What's in a Name? Sometimes a Lawsuit.

The Wall Street Journal

Start-Ups Can Get Mired in Costly Trademark Scuffles With Bigger Firms

Jimmy Winkelmann, founder of The South Butt, 

resolved a trademark infringement lawsuit with VF Corp.

Jimmy Winkelmann started a clothing company several years ago to mock fellow students who wore the outdoorsy The North Face brand, despite having no inclination to venture into the wilderness. He dubbed his company "The South Butt" and flipped The North Face's half-dome logo to look like buttocks.

But at least one party wasn't amused: The North Face.

Mr. Winkelmann, now a student at the University of Missouri at Columbia, received a cease-and-desist letter from the company last summer. He declined to comply, prompting a trademark infringement suit that was settled out of court in April.

The South Butt is still in operation. Mr. Winkelmann's lawyer and a spokeswoman for The North Face, a unit of VF Corp., said the matter was resolved amicably, but declined to comment further. It's unclear if Mr. Winkelmann is required to make any payments to The North Face or if the company has imposed any conditions on his marketing efforts.

Small businesses, unwittingly or not, have a history of running into scuffles by playing off a larger company's protected trademarks—sometimes resulting in legal battles they can ill afford, given the limited resources of most start-up operations. Some 3,500 trademark cases are filed each year in U.S. district courts, according to FTI Consulting Inc., a Baltimore advisory firm that tracks intellectual-property statistics.

Large corporations are highly protective of the brands and logos they often spend years and millions of dollars promoting. Inexperienced entrepreneurs may not realize "that a lot of big businesses have people who are assigned to find people who are using their trademark," says Anuj Desai, an attorney specializing in trademarks and licensing at Arnall, Golden, Gregory LLP in Atlanta.

Victor and Cathy Moseley of Elizabethtown, Ky., say they received an initial complaint alleging trademark infringement from Limited Brands Inc., the parent company of Victoria's Secret, within two weeks of opening an adult novelty and lingerie shop called "Victor's Secret" in 1998. The Moseleys ultimately changed the name of the boutique to Cathy's Little Secret, but still entered into a 12-year court battle to keep the original name. The shop lost an appeal in May.

"It's discouraging," says Ms. Moseley, who plans a further appeal. Limited Brands declined to comment.

The big corporation doesn't always win. Last fall, McDonald's Corp. lost an eight-year battle to prevent a family-run restaurant in Kuala Lumpur from calling itself McCurry. Malaysia's top court ruled that the Indian-food eatery could keep the prefix "Mc" in its name, as long as it distinguishes its food from the hamburger giant's. McDonald's didn't return a call for comment.

But many small businesses find it's not worth picking a battle with a deep-pocketed corporation. Legal representation alone can run $10,000 to $50,000, or several hundred thousand dollars if the matter goes to court, according to Mr. Desai. Most owners who find themselves on the receiving end of a cease-and-desist letter often settle the matter quickly to avoid the cost of a prolonged lawsuit, he says.

Problems could likely be avoided with some due diligence, says Maria A. Scungio, co-chair of international trademark and copyright practice for Edwards Angell Palmer & Dodge LLP in New York. When starting up, many small-business owners don't seek legal advice or register their name with the U.S. Patent and Trademark Office, which could tip them off if they are encroaching on someone else's trademark, she says.

Ric Trader says he regrets not registering his company's trademark when he started Yard Doctor Landscaping in Punta Gorda, Fla., in 1998. That process, he says, may have made him aware of the existence of Lawn Doctor Inc., a national lawn-care company in Holmdel, N.J., that began franchising in 1967.

Mr. Trader says he was sent a cease-and-desist letter by Lawn Doctor in 2002, when his company was already well established, breaking $1 million in annual sales. He ultimately decided to ignore the letter, reasoning that customers wouldn't be confused by the similar names.

Lawn Doctor soon filed a lawsuit against the small company. Mr. Trader, who didn't retain a business lawyer, says that the ensuing years of legal paperwork were draining.

In an out-of-court settlement in 2005, Mr. Trader says he agreed to change his company's name in exchange for a five-figure sum. But with all the setbacks as well as Hurricane Charley taking a toll on his business, Mr. Trader decided to sell the business just weeks later. Lawn Doctor declined to comment.