Good fences
by Beth Ewen It’s easier than ever for companies to encroach on your company’s brand, now that the wide-open Internet has replaced the bricks-and-mortar marketplace. Two Merchant & Gould attorneys, Chris Schulte and Andy Ehard, tell how to build good fences.Upsize: I’ll start with a big question. How can companies manage and protect their brands in this digital age?
Andy Ehard: I’m going to dive in, and make the assumption that this is early in the process. First, you have to do due diligence. You want to make sure that there’s nobody out there that’s using your brand.
Early on there might not be an issue, but as you become more well-known — you don’t want to bump into anyone later on, when you’ve invested in your brand. Do that due diligence on the front end.
Then it’s common to seek federal trademark protection.
Chris Schulte: We work with thousands and thousands of brand holders. Trademarks and brands are intangible property. People don’t know where the fence is anymore. In the old days, you put a fence around your brand, and it was hard to encroach.
The Internet changed that. We’ve seen the Internet provide a fertile ground for companies to dilute the distinctiveness of the brand, and actually divert sales. Upsize: Are people diverting sales deliberately, or by accident?
Ehard: It’s big-time deliberate. In the old days when we had bricks and mortar, it was very difficult to do this. The barriers to entry to someone who does want to rip someone off have gone way down.
Upsize: So what should a business owner do?
Ehard: Half the battle these days is finding out about it. These people that are the underbelly — it doesn’t cost much to get a domain name, and all of a sudden you’re providing a luxury good and people are clicking through to this other site. If you do discover it, it starts with a letter from their lawyer: ‘Stop, or we’re going to get you.’
Upsize: That sounds costly.
Schulte: There is a price tag element to it, and lawyers don’t come cheap. We use a product made by Andy’s old company, and they send us possibly 80 infringement cases a month. You could say, that’s 80 possible million-dollar lawsuits, but it doesn’t happen, because when we send a letter they almost always go away.
The fear that you’re finding out something that is going to be too expensive to pursue, that’s not founded.
There’s something called the UDRP, the uniform dispute resolution procedure. There’s an arbitrator involved, and that can save you the expense of going to federal court. The good news for the brand holder, the force of a well-positioned law firm gets them to fold up and go away.
Ehard: We can do it for under $4,000, and you’ve got that domain name back.If a client sends me an online infringement, what can we do? The last thing you want to do is send a cease and desist letter, and say “we were first,” because you might find out they were actually first. So you have to do some research. Out of 100 cease and desist letters we send, 80 percent of the time they go away.And simply because you’ve filed suit, 98 percent of cases that are actually filed settle before you go to court.
Upsize: How much of this activity is deliberate?
Schulte: High-end brands are constantly having this happen, the Louis Vuitton, consumer goods.
Ehard: They’ll figure out what are the valuable trademarks, and they’ll buy them in bulk and put them up on the Web.
We had a synthetic lubricant company in Wisconsin, and someone put up a similar company name, and people would click through to this informational site and so were diverting the click-through revenue.
Upsize: Scott Augustine, who was on the cover of Upsize last month, said, “If you’re going to invent, don’t bother unless you’re going to file patents. And if you’re going to file patents, don’t bother unless you’re going to enforce them.” Do you agree with this, and does the same thing apply to brands and trademarks?
Schulte: There are two sides of branding. No. 1, if you’re going to pick a name and don’t file for trademark protection, you probably will not be able to cover a claim under your general business insurance policy. The insurer will say, you need additional coverage for that. So you’re running bare.
No. 2, it’s an asset. You don’t have to be a 3M to be a wonderful brand name. There’s just a core of good entrepreneurial companies without patentable products, without a secret sauce, and the brand drives the company. We’ve seen the value of the brand.
Ehard: If you’re going to invest in protection you want to be able to bump someone else out of your space. If a brand holder fails to take action on an infringement in its space, you could reduce your ability to defend it in the future.When people start their company, they think about, “what’s a cool name for our product?” But you want to be completely distinguishable. You want them to hear your brand name and know it’s you and you alone.
Upsize: How can you find out if someone’s encroaching on your brand?
Ehard: There’s a couple of simple things you can do. In the old days, every Friday from 3 to 5, they’d say all of the employees are going to jump online.You’d be surprised how many times they found something.
Schulte: We had a company, their marketing director was doing some online research, and one of their competitors kept coming up, and sure enough it was in the meta-tags.
Upsize: That sounds so low-tech, the employee-jumping-online method.Ehard: It can work, but it’s not an effective process.
Schulte: We advise them to use a service like Andy’s old company that uses software to do the searches. Also, your sales force, walking around the trade shows, can do this. Vendors and employees can keep their eyes open.Upsize: Andy, what’s your old company?
Ehard: Nameprotect.com. For maybe $300 per year, it can do these searches. It’s in Madison, Wisconsin. There’s also Cyveillance out of Virginia.
Upsize: Why did you leave that company and join Merchant & Gould?
Ehard: That’s a good question. I ask myself that every day. [laughs] We grew the company, it was four guys in the basement, we got it up to 100 employees and we thought we’d screw this up soon, so we sold it.
Upsize: Can you sum up the most important things for business owners to remember about this topic?
Ehard: Make sure you protect your investment, is the key. Understand the value in the name, and because of its value, protect it, that’s the first step. And then taking steps to enforce it should you learn of potential encroachment.
Schulte: My take is, build the fence and tend the fence. Build the fence through the registration and clearance process, and tend the fence to the extent you can. Maybe at first you can only do the basics. People get in the black-and-white world, and if they can’t do everything they give up. Your protection can grow along with your company.
Ehard: It’s hard to spend resources on this. I screamed and yelled at our old company, that we had to get trademark protection. One of our partners was a Harvard bean counter, and he didn’t want to spend the $2,000—and we were a trademark protection company. That would have been great, a trademark protection company that couldn’t protect its trademark.
At first business owners get so involved with the physical assets. They think, we have to have office space for our employees, and chairs and computers. If two years from now your brand fails, you won’t need those computers. Don’t think of your tangible assets only.
[contact] Andy Ehard and Chris Schulte are attorneys at Merchant & Gould, the intellectual property law firm in Minneapolis: 612.332.5300; aehard@merchant-gould.com; cschulte@merchant-gould.com; www.merchant-gould.com
