Trademark Protection: Is Litigation Worth the Cost?

Anybody who has any involvement with Intellectual Property (“IP”)  knows full well that protecting IP means a multi-step process. Obviously, step one is the conception of the invention, idea, trademark, trade name, or other innovation where protection might be necessary. Step two is the decision about what to do with the “new” idea, etc. in terms of the need to try for exclusivity on it –or not.  Many “new” things do not need IP protection – and other “new” things may not qualify for it. If the “new” idea fits into the area where protection is desirable and it qualifies, then the next step is to seek legal protection. Of course, such protection will have a cost – whether or not the protection is sought by the inventor/conceptualizer himself/herself or itself (in the case of an organization) or assistance of counsel is required.

So, let’s assume the inventor/conceptualizer takes legal steps to protect the innovation – for the case of this discussion – a trademark.  Such protection involves both common law claims and filing of a registration application at the United States Patent and Trademark Office (USPTO). Legal protection has a cost – not only in money, but also in time and other resources such as market research and prior art and trademark searches.

But, it doesn’t end there.  If you must defend your property – that means litigation.  The costs of litigation may outweigh the value of your trademark.

In the case of Tommy Gun maker, Saeillo Enterprises, Inc. – the cost was determined to be worth it – at least at the trial level. As reported in the IP Watchdog on May 4, 2013, the issue was the unauthorized use of the term “Tommy Gun” and the shape of the weapon on a bottle offered by a liquor company to sell vodka under the Tommy Gun brand name.  The case was filed in March, 2013 in Illinois (the defendant is an Illinois corporation) and alleges violation of federal trademark law, state law of Illinois and common law (the allegations and legal theory of the Tommy Gun case complaint are well covered in Adrienne Kendrick’s article in IP Watchdog).

Since this case is barely two months old, at the time of writing this article, the outcome is not yet known, but whatever the outcome in this case, intellectual property litigation often does not end at the trial level.

How far do you go – and how much are you willing to spend to finally win a decision in a trademark case which is not settled (as many cases are)?  This key question requires serious consideration of the value of the trademark in terms of product or service identity, possible confusion which may occur by the alleged infringing mark if you do not clarify trademark ownership and financial ability to withstand the costs of suing. Once suit is filed, expect to face much lost time as well as attorney’s fees during discovery, trial prep, presentation of the case – and possible appeal by the losing side.

While outcomes of litigation are never certain, a 1979 federal appellate decision offers some guidelines for success relating to the key test of likelihood of confusion.

In AMF, Inc. vs. Sleekcraft Boats, 599 F.2d 341 (C.A.9) 1979, the Court set forth eight elements which, taken together, meet the threshold of confusion.  While not absolutes in terms of winning or losing a trademark case, satisfying the following elements is what courts will be looking for from the moving party (plaintiff):

1. Strength of the mark
2. Proximity of the goods
3. Similarity of the marks
4. Evidence of actual confusion
5. Types of marketing channels used
6. Type of goods in question – and the degree of care expected of the purchase
7. Intent of the defendant (alleged infringer) in using its mark (subject matter of the claim)
8. Likelihood of expansion of the mark product lines

Other courts have contributed to the confusion issue, and, notwithstanding the fact that the U.S. and English Common Law tradition says that later courts are bound by earlier decisions ( a principle called: Stare Decisus ), many courts find ways of distinguishing the matter at hand from earlier cases.  In other words, with litigation – even following what seem to be accepted tests and standards, an outcome can never be certain – until the final appeal is won or lost or the other side finally gives in.

So, let’s say the mark in question is a major factor in distinguishing the company’s product or service from others offering similar products or services – like “McDonalds®”.

Next to consider are serious pocket book issues. Intellectual Property litigation is known as one of the most expensive kinds of litigation. Trademark litigation is not usually as costly as patent litigation but the cost of stopping someone else from using a mark is likely to end up in a 6 digit number.  McDonalds is one company which does not hesitate from spending money to try to retain exclusivity of its mark in food and even other related fields. Some of these cases are won by McDonalds and some lost, but whatever business tries to use a similar mark will hear from McDonalds.  Quality Inns International learned the hard way then the “Mc” prefix meant trouble when they planned to open a new hotel property under the name “McSleep” Inns. The Court ruled in McDonalds favor in that case, but not all decisions have gone McDonald’s way. That company might be re-named “McLitigator” as it has been a party to a myriad of cases around the world. (I’ll probably get sued for using the term “McLitigator” in this article).

A fairly complete collection of McDonald’s litigation cases can be found in Wikipedia under “McDonald’s Legal Cases”.  It will be noted from that article that Big Mac won most cases, but also lost a few. And.. Big Mac had the resources to pursue would-be trademark infringers.

Trademark violators can be hit with a fairly substantial penalty – such as monetary damages (where it can be shown that the plaintiff actually lost money or that the defendant unjustly gained money by mis-use of the infringing mark. In some cases, punitive damages can be awarded by the Court. These are more challenging to prove, but if the plaintiff can show that the infringement was intentional and willful – and caused damage to the plaintiff.

The other kind of remedy in trademark cases is to have the Court stop the infringement (i.e. injunctive relief).  If the trademark is valuable enough for a plaintiff to bring an action in the first place, the moving party probably wants, more than anything else, for the Court to enjoin the offending party from using the mark.

The case law gives some guidance as to expectability of outcome in a winning trademark case, but each Court will look at the facts, the motivation behind the infringement (was it inadvertent or intentional), the value to the plaintiff of the mark and lost profits – if any.  In intentional infringement, the Court may even order the infringer to pay plaintiff’s attorney’s fees.

As with patent litigation, there is always the risk in bringing a trademark infringement case, that the Court will find that either there is no protectable trademark or that the plaintiff claims rights beyond what it is entitled to under the Trademark laws of the U.S. and various states.

In dollars and cents, what will a trademark case cost?  In true attorney fashion, that question has to be answered “it depends”.   Litigation costs in these cases fall into three phases (1) initiating the action, (2) proceeding with the case including, if necessary, trial, and (3) appeal – either as the winning party or losing party.

Statistics show that most litigation is resolved prior to trial – and even after trial – in some cases (to avoid the expense of appeal). As noted earlier, to initiate a realistic trademark claim, expect to pay $100,000 or more.  Total costs, depending upon how vigorously the matter is defended and/or appealed, can be millions. An article by Ethan Horowitz titled Cost of Action vs. damages in Trademark Infringement Actions in the United States might help discern for trademark owners whether or not the cost of litigating the issue of trademark ownership rights is worth it or not.

About the Author

Charles P. Lickson is a former practicing attorney and is Founder and Chairman Emeritus of a clean technology alternative energy firm where he serves as Executive Vice President – Operations and, among other things, is responsible for in-house legal support for Intellectual Property.  As a trial attorney, he had extensive experience litigating intellectual property cases.  He has also served as a amediator in a number of high tech cases. Lickson is the author of 6 books and the Editor of the upcoming GreenTech Legal Reporter™ .