Trademark Bullies, the Legislature and the Courts

Nobody likes a bully, and I think we can all agree that the world would be a better place without bullying. Yet bullying in the schoolyard is not the same as bullying in the courtroom, and the issues can be complex. Is it fair to apply the bully label to any intellectual property owner who seeks to enforce its rights against a smaller company or who ultimately loses the case? If not, how can one tell the difference between legitimate enforcement and so-called bullying? These tricky issues are raised in a recent trademark bill signed into law earlier this month.

On January 28, 2010, Senator Leahy of Vermont introduced the Trademark Technical and Conforming Amendment Act of 2010 (Senate Bill 2968). The primary purpose of the bill was to harmonize the procedures governing trademark registration with respect to applications filed in the U.S. directly and pursuant to the Madrid Protocol, such as to make the grace periods following missed deadlines consistent.These provisions were uncontroversial enough, and were indeed received favorably in the trademark community. But Senator Leahy tacked on a statement at the end of the bill requiring the Secretary of Commerce to “study and report to” Congress The extent to which small businesses may be harmed by litigation tactics [by corporations] attempting to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner." S. 2968, Sec. 4(a)(1).

This section became known as the “trademark bullies” provision. It was reported that Senator Leahy included this provision because he was frustrated that Vermonster, a local brewery of beers and ales in his home state, was being targeted by Hansen Beverage Company, the producer of Monster Energy Drink. (Senator Leahy later agreed to remove the words “of corporations,” but the remainder of the language remains intact.)

The legislation was quickly passed by the House and Senate, and was signed into law by President Obama on March 17, 2010 (Pub. L. 111-146).

The notion of conducting a study to determine whether and to what extent brand owners are “attempting to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner” is a controversial one. Unfortunately, the bill moved through the legislative process so quickly that the intellectual property community did not have time to comment.

In my view, the fundamental premise of the proposed study is deeply flawed. Trademark owners are entitled to enforce their rights, and doing so does not make them “bullies” even if they are ultimately unsuccessful or the defendants are small companies. It is the role of the courts to weed out unmeritorious cases pursuant to well-established legal standards. In appropriate cases, courts may exercise their discretion to award attorneys’ fees to the prevailing party under 15 U.S.C. §1117(a) or Rule 11 of the Federal Rules of Civil Procedure. The Legislature should not second-guess whether the courts are doing their job. It is the role of the Legislature to make the law, not apply it.

In addition, the proposed “trademark bullies” study raises a host of practical questions and challenges. Who will conduct this study? What will its scope be? Most importantly, what standards will be applied to determine whether a particular litigant has crossed the line and gone “beyond a reasonable interpretation” of the trademark laws?

Finally, who will pay for this study and is it worth the cost? Americans on both sides of the aisle are concerned about the federal government’s budget deficit, and this does not seem to be a good time to “pile on” by commissioning a study of questionable value.

One thought on “Trademark Bullies, the Legislature and the Courts

  1. Any company that has grown to the point of NEEDING to create and staff a full-time trademark / copyright enforcement department usually aren’t just being ‘bullies’ when they take the time and effort to scare the s*** out of some ‘poor young entrepreneur’ who thought he was being ‘clever’.
    Are there really THAT MANY ignorant people around the country crying foul when companies such as Monsterâ„¢ Energy Drink slap a C&D on people like this? That’s just routine house cleaning in my book.

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