Minnesota State Representative Joyce Peppin, is convinced that “trademark bullying” is a problem and that it requires a brand new law in Minnesota to properly deal with it.

Representative Peppin apparently is a law student at William Mitchell College of Law, and she has teamed up with other students and William Mitchell law faculty to write and introduce into the Minnesota State House, a bill entitled the “Small Business Trademark Protection Act” (H.F. 2996).

The body of the proposed bill makes no reference to “small business,” nor does it attempt to define “small business,” but it does purport to define “trademark bullying” this way:

 “[T]he practice of a trademark holder using litigation tactics in an attempt to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark holder.”

As presently written, the proposed Minnesota state law would require the following:

  1. All trademark cease-and-desist letters sent to a Minnesota entity by an entity with a presence in Minnesota must contain specific language notifying the recipients of their right to a settlement conference through the Minnesota Office of Administrative Hearings; not available after suit has been commenced by any party.
  2. The primary purpose is said to assist the parties in resolving disputes and the secondary purpose is said to identify and label cases of “trademark bullying.”
  3. The timing, format, and additional requirements are detailed, e.g., how the conference shall not exceed eight hours unless the parties and the judge agree otherwise.
  4. Attendance by parties or their representatives is mandatory; if the party starting the dispute won’t participate, it is liable for a $1,500 fine and the attorney fees, costs, and disbursements incurred by the other party.
  5. At its own cost, any party may provide information such as expert testimony, industry practice standards, and evidence of trademark use in commerce.
  6. If a settlement is not reached but the parties have reached an agreement on any fact or other issue, the alj must issue an order confirming and approving, if necessary, those matters agreed upon. The order is binding on any Minnesota state district court judge who is later assigned to hear a related civil action.
  7. If no settlement is reached, any party may request the issuance of an alj summary. The alj may issue such a summary without the request of any party if the alj believes that the claim brought is a case of “trademark bullying.”
  8. Treble damages may be awarded against a party guilty of “trademark bullying”.
  9. If a party is found by a Minnesota state district court or the Office of Administrative Hearings to have engaged in “trademark bullying” more than two times in a period of ten years the party may have their right to conduct business in the state revoked.
  10. The cost of the settlement conference is split equally, unless the alj orders otherwise.
  11. The proposed effective date is August 1, 2012, and would apply to disputes evidenced by cease-and-desist letters and similar communications sent on or after that date.

I’m thinking this proposed legislative solution to “trademark bullying” really misses the mark, your thoughts?

  • Brand Geek

    Sounds like this would be a better law school research paper than actual legislation. Failure to define “small business” and the fact that the law applies to anyone doing business in Minnesota seems to indicate that the title of the legislation is a misnomer. I like the idea of mandatory settlement conferences — though I’m not sure that they’re appropriate pre-litigation.

  • James Mahoney

    How do you think it misses the mark, Steve?

    I see several puzzling attributes, the main one being that it seems to me that any law, regulation, etc., that rests on a “reasonable interpretation” is patently unreasonable. I can’t really define what I mean by that, but I know it when I see it. (ahem)

  • stevebaird

    James and Lara, thanks for sharing your perspectives.

    Lara, your comments make a lot of sense to me.

    James, there are actually so many problems with the proposed legislation, it’s hard to know where to start, but I’m planning to devote my next post to express the most pressing concerns and questions that jump out at me.

    James, you have hit on one I discussed in my first blog post on trademark bullying, back in 2010: a reasonableness standard makes no sense when talking about applying a pejorative label and attaching serious consequences for engaging in conduct that isn’t black/white — it is in essence suggesting nothing more than a mere negligence standard, at best.

    Reasonable minds can and will always differ on what constitutes a reasonable scope of rights in any given case, and whether pursuing a particular enforcement target is within that reasonable scope, so, from my perspective, this standard of culpability simply cannot form the basis for or warrant the proposed draconian remedies like revoking rights to conduct business and treble damages, etc.

    Moreover, we already have laws in place to protect against what I would call true “trademark bullying,” when claims are “objectively baseless” — such as attorneys fees awards to the prevailing party in exceptional cases, remedies for vexatious and/or bad faith litigation, and Rule 11 for truly frivolous claims, to name a few, and putting aside for the moment that the social media shame-wagon can always be fired up when necessary, but I’m getting ahead of myself.

    In the meantime, I’m looking forward to hearing more about what others think about it.

  • Sko18

    As I read the bill, I see that it seems to be titled the “Small Business Trademark Protection Act.” I understand that this is not a reference to small business “in the body,” but it does seem to imply that the intent of the proposed change is to protect small businesses from trademark bullying. To my knowledge, statutory construction as imposed by courts would likely pick up on the connection between the name of the bill and its intent.
    As to the concern over a lack of a definition for “small business,” I would suggest an evening with 645.445 and a bottle of wine. She will tell you allyou need to know. If you know what I mean.

    I cannot agree that this bill, as proposed, misses the mark. I would say the more draconian internment is that which the small business, whose trandemark is infringed upon by a large business with resources vast enough to bankrupt the small business through brute force litigation, is forced to endure.

    The roots of trademark protection lie in principles of unfair competition. What is more unfair in competition that misapropriating the mark of another and then forcing their silence through costly litigation?

  • Mitchell Billings

    Thanks for the post, Steve. (If you wouldn’t mind posting this comment instead, itcontains a slight correction i was alerted to…)

    The Small Business Trademark Protection Act, introduced in the Minnesota State House and Senate last week, is intended to provide a means for businesses without extensive resources to respond to a potentially frivolous trademark infringement claim. Some trademark owners have found ways to expand their ownership beyond what the Lanham Act affords them, and they have done this through threatening litigation, or litigation itself. This can cause a small-business owner to go through an expensive rebranding process, or to abandon a business altogether.

    We wrote this bill for a number of reasons. We recognize that this is not the only solution, and that it may not be a perfect solution. It is, however, a way to use resources already in place in the state of Minnesota to stop some of these suits before they are able to go to trial, saving small business owners from paying sometimes hefty legal fees. If a claimant is bringing a legitimate trademark claim, than this initial step will not stop them from bringing their suit. It is important for small-business owners to know that they have options when they receive a cease and desist letter.

    Perhaps most importantly, the introduction of this bill seems to be creating a discussion about trademark bullying. Your reaction to the bill is precisely what we are looking for. What can we do better? If the trademark law community provides feedback, this bill will be a better bill when it is re-introduced next session. This is a first-of-its-kind piece of legislation, so it is going to take conversation and debate to get it right. We want to make this a model for other states, and the federal government, to show how existing resources can be used.

    We encourage this conversation, and hope to hear from the trademark community as this bill moves forward.

    Ken Port
    Mitch Billings
    Dave Matzen
    Jessica Alm

  • Tyler Ochoa

    I’m sympathetic to the idea, but I have serious doubts that “trademark bullying” can be defined with sufficient clarity to reach a significant percentage of “bullies” without deterring potentially legitimate claims. Too many courts are willing to accept what I would consider to be outrageous claims (or claims that “attempt to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark holder”). The result is that even outrageous litigation positions can be found to be a “reasonable” interpretation of the law. Also, a state law will do very little to curb the practice of abuse of federal trademark rights. Any application to federal trademark claims almost certainly would be preempted. Having said that, perhaps we should encourage experimentation at the state level that might eventually lead to a better targeted solution at the federal level. (Awarding attorneys fees to prevailing defendants would be a good start.) – Prof. Tyler Ochoa, Santa Clara University School of Law

  • Carl

    One of the major flaws with this proposed legislation is it completely ignores federal preemption. This legislation would apply to cases arising under state trademark law, but I do not see any way this law could be applied to cases filed under the Lanham Act. It seems this law would do little, other than ensuring that few plaintiffs would file suit under state law and rely only on Federal law to enforce their trademarks.