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You may hear often about patent trolls in the media. Patent trolls (also referred to more formally as “Non-Practicing Entities” because of their tendency to not practice the invention that they own rights to) are persons or entities that acquire and enforce patent rights against accused infringers in an attempt to collect licensing fees. A patent troll is not interested in manufacturing a product or engaging in a process under the patent that they have acquired. Rather, their sole interest is to engage in a kind of economic rent-seeking, searching out collecting fees from entities that are practicing the patented invention. For this reason, patent trolls are often charged with the claim that they are impeding innovation and harm the ability of companies to deliver products that consumers demand at the lowest price.

A glaring problem that many trademark owners face, but which does not appear to have garnered the same degree of attention in the media, are trademark trolls. Trademark trolls are individuals or entities that seek out the names or symbols belonging to well-known third parties with the sole intention of deriving value from the trademarks through licensing back to the true owner or selling the trademarks and other related properties (including domain names) to the trademark owner. There are some fundamental differences between patents and trademarks that make it slightly more difficult for trademark trolls to accomplish their goals effectively. In the trademark troll world there are three types of bloke :

  1. The bloke that registers the trademark, knowing that the trademark is owned by a third-party, with the main purpose of using those trademarks against the true owner of the marks.
  2. The bloke that trades in trademarks like another might trade in fine Persian rugs: registering catchy or even relatively common words (but not generic or descriptive, mind you) with the hope that such words will someday be the subject of a valuable trademark.
  3. The bloke that registers a trademark with a plan to use it legitimately, but who then tries to broadly enforce the mark against a bevy of diverse actors, parties who may not even compete with the registrant. 


While all three types of trademark trolls are generally annoying, the one that causes the most headaches for businesses is the person that registers a trademark, uses it for one narrow line of business, and then goes after the later user of the trademark.

“So why should I care?” you might ask. After all, this seems to be a problem that somebody with a name that is garnering a lot of attention would face, whether in the U.S. or abroad. Companies like Tesla (who, in fact, happens to be facing this very problem in China). Of course Tesla’s plight will garner a lot of attention because they happen to be one of the darling “in” companies so one would expect them to get a lot of press.

But the problem of trademark trolls can arise in several different contexts and impact any type of company (although the impact is most poignant for multinational companies). Any business that hopes to use a phrase or a word in a marketing business might fall prey to a trademark troll, who claims that the new entrant into the marketplace is infringing on the trademark.

Take for instance a small coffee shop and an electric toy train manufacturer that decided to use the phrase “I ♥ NY”, drawing the ire of the New York State Economic Development agency, the owner of several federal registrations for the “I ♥ NY” trademark. The toy train maker had developed a scale model of a tanker car, placing the slogan “I ♥ NY” on the side of one of the trains:

After discovering the grave and bold actions of the manufacturer, the State of New York brought down the hammer, sending a C&D letter with threats of a trademark infringement suit if the toy manufacturer didn’t pay the agency the licensing fees they were entitled to. The toy company sold a whopping 99 units with total revenue of about $3K an amount which, undoubtedly, would be a complete boon for the NY State Economic Department. What goal did this enforcement action accomplish? Was placing “I ♥ NY” on a toy train really going to make consumers believe that the NY tourist agency made this train? What harm does such an affiliation cause to the NY tourism department other than the fact that the toy train is just another opportunity for NY to “get its name on” by getting more visibility in the marketplace?

You get the point. Trademark trolling can happen to anybody and when it does, it is often annoying especially when you just trying to make an honest buck. In the case of the toy train, the troll was taking its rights to the extreme, claiming that their rights covered anything and everything under the sun where a consumer could make some kind of association between the mark and the owner (even when such an association requires the wildest, most narrow sense of imagination on the part of the consumer). This is often the kind of trolling smaller businesses see.

The problem isn’t confined to just trademarks, either. It impacts domain names, too, which is a huge problem in a world where so much marketing and information exchange takes place over the internet. Here, a business faces a potential lock-out from being able to use its hard-fought name in a URL based on the trolling of an earlier registrant. The remedies available in such a case vary, especially if the business seeking the domain name has only recently started using its trademark (where, unfortunately, the only form of relief may be a purchase of the domain name outright from the squatter). 

For smaller companies facing a big bad wolf of a trademark owner, the answer may be to just stick to your guns (or the abled guns of your favorite attorney) because, while many trademark trolls may huff and puff, many may not be prepared for all the bad publicity that will rain down on them when they are found to be stepping on the little guy. For all the large companies pushing into markets, its best to be in an offensive position by having registered all the important trademarks; or at least have the economic and legal “chops” to show that the trademark is so well-known around the world that it would be laughable to think that the small guy “trolling” on the trademark rights actually had a legitimate interest vested before the company burst onto the scene.

 


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