According to the United States Sentencing Commission, the majority of trademark infringement lawsuits involve damages of more than $150,000. RIAs facing trademark infringement litigation may have to pay these damages if they lose their lawsuits, and this could be enough to completely bankrupt some firms. Trademark infringement litigation can also lead to much higher damages – potentially millions of dollars. Extreme outcomes can even put defendants in prison. RIAs concerned about trademark infringement litigation may be able to receive targeted legal guidance from regulatory defense attorneys. Contact the Altitude Securities Law Office at (405) 534-4914 to schedule a consultation to review best practices for avoiding trademark infringement.
Risks and Consequences of Trademark Infringement for RIAs
RIAs accused of trademark infringement may face numerous financial, legal, and reputational consequences. Even if litigation never occurs, allegations of trademark infringement can cause various complications.
The Risks Associated With Trademark Infringement Litigation
Trademark infringement litigation can cause an accused RIA to suffer financial losses. If the RIA loses the lawsuit, they may be ordered to pay the plaintiff damages associated with monetary losses, legal expenses, and reputational harm. Depending on the circumstances of each case, these damages may range from hundreds of thousands to millions of dollars. Courts may also issue injunctions for RIAs that affect their business activities. In addition, litigation can prove time-consuming and stressful while drawing attention and resources away from more profitable endeavors.
RIAs Could Face Accusations of Cybersquatting
Cybersquatting is the practice of intentionally registering domain names that are identical or similar to protected trademarks owned by other companies. This strategy presents numerous potential benefits. First, cybersquatters can demand inflated prices for domain names that match protected trademarks – knowing that the owners of these trademarks are probably willing to pay for their use. Cybersquatters may also attempt to use confusingly similar domain names to draw investors away from more established RIAs. They may create even more confusion by intentionally damaging the reputation of an existing RIA with a domain name that matches their protected trademark or business name. The most blatantly criminal cybersquatters use this strategy to facilitate scams.
Cybersquatting can lead to serious legal issues for RIAs. The Anticybersquatting Consumer Protection Act passed in 1999, and it provides a path to litigation for those affected by cybersquatting.
Investor Data and Funds Could Go to the Wrong Firm
In serious cases, trademark infringement can cause the accidental redirection of customer funds and data. If two RIAs have identical names, customers may mistakenly send their funds to the wrong firm. This phenomenon is increasingly common with the rise of online banking, as customers may send investment funds from their banks with just a few clicks. A scroll-down menu may appear for customers to select payees, and it is often difficult to distinguish between two RIAs with the same name.
These mistakes can easily lead to litigation, especially if sensitive data is involved. This data might include Social Security numbers, birthdates, and a range of bank account numbers. Less technologically savvy investors may even mail physical checks to the wrong RIA. The process of returning investor funds can be time-consuming, and these accidental transfers can intermingle with the funds of legitimate investors. Investors who have made this mistake may consider litigation. These lawsuits may involve the loss of funds and the leaking of private data – even if the customers technically facilitated these leaks and transfers themselves. In addition, the RIA that first registered the trademark may sue a firm with a similar name, claiming various damages. These damages might involve the cost of addressing incorrect transfers or the loss of reputation.
The Four Defenses to a Trademark Infringement Claim
There are four main defenses to trademark infringement claims. Although each defense can be effective, the optimal choice is highly situational. To determine the most appropriate defense strategy for their unique circumstances, RIAs may wish to consult with the Altitude Securities Law Office.
Doctrine of Laches
The doctrine of laches states that if a plaintiff waits an unreasonably long time before suing a defendant for trademark infringement, this represents an unreasonable detriment to the defendant. The courts may deny relief to the plaintiff as a result.
The Doctrine of Estoppel
If the plaintiff previously indicated that they accepted the use of the trademark by the defendant, they cannot contradict these earlier claims. Under the doctrine of estoppel, these contradictions may allow the defendant to avoid legal consequences.
The Doctrine of Unclean Hands
If the defendant used the trademark or domain name for unlawful purposes, they are said to have “unclean hands.” This prohibits them from taking legal action against defendants who allegedly infringed on their trademark.
The Fair Use Doctrine
The fair use doctrine states that defendants are allowed to use protected trademarks without permission in certain situations – such as product reviews, criticisms, news articles, parodies, and more. Descriptive fair use also allows RIAs to use protected trademarks when describing their own services.
Defenses for Cybersquatting Claims
As a trademark infringement allegation specific to digital contexts, cybersquatting claims merit an equally attenuated strategy for defense. The Anticybersquatting Consumer Protection Act primarily targets those who have no discernible intention of creating websites with their domain names. According to the Digital Media Law Project, only RIAs with a “bad faith intent” to profit from domain names face threats from this cybersquatting law. If RIAs show that they fully intended, at the time of domain name registration, to create legitimate websites and carry out normal business activities with the domain name, they can avoid the consequences of cybersquatting litigation. To determine whether or not companies used domain names in bad faith, courts consider nine factors:
- Existing intellectual property rights
- Whether the domain name matches the name of the defendant
- Any prior use of the domain name by the defendant
- Use of the trademark under the domain name
- Any intent to divert customers away from the site of a trademark owner
- Any offers to sell the domain name to a third party for profit
- Whether the defendant used false information when applying for the domain name
- Whether the defendant registered multiple domain names similar to trademarks
- The distinctiveness of the trademark used in the domain name
Contact an RIA Registration Lawyer Today
Trademark infringement law is not only complex, but it is also highly situational. The outcome of each trademark infringement lawsuit depends on the nature of the businesses involved, the jurisdiction, and even the spelling of the relevant marks. While internet research helps RIAs become more familiar with the potential risks and consequences associated with trademark infringement litigation, a more active, targeted approach to defense is necessary for those facing imminent legal action. To discuss defense strategies that may be appropriate based on the specific situation at hand, reach out to the Altitude Securities Law Office. Call (405) 534-4914 to get started.