Five years ago, a small Georgia toy company called Peaceable Planet began marketing a stuffed camel named "Niles." The next year, Ty Inc., the maker of Beanie Babies, flooded the market with stuffed camels also named "Niles." Peaceable Planet sued to protect its trademark. Last April, the 7th Circuit U.S. Court of Appeals ruled in favor of Peaceable Planet and ordered Ty to withdraw its stuffed camel.
Normally, lawsuits over trademarks involve a big company trying to fend off a copycat. But under a legal doctrine called "reverse confusion," a small company can fight back when a giant threatens to overpower it by adopting a confusingly similar trade name.
It's not easy, though, to win a reverse confusion case. New York City attorney Lisa Pearson, a partner in the trademark law firm Fross Zelnick Lehrman & Zissu PC, says that courts examine each case by many standards before finding a trademark violation.
"In some cases, courts have ruled that they'll apply a truncated standard so you don't have to show how famous your brand is," Pearson says. Under the easier standard, the plaintiff only has to show that its trademark is unique and that the infringing company would be able to saturate the market. But most courts insist on the full test.
Consider Glow Industries Inc., a California company producing gift baskets of bath and body products under the trade name "Glow." The company sued to stop entertainer Jennifer Lopez from marketing a line of fragrances, cosmetics and skin-care products under "Glow by J.Lo."
"There were other beauty products with 'glow' in the name," says Pearson, who represented Lopez. Finding that the plaintiff's name wasn't strong enough to be protected, the California district court dismissed the case.
To avoid having your trademark overwhelmed by a larger competitor, make sure it's unique. It can't be merely descriptive, such as a line of chairs called "Chairs." Even a suggestive name, such as "Glow" for beauty products, is weaker than a fanciful name like "Apple" for computers.
Before choosing a name, use a trademark firm to do a search to see who else is using that name, in the United States and abroad. Then have a trademark lawyer review the results. "Look beyond what's federally registered," says James Weinberger, an associate at Fross Zelnick Lehrman & Zissu. "Are there websites that have that name?"
"The theory of reverse confusion is a fantastic tool for small business," Pearson says, "but it's properly used to protect conceptually strong brands."
Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.