gets you nationwide protection, whereas an unregistered mark will only be protected in the geographic area where its owner used it.  So if you start a restaurant in Phoenix called The Alligator’s Lair and do nothing more.  No one will be able to open a competing restaurant with the same name nearby to you.  But if you get federal registration, you have the potential to turn your restaurant into a statewide or nationwide chain.  You may not be able to shut down a restaurant in Baton Rouge that was using the name before you, but that restaurant won’t be able to stop you from opening one of yours next door.

Finally, if your mark remains registered, in use and undisputed for five years, it becomes much harder for anyone to contest your rights to it.  So, if you’re just starting out, there’s an advantage to registering quickly and starting that period running while you’re still not on anyone’s radar screen.

You can trademark lots of identifying factors (including smells) but most commonly businesses register a “word mark” (e.g. PEPSI), a logo (e.g. the familiar Pepsi circle logo) or a stylized way of writing a word mark (such as the familiar stylized way of writing Coca Cola).  If you have more than one of these, it’s important to consider registering each one separately.  If you have a name that can’t be registered (such as my business name – Stone Business Law, which is just a common name and a description of my services), it’s important to register a distinctive mark (in my case, a stylized version of "Stone").