What I Learned From Getting Trademark Hijacked by a Competitor
Countless hours and over $30,000 later.
I launched my second business, Wahoha, in June 2010. It was a network that recommended funny and interesting content to millennials.
We liked the name Wahoha because it ‘sounded Hawaiian’ and easy-going but didn’t mean anything in particular. Great for the fun and entertaining content niche we were targeting. Major domains and trademarks for intended markets were also available at that point.
On launch day we had over 17,000 visitors to our website. The second day over 20,000. The third day over 25,000.
It kept growing, with a lot of work, until we reached the top 1,000 most visited domains in the world just over a year later.
Those early days were super intense. As a team we were laser focussed on serving our customers — making our product more valuable, reducing friction points, adding servers, rapidly implementing feature requests.
You know, fully sucked in by a “pull factor” whirlwind after releasing a product into the marketplace that delivered compelling value.
While we were in this state of extreme concentrated focus something caught us totally off-guard we hadn’t really considered.
An email arrived to inform me that someone had applied for a US trademark for our brand Wahoha — six weeks after we launched.
Now, I knew that we had made up the word ‘Wahoha’ so this seemed really odd. Was this a mistake or a scam?
Next, I began an immediate investigation and searched through the U.S. Trademark Electronic Search System to verify the validity of the email I received. Then, I found it quickly.
There was an application for our brand name Wahoha. It was applying for the exact same goods and services we were offering.
What are the chances that another legitimate business launched coincidently at roughly the same time we did with the same made-up name and the same services exactly described? Infinitesimally small.
Reading on, I learned that an individual had made the application. But I didn’t recognize the name and it didn’t make much sense.
After some further research I discovered this person was an officer of a competitor and it started to become clear this was an underhand competitive tactic.
We had been trademark hijacked.
What’s more, I found a website they had created using our brand name Wahoha. It featured the same style of content we did and it was hosted on wahoha.net (we used wahoha.com).
They even put up copyright notices for 2009 to give the impression they had been trading for longer. But, a quick WHOIS search confirmed the domain was registered after our launch.
This website was not an attempt to set up a legitimate business using the goodwill of the brand we’d established. It was just a facade so they could provide evidence of using the name Wahoha commercially to the United States Patent and Trademark Office.
It had no traffic, no customers, minimal content, and was updated at a geological pace. It was pretty much an off-the-shelf WordPress template with a few posts added.
Why would someone make this move?
Trademark hijacking is a scheme to benefit or extract profit from a legitimate business by setting up a fake business and “exploiting vulnerabilities in trademark registration systems” to acquire trademarks for brands and marks they use.
An example of a vulnerability in a trademark registration system is the “first-to-file” convention, which is practiced in China.
This means “the first party to register a trademark, even if it is connected to a well-known brand or idea, will be sole owner of that trademark.” It’s why Apple forked out $60m to a Chinese company for the trademark to ‘iPad’.
The U.S. doesn’t use the “first-to-file” convention like China but instead “first-to-use”. This means the entity that first uses the brand or mark in commerce takes priority in registration.
Despite that, there are still vulnerabilities in the U.S. system that trademark hijackers exploit — like filing in unoccupied classes (more on that below) or outright fraud.
In the Internet age it’s become easier for hijackers to forge or misrepresent application specimens that “give evidence” they’ve used a brand name.
Lately, third-party sellers on marketplaces such as Amazon have become a popular target group.
Once hijackers have spuriously acquired the trademark they need, the next step is to “lawyer up” and commence initiatives to extract royalties or fees.
Businesses are faced with the choice of either fighting it out with high-priced attorneys or rolling over and submitting to the demands of the hijackers.
Each scheme can have different motives and approaches but the underlying principle and intention is the same:
1. Spuriously acquire trademark rights to the brand of a legitimate business.
2. Leverage trademark ownership against legitamate business to benefit oneself.
In our case the motive of the hijacker was not royalties or fees. Since they were a competitor, their objective was to disrupt the operations of our business for the benefit of their own.
They were a well-financed market leader. We were a small upstart that made a noticeable impact into the marketplace from day one and began to pick up their customers.
Our market share was small to start with, but if you extended the trends of the first few weeks over a longer period of time they clearly indicated we were on a pathway to becoming a market leader — and we did.
By filing first they had gained the upper hand. We now had to oppose their claim through an official government process and discredit their application through an evidenced-based approach to prove they didn’t use the brand name before our launch date. This can take a long time, years.
If they “were lucky” the trademark might have been approved by the United States Patent and Trademark Office without us noticing.
In that scenario, they could’ve commenced legal proceedings to force us to cease and desist using the brand Wahoha.
But even if they didn’t ultimately win the trademark this move had a material impact in other ways.
Our small team of three now had to allocate precious time and capital to deal with this. Attorneys are expensive and the hours I put into paperwork, gathering evidence, calls, and preparing for depositions was significant. The back and forth went on for months.
The certainty over the ownership of our brand and the associated goodwill we were building up with customers whilst all this was going on was unnerving.
In the end our competitor abandoned the fight — 1.5 years later.
We secured the trademark. But, it was a hollow victory since we were taking back what was rightfully ours. And, it wasn’t cheap.
It should have cost a few hundred dollars to acquire the trademark for Wahoha through the normal process.
Instead, it cost over $30,000 in attorney fees and countless “founder hours” diverted away from focussing on product, customers, and growth.
Now its ten years and several businesses later I’ve developed a framework for how I approach brand name intellectual property security for the startups I setup.
I don’t use a blunt approach, which is too pursue a strategy of exhaustive intellectual property protection from the get-go. Although your attorney may recommend this, I’ve found it’s not practical for a lean startup.
In addition to your company name, brand protection applies to product names too— of which there can be many.
Since startups often have a global customer base there’s a lot of jurisdictions to deal with. Within those jurisdictions there are multiple classes of goods and services to potentially apply for (45 in the U.S.). Each class represents a different industry that you will have to apply for if it applies to your brand.
You may even be challenged when your trademark goes out for publication and incur more costs dealing with it.
Paying an attorney to do this all of this can cost a small fortune. Even if you apply for the trademarks yourself it will cost thousands of dollars in application fees and take many hours.
All of this for brand names that may never work out because the appetite wasn’t there from customers or you decide to pivot significantly and the trademark isn’t suitable anymore.
It can be a huge waste of resources in both time and money that can be better-applied elsewhere — particularly if you’re bootstrapped or angel-funded and capital is extra tight.
My framework is based on the premise that the likelihood of a hijacker targetting a business is a function of its success and level of vulnerability.
For example, businesses with high success and low intellectual property ownership are very attractive to hijackers whereas businesses with low success and high intellectual property ownership are not.
The objective is to consistently maintain a ratio of success to intellectual property protection that’s enough to deter would-be hijackers — which I’ll detail below.
It’s natural to think from day one your brand is the most vulnerable to hijackers that it will ever be. But for the most part, the reverse is true.
Until your brand has value hijackers will steer clear. It isn’t worth their effort. This can be utilized as an advantage.
In the beginning of your startup’s life the primary objective is to test your product value hypotheses. Your brand name is relatively immaterial.
In the unlikely event a hijacker steals your brand name in the first few days after launching you can change it and still be successful.
A startup is nimble and unburned by brand inertia.
Your customers will stay with you because they love your product and may even help you pick a better name.
For example, if Nike had to change it’s name tomorrow that would be pretty devastating. Whereas, who remembers Monzo used to be called Mondo?
As a startup gains momentum its brand name increases in significance and value proportionally to sales and reach. So, I take a measured approach that matches these changes. It’s evidence-based and reduces the risk of money and time is being thrown away.
There is one exception I have to this rule. If it’s a brand name that I feel 100% encapsulates the ethos and mission of my company or product and no other name could possibly come close then I would file for a trademark as soon as possible. But, this is rare.
Most of the time I launch a product I will not file for a trademark immediately. First, I will launch and assess reception from customers.
When there is proven ‘pull’ for the product and evidence the brand name resonates with my customer base I apply for a trademark then.
To keep costs down I usually make the application myself. And, only in the jurisdiction with the largest target market with the fewest possible classes.
Doing this officially declares your claim over the mark — not exhaustively but materially enough that it might reduce a hijacker from making a move at this point.
Retroactively applying this approach back to Wahoha, I would have filed within the first week of launching and before my competitor did. The product gained immediate and undeniable traction during that timeframe. More than enough to substantiate applying for a trademark in our primary market.
As the business continues to grow I apply for further trademarks in jurisdictions that start to become material in terms of customers or revenue. I do this fairly early but at a point where it’s not that risky because it’s based on data-driven projections.
Once the business is fairly well-established I will revisit our trademark strategy in each of the markets where we have already filed, usually with the assistance of an attorney.
This is to reassess our coverage in light of product expansion and help detect vulnerabilities in other goods and services classes where we do not have a presence.
Since every business is different it’s not possible to suggest hard KPI figures for when it’s appropriate to file within this framework. But, it’s a straightforward exercise to develop a methodology.
For example, you could file in a jurisdiction when the cost of filing is equivalent to one month’s revenue generated from it. Or, you could base it on a proprietary metric that is significant to your business.
If you become super successful in your primary market early and geographic or localization constraints are throttling your growth in other potentially lucrative markets, you may want to consider establishing a minimal presence and filing for a trademark in them.
If you don’t, copycat operators in these markets may file for trademarks, domains and companies under your brand name before you officially launch there. This happened to Groupon in Australia.
That being said, by that point your success may give you enough leverage to acquire the trademarks through negotiation or other means.
The key takeaway here is to think about your trademark strategy from the beginning.
Ignoring your strategy completely exposes you to risk. Overdoing it from the start will be expensive and you could end up with a portfolio of trademarks in a breadth of jurisdictions that are worthless.
Have a plan that takes a measured approach and keeps you appropriately protected over time.
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This content is meant for informational purposes only and is not intended to be a substitute for professional legal advice. Always seek the advice of a qualified attorney for legal matters.