Swimming with the Shark Tank
If you’re a fan of Shark Tank, one of the more interesting pitches was by Rachel Zietz in 2016, a (then) fifteen-year old lacrosse player and entrepreneur. She said she was tired of the lousy lacrosse equipment she had been buying from the major manufacturers, who, she suspected, didn’t really understand the sport. She would design better equipment herself. Encouraged by her parents and The Young Entrepreneurs Academy of Boca Raton to form a business around something she loved, she started manufacturing and selling lacrosse equipment. She called her business “Gladiator Lacrosse.” She was only thirteen. It was 2013.
None of sharks invested in her company, though they were all impressed and a few were intrigued. They didn’t doubt her business model or her success. Her company already had revenues of $340,000, in just a matter of two years, so she was clearly tapping into something. They just didn’t see how their involvement and money would add anything to her company.[ref]One lesson of Shark Tank is that not every company needs or should have venture capital investment. You have to show not only that you are successful, but that the infusion of capital would work a quantum leap for your company.[/ref] Some also doubted that she could stay involved in her company at such a young age, when she would have so many other commitments. She responded that she has a strong brand: GLADIATOR.
Those about to die salute you!
Speaking of which. There might be a problem with that. Another company, Sports Guard, Inc., has been using GLADIATOR for sports mouthguards, since 2004. Not only that, but Sports Guard registered GLADIATOR for “custom fabricated protective mouthguards for athletic use” several years ago. And all that success and publicity seems to have gotten Sports Guard’s attention. It has sent her at least one not-at-all-nice letter demanding that her company knock it off and maybe find a new trademark.
We know (or can guess at) all this not because Sports Guard has sued Ms. Zietz’s company, but because Ms. Zietz’s company has sued Sports Guard. She is not accusing Sports Guard of doing anything wrong. Instead, she wants the court to tell the world that she isn’t doing anything wrong. That, even though she is using almost the identical trademark, she isn’t infringing Sports Guard’s trademark rights. She is seeking a declaratory judgment, and these types of lawsuits are colloquially known in the business as “DJ actions.”
Ms. Zietz’s Complaint[ref]OK, the complaint is actually made by her company, Gladiator Lacrosse, but the Complaint is almost entirely about her. So let’s maintain the fiction that Ms. Zietz is directing the lawsuit.[/ref] sheds a lot of light on her many accomplishments, awards and public recognition, none of which is particularly relevant to any legal issue but sound nice. It also sheds a bit of light on the main point of this blog post: how in the world did she end up in this predicament?
Some basics: the first (or “senior”) user of a trademark owns the mark, for certain goods and services, so long as it keeps using the mark. Others can later use the mark (or something “confusingly similar”) only if doing so wouldn’t be likely to cause confusion among consumers. At a very high level[ref]VERY HIGH.[/ref], this usually means: if the goods and services of the two different uses of the mark are sufficiently different. To take a hoary old example: you can have DELTA for air travel, DELTA for dental services and DELTA for water faucets. There’s no likelihood of confusion because the goods and services are so different.
Here, Ms. Zietz uses her mark for lacrosse equipment, and Sport Guard uses its mark for sports mouth guards. Those goods aren’t exactly the same, but they’re pretty closely related. Both goods are used in connection with playing sports, and… Isn’t that a mouthguard I see in that lacrosse player’s mouth? Yeah, pretty sure.
Although it’s not quite the end of the analysis (I think much would depend on the saturation of “gladiator” in other sports-related goods and services[ref]The idea is that, if consumers are used to frequently seeing a mark in the same general class of goods and services, they’ll be less likely to assume they’re all related.[/ref], which I suspect is fairly high), it looks bad enough that most lawyers would have suggested that Ms. Zietz maybe try a different mark.[ref]Note that the saturation of GLADIATOR among sports-related goods and services cuts both ways. Yes, it means Sport Guard will have more difficulty enforcing its mark, but it also means that you’re choosing an inherently weak mark—both legally and practically. That’s a separate reason to avoid the mark.[/ref]
But, even to be in a position to make this decision, Ms. Zietz needed to be aware of the Sports Guard mark. This is accomplished by “clearing” the mark. You search for other uses of “gladiator” not only among lacrosse-related products but sports-related products. At a minimum, you’ll want to search the publicly-available USPTO database. This would surely have found the Sport Guard GLADIATOR mark, since it was registered. Then you decide whether you want to risk it and go forward, or try another mark.
According to Gladiator Lacrosse’s Complaint, this is how the trademark clearance was conducted:
As she was a teen starting a new business, Rachel looked for the most economical ways of starting the business, and with the help of the Young Entrepreneurs Academy mentors, researched the name Gladiator Lacrosse, made sure to check for its availability, and based on the fact that the website www.gladiatorlacrosse.com was available for the sum of $10.00, decided to give her company the name it has today.
Um, no, that’s not a clearance. It says she “researched the name,” but it appears all the “research” consisted of was to see if a certain domain name was available. Domain names aren’t the same thing as marks (though they can be), and the availability of a domain name doesn’t mean the equivalent trademark is available. More important, she researched the wrong thing. She researched “Gladiator Lacrosse,” when she should have been researching “Gladiator” on its own. “Lacrosse” doesn’t add anything very distinctive to “Gladiator,” since all it does is describe the products.[ref]As you’d expect, the USPTO made Gladiator Lacrosse disclaim “Lacrosse.”[/ref] So it doesn’t do much to distinguish one use of “Gladiator” from another.
But let’s cut Ms. Zietz some slack. The was thirteen years old when she started the company. And, while the Young Entrepreneurs Academy of Boca Raton probably provides lots of able assistance, it probably doesn’t have any trademark lawyers on staff. Why would they? These are businesses being started by kids. They aren’t supposed to generated hundreds of thousands in revenues with bigger plans on the horizon. They’re supposed to remain nice and small, and if you’re small enough, you really don’t need to worry about things like trademark clearance. You could probably call your business DISNEY and get away with it.[ref]But don’t chance it. Oh, no.[/ref] It’s only after she became successful that Mr. Zietz’s company attracted attention. Oh, and that appearance on Shark Tank might gotten her some wanted—and unwanted—attention.
Checks Crossed Up
But wait, you ask: didn’t Ms. Zietz apply to register GLADIATOR LACROSSE, and wasn’t Sport Guard’s registration for GLADIATOR already in the system? Why, yes. Yet, it was. But aren’t there examiners who are supposed to check for things like this and maybe even refuse to register the mark? Why, yes. Yes there are. That’s a great point! And did the examiner catch this one? As it happens, no, not this time, even though they are nearly identical marks for goods in identical goods-and-services classes.[ref]International class 28. I checked: the Sports Guard mark wasn’t caught at all.[/ref] I’m afraid this happens from time to time. The system sometimes coughs up a hairball.[ref]I’ll be honest. This really gobsmacked me. Same mark, same class, and you miss it? But Tara assures me that this really does happen from time to time.[/ref]
But wait, you might also ask: isn’t there a period of time after examination but before the registration issues when others—like, maybe, in this case, Sport Guard—can “oppose” the application? Why, yes. Yes, there is. Another great point! Why didn’t Sport Guard? I’m guessing Sports Guard just didn’t know. Could they have known? Yes, by using a trademark watch service keeping an eye on trademark applications (that have reached the opposition stage). That costs money—but for companies that lean heavily on their marks and branding, it is often money well spent.
So a wunderkind made the kind of mistake that grownups make all the time: falling in love with a trademark without clearing it. Mistakes happen. Mistakes like that keep lawyers like me in business. But is Ms. Zietz fixing her mistake by filing the DJ action?
A Lawsuit Was Filed
A DJ actions are like passive voice. Whereas usually, in a “substantive” action, the plaintiff is also the one who claims to have been harmed, in a DJ action, the plaintiff is the one accused of wrongdoing. This is can be a little disorienting, even for lawyers.
By bringing a DJ action, Ms. Zietz forces the issue. She doesn’t need to wait for Sports Guard to sue her—if it ever does. She can get a declaration absolving her infringement. But that’s all she can get. She gets no fees, no damages. And there’s no guarantee that the court agrees with her. So, the upside of a DJ action is limited.
The downside, by contrast, is pretty bad. You can do more than lose. First, a DJ action might be a different kind of lawsuit, but it’s still a lawsuit, like any other lawsuit, with discovery, discovery disputes, motions, lawyers, bills for court reporters and maybe experts, and so forth. Second, the defendant has no choice but to bring, as a counterclaim, the substantive action that it was threatening (or else it’ll lose the right to bring it later). So, if you lose the DJ action, it also means you lose the substantive action, which will likely subject you to damages, injunctions and so forth.
An oft-cited advantage of DJ actions is that you get to have the lawsuit in your “home court.” All things being equal, it’s a bit cheaper to have a lawsuit close by[ref]You save some money on attorney travel and engaging local counsel.[/ref], but thing aren’t always equal. Some district courts move their lawsuits along much more efficiently than others[ref]There are statistics you can look up to get a sense of how fast things move.[/ref], and that’s often a much bigger cost-driver. And in federal court, at least, don’t expect “home cooking.” In my experience, federal courts treat out-of-town parties fairly. Another problem is that you can’t always get jurisdiction over the defendant (who, remember, would be a plaintiff in a substantive suit), whose only contact with your state and district might be limited to just sending a demand letter or two.[ref]That’s not going to be a problem with Ms. Zietz, I don’t think. Sports Guard sells its goods throughout the country, including in Ms. Zietz’s state and district, and she does, too, so I think Sports Guard has had enough contact with her state and district to justify jurisdiction.[/ref]
The main advantage of a DJ action, therefore, is clearing the air. If you find your business stymied by legal doubts, getting what amounts to a court’s permission to do what you planned to do is useful.[ref]DJ actions are especially effective if your adversary has overplayed its hand, threatening you more than can be justified by the underlying facts. In that case, it’s a bit like calling a bluff in poker, and the resulting lawsuit might be short enough that it’s economical.[/ref] Even learning you can’t is useful. But not every legal dispute can be raised as a DJ action. Courts are not in the business of giving legal advice. They’re in the business of adjudicating legal disputes. So, before you can bring a DJ action, the dispute has to progressed to the point where you legitimately think your adversary will sue you. Your adversary must have done more than let you know about its rights or even assert them, but there must a threat of litigation. It will hardly surprise you that experienced lawyers are skilled at sending demand letters that get the point across without crossing this line.
Same Old Story, Only with Sharks
So, here we are. Gladiator Lacrosse has invested several years by now in its GLADIATOR LACROSSE mark, which it stands a decent chance of losing, if Sport Guard decides to push forward. And, by filing the DJ action, Gladiator Lacrosse has brought that possibility closer, even as it seeks clarity. According to its Complaint, Gladiator Lacrosse will be “put out of business” if it loses the right to use GLADIATOR LACROSSE. Possibly that’s hyperbole[ref]From a lawyer?! Say it’s not so![/ref][/ref], but if the trademark is the key to her business model, it might not be much of an exaggeration. Changing brands is always painful, and the more established they are, the harder it is. Let us hope the lawyers involved can come up with a creative solution—or that Sport Guard backs down.[ref]Suing someone only sometimes causes them to back down. Sometimes, it just increases their resolve.[/ref]
In the end, this trademark dispute arose for the same reason many do: A new company didn’t expect success, and so didn’t do any kind of trademark clearance. It’s just, in this case, there’s a better excuse than usual: thirteen-year-old kids aren’t supposed to succeed in business (or appear on Shark Tank)!
Thanks for reading!