Startup Case Study: Cease & Desist Letter
Last week we received a cease and desist (C&D) letter from a lawyer representing a large company that felt we were using their trademarked name illegitimately. Rather, I suspect, we received a letter from a law firm who’s responsibility is to protect the company’s assets including any trademarks, servicemarks, or other IP. I doubt many people in the company have ever heard (or care) about our startup.
Look, I respect others’ claims to intellectual property, and I don’t think people should be able to benefit from another company’s investment in marketing and goodwill, but I still find the whole concept around C&Ds for trademarks very distasteful. The sole purpose of the letter is to threaten. It’s called a "Cease and Desist" letter, not a "Inform & Engage" letter. And the biggest frustration is that it results in excessive legal fees – which break the spirit of a startup when you’re bootstrapping a business.
Here’s the case:
Our product name, DEX, is for a professional relationship management and CRM application targeted to small and medium businesses. Personally, it allows you to keep track of your professional relationships. For small businesses, it allows you track your sales and customer engagement.
Their product, Dex Knows, is an online yellow pages directory and offline phone book / magazine combo.
They believe / assert that our use of the name may cause confusion and that we benefit from their goodwill. I believe that consumers will not be confused, that our product is very different than theirs, and that there are over a dozen other product and company names that use the term Dex.
So what would you do?
- Fight it. Can you afford it? Cases like these are a bit like a poker match, do you ante up if you can’t afford to go "all in"?
- Rollover. How good is your plan B (if you actually had a plan B)?
Raymond Luk on November 22nd, 2008
Hi Scott,
I’m sure you’re already consulting a lawyer so I’ll skip that part. I think the issue is that while their Web site is dexknows.com they call their product Dex (e.g. “powered by Dex”). That’s probably why they feel the way they do.
I agree it’s annoying to be distracted by this kind of thing. I would take a very practical approach. On the one hand, weigh the real value of your brand to your customers and market. This is what you’d be giving up. On the other hand add up expected legal fees, management distraction and possible brand confusion with someone else out there promoting a Dex product.
If you avoid taking anything personally and are cold and calculating about it, you’d probably conclude that your pre-launch product has no real brand equity yet. Legal fees and management time, on the other hand, are really valuable. So I would find a new name.
Does it feel good to be taken to task by a big company over something you feel you are in the right about? Nope. But one thing bootstrapping startups need to always do is focus on what’s important. Fighting legal battles is not important (and hopefully never will be for you!)
cheers,
Raymond
Oli on November 23rd, 2008
Easy: rename it to “Deks” and sell them your first batch of t-shirts.
- Oli
P.S.: In all seriousness, this sucks, but since you haven’t actually launched the beta yet, I think it’s safe to rename to something else. Wasn’t Windows Vista still called Longhorn when it shipped as a beta?
zchamu on November 23rd, 2008
You should talk to the ladies at kirtsy.com. They went through something similar.
Ian Graham on November 23rd, 2008
Hey Scott,
This sucks for sure. I have been the recipient of a C&D in the past and we found our path of least resistance was to change our name. Not fun but far better than wasting a lot of time and resources in a fight we were unlikely to win.
On the flip side of the coin there was a case in Canada where Mattel took a restaurant in Montreal called Barbie’s to court about the use of the name. The restaurant won mainly because they were in different industries, IIRC. There are a couple of other cases that support your cause. However, I think Raymond and Oli offer some good points and it is probably better to change than fight a battle and lose the war.
Ian Graham on November 23rd, 2008
Just Google the Barbie case, here it is:
http://csc.lexum.umontreal.ca/en/2006/2006scc22/2006scc22.html
Jay Godse on November 23rd, 2008
Hi Scott.
I’m with Raymond Luk on this one. Roll over.
I think you are on the verge of launching a powerful new category in CRM products, and the name you pick will become strongly associated with the category.
Good luck.
Cheers, Jay
Steve O'Halloran on November 24th, 2008
Dexknows.com is owned by RH Donnelly; a public company on the NYSE with revenues > $6B (yup, billion). Chances are that RHDonnelly has never heard of you, but they most likely have an outsourced Legal firm that is on retainer to ensure IP/Trademark & copyright ‘assurance’. That law firm will prove their ‘worth’ to RH Donnelly by ensuring that your reference to ‘DEX’ is removed… and they will win by attrition (i.e. let’s both burn $600 a day in legal fees and see who gives up first).
It *used* to be safe to assume that grabbing the domain ensured that the business ‘name’ was safe…. but not today…. Roll over on this one.
Maybe you could ‘extend’ the name ‘Dex’ to ‘Dexit’ or even flip it to D3X (pronounced ‘Decks’)… but more importantly, get the name ‘checked’ via an IP firm like Gowlings. Christopher.VanBarr@gowlings is an excellent resource; and he used to be legal counsel at Corel.
Chris on November 24th, 2008
I have to agree with what the others are saying: They use the name “Dex” frequently and you could argue that “your Dex” is a different line of business and in a different geography. But at the end of the day it’s just going to be a big distraction that will add no value to your company.
Why don’t you turn this into an opportunity? Have (another?) name search contest. You could make this a very viral campaign: the reason for the contest (big corporation using a hammer on small business; the distasteful nature of a C&D) would attract a lot of attention while giving you a great platform to talk about the unique features of your product.
Ian Brown on November 24th, 2008
All good advice. If you are ready to move on let me be the first to submit an name – simply rotate the “d” 180 degrees – pex for “professional exchange” . pex.com is “taken” but is not very active (Alexa ranking of 4M+) It might be cheaper to make them an offer than fight this one. (If you have a contest as Chris suggested, a great idea, this is my entry)
Wendy on November 24th, 2008
Yup! I have a plan B. Needed one from the get-go because I don’t own askaround dot com. My attempts to “inform and engage” produced a brush-off and a vague trademark threat.
Your competitive advantage is that you are nimble, quick-witted, creative people. Companies who phone the lawyers first are rarely any of the above. Tim Ferris wrote about this recently http://snipurl.com/6pvd6 There are some very useful comments a long way down the list. Gist is that ‘Lawyers act like this because they can’t help it”
Nameboy has everything you need. ( I have some ideas too if you are really stuck) The solution you find will be better than anything you have to leave behind. I know it’s going to cost you some but it will be cheaper that the lawyers and well worth it in the long-run.
Trouble is our businesses are like kids. We need to name them and then we can’t help being emotionally attached to the name. My next endeavor will be called ‘working title’ until it is 5 years old!
Natasha D'Souza on November 24th, 2008
It’s unfortunate but this is a huge distraction for you at the moment. I say take the path of least resistance and come up with another name. Use your social media vehicles to assist you with this campaign.
Picking a name is very important and perhaps it’s time to invest in a proper name search. Your product is great so the new name will have to be something that you can brand effectively for a while.
You’re not the first startup to be faced with this so cheer up and looking forward to the new name.
Patrick Pichette on November 25th, 2008
OK, I am late to the discussion, so this will sound redundant: find a new name.
Scott, MG has a strong following, just look at the feedback. So here’s an idea – host a naming contest. I know, not very original…but so what. Open it up to everyone who signed-up for a Dex (d’oh, I mean Deks) beta. Give away an iPod or some other gadget (when is Kindle coming to Canada?) to the winning entry. I bet you get lots of great ideas.
But seriously, before you make a new name official, listen to Steve and run it by an IP firm like Gowlings. Paying for this service (on a start-up budget) is a pain in the a$$, but it will save you time and energy down the road.
Scott Annan on November 25th, 2008
Thanks everyone for some great feedback.
There has been some movement that I can’t talk about until after I get the “green light” from our lawyers (the contest will open within the week… stay tuned!)