Referring To Your Unenforced Trademark As A 'Lottery Ticket' Is A Great Way To End Up With Nothing

from the door-to-riches-blocked-with-timebar,-extra-la[t]ches dept

Trademark protection is use-it-or-lose-it. A company with a possibly-legitimate claim to the trademarked term “Dropbox” thought it could just sit idly by while another company put the term to use, hoping to capitalize on that company’s success later. In the end, the lack of enforcement efforts cost it its infringement claims. Here’s the backstory, from Tucker Chambers of DuetBlog. (h/t Rebecca Tushnet)

Dropbox filed a trademark application to register the DROPBOX mark in 2009, but was hit with a flurry of oppositions by other companies such as Officeware, the owner of the FilesAnywhere service, Yousendit, Inc. (which has changed its name to Hightail), and others. Dropbox was ultimately successful on those oppositions and obtained its trademark registration for DROPBOX in 2014. Thru did not file an opposition to Dropbox’s 2009 trademark application.

Last year, Dropbox filed a lawsuit against Thru, seeking declaratory relief that its use and registration of the DROPBOX trademark does not infringe upon Thru’s purported trademark rights. Thru counterclaimed for trademark infringement, alleging that it had priority to the DROPBOX mark based on use as early as May 2004, and that Dropbox did not start using its DROPBOX mark until 2008. Later in proceedings, Dropbox moved for summary judgment on Thru’s counterclaim. Dropbox argued that Thru’s claim was barred by the doctrine of laches because Thru unreasonably delayed in making its claim and this delay prejudiced Dropbox.

Thru’s product — and registered term — “Thru Dropbox” might have kept Dropbox from being called Dropbox. But rather than move forward when it first became aware of Dropbox’s entry into the market, Thru decided it might be more profitable to act as a trademark squatter.

Thru first tried to claim that it had no idea Dropbox was entering the market and remained unaware of this fact until 2011. It didn’t even start moving to enforce its trademark until three years after that. The court found this claim unbelievable considering both businesses were operating in the same file-sharing market and Dropbox, by 2011, already had 40 million users.

The court found Thru’s claims LITERALLY unbelievable once company emails discussing Dropbox were made public during discovery. The moral: if you refer to your trademark registration as a “lottery ticket” in corporate emails, you’re likely going to find out it isn’t a winning one. From the decision [PDF]:

In an interrogatory response verified by Thru CEO Lee Harrison, Thru stated that “Thru?s directors and management first became aware of Dropbox, Inc., and its use of DROPBOX in mid- 2011” and that “Thru?s directors and management is not aware of any employee that was aware of Dropbox, Inc. and its use of DROPBOX at any earlier date.” Ex. 40. Record evidence shows that this is not the case. On June 9, 2009, Thru?s Chief Technology Officer sent an email to the Harrison, as well as other officers, informing them about Dropbox, which offered another service “to sync the files across computers.” Ex. 42. On June 15, 2009, the CTO wrote again, asking “[a]re we ok with web-only write only dropbox or we will need [sic] something like getdropbox.com2 ? They are very prominent in Mac community.” Ex. 43.

In a sworn deposition, Harrison nonetheless insisted again that he had never heard of Dropbox before the summer of 2011, at which point Dropbox had 40 million users. When confronted with the CTO?s 2009 emails, however, Harrison conceded that his interrogatory response had been “false.” In light of this evidence, Harrison?s continued assertion that “[Dropbox] did not get [his] attention until 2011” is simply not credible.

The evidence on the record shows Thru was discussing Dropbox’s entry into the market as early as 2009. But it refused to move in opposition of Dropbox’s use of the term because Thru execs thought delaying this action might be the more profitable move. Thru sat on its hands for four years, hoping for a bigger payout.

Finally, and perhaps most significantly, the record belies Thru?s explanation for the reason behind its delay. Dropbox points to numerous documents that indicate that, in fact, Thru?s delay was a deliberate attempt to maximize the value of its claims by leveraging an anticipated initial public offering from Dropbox. Thru had been explicitly contemplating a lawsuit concerning its trademark rights at least since February 2012, when Harrison wrote in an email to an investor: “New development turns out we own the term Dropbox . . . Our IP attorney is talking to Dropbox?s attorney about buying the name from us . . . They raised 250M in October 2011 at 1B value. . . . An action could be had soon.” Ex. 47. Harrison repeatedly in emails described Thru?s claim as a “lottery ticket.” Ex. 54 (discussing whether “a portion of the staff [had] no skin in DB lottery ticket game”); Ex. 62 (“Dropbox will be a lottery ticket.”).

In October 2013 Harrison wrote that “My call is [Dropbox] want[s] us to file a lawsuit and treat us like [Officeware] so they can quietly dispose of this matter anytime they want to . . . The best leverage we have is to sit tight and wait to the IPO announcement and be prepared to file suit that day and make as much noise as we can about it.” Ex. 51; see also Ex. 57 (“If we wanted to be the first to file we should have done that last year. Time is on our side not theirs. Slow walking this to [Dropbox?s pre-IPO] S1 filing is all that is important.”). In his deposition, Harrison confirmed that he had felt that a pending IPO “was a leverage point,” that “it would be tough for them to file without clear title” to their trademark, and that accordingly Dropbox “would come to us eventually and settle with us.”

Yeah, you can’t “slow walk” your IP protection. Thru thought it could get a cut of those sweet, sweet IPO dollars. Instead, it’s on the receiving end of declaratory judgment, collecting a fat payment of $jack.

Filed Under: ,
Companies: dropbox, thru

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Comments on “Referring To Your Unenforced Trademark As A 'Lottery Ticket' Is A Great Way To End Up With Nothing”

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Andrew says:

Is Thru so bad?

So – not to rush to Thru’s defense – but this is not a great victory.

When they found out Dropbox was infringing (let’s assume they really used the trademark, it was useful, etc), then they should have immediately sent a cease and desist.

If they send that, then Dropbox can file a lawsuit for declaratory judgment in the venue of their choosing. So – for even enforcing your trademark, deep pockets win over legitimate claims (sometimes).

If Thru could not afford a lawsuit (or substitute your own struggling company name here), then they can’t risk a cease and desist.

So what would you do? Maybe wait for a more advantageous time to file a cease and desist.

At any rate – I don’t consider this clear-cut malfeasance on the part of Thru, rather, it’s part of the basic playbook of IP laws that support moneyed interests, and virtually no-one else.

Niall (profile) says:

Re: Is Thru so bad?

They were guilty of bad tactical planning, and I can appreciate they wouldn’t want to be palmed off quietly like Officeware – but if they had as strong a case as they thought they could still have made some nice cash selling or licensing the name right from the get-go.

However, lying in court about it is particularly stupid and illegal, and certainly deserves them their $jack payout.

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