Facebook’s “Trademark Bullying” Should Serve as an IP Strategy Lesson for Startup Entrepreneurs

Like other forms of bullying, Facebook's aggressive trademark activities can be attributed to "poor parenting"

This week, Facebook’s trademark action against a small online teaching company has been all over the news.  In summary, Facebook contends that TeachBook infringes its trademark rights in the “Facebook” name because, presumably, the “book” part of the name is associated in the minds of the relevant consumer public with the now well-known Facebook brand.  Today, it was reported that Facebook is now trying to own the rights to the “face” part of its name.

Most wouldn’t be surprised that the word “book” is used as a part of the name of a multitude of products and services, which would make it appear that Facebook is using its resources to beat up on smaller companies.  The natural response from the layperson is “why is Facebook being such a trademark bully?”   But to someone with experience in IP strategy, the business reasons behind Facebook’s actions are clear.

From a legal perspective, Facebook likely has little legal standing to extend its trademark rights in a direction that will allow it own either “face” or “book” as individual aspects of future trademarks in as-yet-introduced third party products or services.  These words are just too non-specific and common to legally signify the source of a product or service.  That is, if you as a member of the public saw the word “face” with another word–say “music”–would you think the company providing that product was the Facebook company?  Probably not.  So, should Facebook be allowed to own all rights to “face” or “book” when combined with another name, as it is now apparently contending?   Certainly not, and, without more legally relevant evidence, the Trademark Office is likely to deny Facebook the ability to prevent others from using face or book in their products or services.

Given the lack of legal basis for its contentions, Facebook’s actions instead appear to be directed toward using its vast financial and legal resources to either get smaller companies to forfeit their probable superior trademark rights or to obtain settlements with cash-strapped start-ups–like TeachBook–that will allow Facebook to expand its products and services in the direction needed in the future.  Is it legal for Facebook to do this?  Yes, and it appears that they have been successful in doing so previously.  Is it right?  I don’t think so, but business is business.   Nevertheless, I hope that Facebook is thwarted in its attempts to leverage the legal system and deep pockets to fix errors made by the founders in the early days who decided that “Facebook” was a cool name for, well–a facebook–as well as the later failures of its business advisors to craft a more scalable and protectable name.  In other words, much like the bullying that occurs with children, Facebook’s current “trademark bullying” is a result of the “poor parenting skills” of those managing the company when it was a young start up. 

With regard to Teachbook, a likely scenario is that Facebook will offer to buy the “Teachbook” mark a couple of million dollars, which would likely be a great boon for the much smaller company.  Teachbook’s management may decide that the money is more important than the existing name (in which it probably has little brand equity), and will therefore make a business decision to sell the “Teachbook” name to Facebook to fund its other efforts.  And–Voilà!–Facebook now can contend that it owns broader rights in the “book” aspect of the name to provide it with even more leverage to gain total control of that aspect of its trademark.   The more examples Facebook can show of use and actual ownership of the word “book” to describe its products and services, the more likely it is for the Trademark Office to grant legal trademark rights to the company.

The strategy to own the word “face” is identical to the one for “book,” but it appears to be a longer shot.  As of the date of this post, there are 481 registered trademarks that start with the word “face,” thus indicating that Facebook is only one of many companies wishing to identify their product with this word.  Also, words coming at the beginning of the mark are generally given heightened scrutiny because that aspect of a trademark is considered to be more recognizable to the relevant consumer.  In addition, the owner of the “FaceCash” mark is objecting to Facebook’s attempt to gain trademark rights to the “face” aspect of its name standing alone because the FaceCash owner wishes to preserve his rights to extend his product and services at a later time using the “face” to as names. Apple also owns rights to the “FaceTime” videophone product, and I don’t think anyone expects them to capitulate to Facebook at any price.

My sense is that Facebook’s strategy will succeed in at least some part, such as with small companies like Teachbook.  They already were able to get Placebook to change their name.  And, for a company with lots of money, that’s all that matters.  However, the core of this issue is the fact that Mark Zuckerberg chose a lousy name for his start up.  This is a common problem:  a majority of start up entrepreneurs fail to think about the ramifications of naming one’s company, product and/or services.  As a result, they may find themselves with a successful company with a name that constrains their ability to trade on brand equity for continued growth, which is the place that Facebook finds itself today.  Alternatively, one can find themselves in the position of Microsoft did in 1995, when the Trademark Office refused to register the “Windows” mark until shortly before the introduction of Windows 95.

Some would think that it would be nice to have Facebook’s problem, and I would agree that I would like to be at the helm of a company with the growth potential that requires broad opportunities for brand extension that need to be named.  Nonetheless, one must recognize that Facebook is now presented with significant business uncertainty and unnecessary risk.  Its future products and services cannot be fully fleshed out without a clearer understanding of how these can be presented to the consumer, and for a start up company in high-growth mode, such uncertainty can be crippling.  Facebook is also likely bleeding legal fees, but this is probably a lesser issue than the uncertainty caused by the trademark issues.

So what are examples of good start up names?  Well, few would contend that Google, Skype and Ebay are indicative of other products and, in my opinion, each of these is a bit “wacky.”   It is just this sort of “fanciful” (the actual legal term) name that most often leads to the legal ability for one to broadly own and, therefore, to widely prevent other companies–whether competitors or not–from seeking to use names even remotely close in form.  Fanciful marks are words that were effectively made up out of whole cloth for use in naming the particular company, product or service etc. and, by definition, can only be associated in the minds of the public with the first and original user.  In other words, start up entrepreneurs should try to come up with names that are what trademark law calls “fanciful” and what I call “wacky.”  Of course, one must balance the need to develop a protectable trademark with the ability to connect with the consumer because a great name is worthless if the product or service name impedes sales in any manner.

What do I think is a good trademark strategy for start ups?  I think Google has done a good job with this in its products by using names like “Voice,” “Reader” and “Patents” along with its main word mark “Google.”  By using these descriptive–and even generic–words along with the fanciful name “Google,” the consumer immediately knows what the product or service is and from whom it comes.  But, Google is certainly an outlier in this respect because its trademark has now indisputably become famous–and in near record time in comparison to others with famous marks like Kodak, Xerox and Starbucks–which resulted from the combination of its fanciful name and its explosive growth over the past few years to effectively seer the “Google” name into our minds.  Indeed, Google’s primary trademark problem today is to prevent its name from becoming generic, such as in “to google something,” which is the fate of former trademarks such as “cellophane” and “escalator.”

Again, it would be great to have Google’s problems, right?  We “mere mortals” should probably strive to create a name that leans toward the upper end of the trademark distinctiveness scale as described in this article.  Nonetheless, start up entrepreneurs would be well-served to view Facebook’s current problems, as well as those faced by Microsoft many years ago, as cautionary tales of the need to generate an IP strategy even at the earliest stages of start up business planning.  While it would be great for any start up entrepreneur to be as successful as either of these companies, I am sure that the founders wished that they had done a better job at “parenting” their fledgling companies.

2 thoughts on “Facebook’s “Trademark Bullying” Should Serve as an IP Strategy Lesson for Startup Entrepreneurs

  1. This is hardly a new trademark enforcement strategy. McDonald’s has been successfully suing restaurateurs who tried to attach “Mc” to the names of their restaurants and/or meals. McDonald’s succeeded in Canada in other jurisdictions (Malaysia) in showing that this line of conduct diminishes its goodwill. I am not surprised by Facebook’s position on the subject, and I will not be surprised if they prevail using arguments employed previously by McDonald’s.

    Andrey, http://www.pinskylaw.ca

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