You have encountered another business that is using a name for its product or service that is identical or very similar to yours, and you feel you are losing customers and profits as a result. How can you stop them? Before you pick up the phone to call an attorney, take a minute to look at how and whether a lawsuit is likely to solve your problems.
Start by reminding yourself that lawsuits usually cost a bundle—a big bundle. Typically, lawyers who handle trademark cases charge $250 per hour and up. It doesn’t take a genius to understand that if you hire a lawyer for a month’s worth of work (surely a low estimate for a full-blown trademark fight) it will cost you close to $40,000. From start to finish, a trademark infringement lawsuit averages about $120,000 in attorneys’ fees for each party. Perhaps these figures will help you understand why we have great respect for the ancient Gypsy curse that says, “May you be involved in a lawsuit in which you know you are right.”
Given the horrendous costs, it pays to carefully consider whether a particular dispute over a mark is worth litigating. Let’s look at this issue a little closer.
If your mark is being used in one state only, your infringement suit will most likely be brought in state court, and the laws of your state will determine how attorneys’ fees will be paid. In most states, the courts will not require the loser of a lawsuit to pay the winner’s attorneys’ fees. Or stated bluntly, even if you win, you’ll have to pay your own lawyer and risk ending up in the poorhouse. However, in a few jurisdictions, such as Colorado, North Carolina, Wisconsin, and Puerto Rico, the prevailing party is awarded attorneys’ fees as a matter of course, and in a few others (Alaska, Iowa, Maine, Minnesota, Missouri, Oklahoma, Texas, and Washington), the court has discretion to award attorneys’ fees, usually in exceptional cases only.
If your mark is used across state, territorial, or international boundaries, you will probably end up in federal court. Federal law permits an award of attorneys’ fees to a victorious plaintiff, but only when the trademark infringement is exceptional—that is, obviously intentional. The bottom line is this: Unless you are dealing with a clear case of bad intentions, don’t count on attorneys’ fees in federal trademark litigation.
Although courts have discretion to award attorneys’ fees in unusual cases, they are required to award treble (or triple) damages—and order the defendant to disgorge any profits caused by the infringement—in cases where willful infringement is proven. Willful infringement cases therefore have the potential to generate a considerable sum of money over and beyond what the true trademark owner actually suffered from the infringement. Since the goal in most cases is to stop the infringing use—which will happen if the court finds that infringement occurred— the trademark owner can use the damages to pay whatever legal fees are incurred. Trademark lawyers understand this and may therefore be willing to represent plaintiffs in willful infringement cases and defer payment of their fees until the case settles or a judgment is obtained. This is not a contingency fee, because the fee isn’t based on the outcome of the case. It’s only a method of deferring fees until the plaintiff is in a better position to pay them.
A common strategy is to file an infringement lawsuit and ask the court to grant emergency relief until the case can be fully litigated and decided in a trial. This type of relief—termed a preliminary or temporary injunction—typically orders the alleged infringer to stop using the mark in question pending the outcome of the lawsuit. Because, as a practical matter, getting slapped with an order of this type puts the alleged infringer in an untenable position from the outset, the party bringing the suit usually reaches a settlement on very favorable terms. To obtain a preliminary injunction, you must convince the court of two basic facts:
The first fact is very easy to show. The mere existence and use of an infringing mark daily robs the owner of the infringed mark of its customer base and the business goodwill that the mark represents. Because there is no real way to measure the loss of goodwill in monetary terms, this type of injury is usually considered irreparable as a matter of course. The second fact—probable success—is another matter. Here the judge has to be convinced that the plaintiff’s infringement claim is strong enough to warrant depriving the infringer of the right to use its mark without first holding a trial. Some judges are more willing to do this than others, and it is impossible to predict whether an attempt to get a preliminary injunction will be successful. Once the court rules on a request for a preliminary injunction, the losing party has a powerful incentive to settle. Because the outcome of the preliminary injunction request usually results in an early termination of the case, the legal fees associated with the normal trademark case often are much less than if the case were fully litigated. But they may still be high—routinely at least $10,000—because it takes a lot of preparation to successfully handle the preliminary injunction proceeding.
Whether a preliminary injunction and settlement are obtained or the case goes to trial (tack on at least another $50,000), using the courts to resolve an infringement claim clearly can be, and usually is, very costly. But many otherwise reasonable people insist on it. Why? Probably for the same reason many otherwise reasonable people behave like pit bulls in divorce proceedings—emotional attachment to being right. And remember the Gypsy curse we discussed earlier—many lawyers get rich because clients try to vindicate their positions. Sadly, the question of who has the right to use a mark often affects people in an emotional way that doesn’t always serve their long-term economic interests. They get addicted to their mark, and as with any addiction, they may be willing to spend way beyond what common sense would dictate to keep it. And it may be hard to perceive if your litigation is motivated by ego, principle, or a sense of outrage when the name of your business (which may even get confused with the existence of the business itself) is threatened.