'Thru Dropbox' Trademark Registrant's 'Bad Faith' Litigation Results In $2 Million Fee Award To Dropbox
from the countersues-bull,-demands-horns dept
Thru, Inc. made a mess of its registered trademark by allowing it to lie dormant. It registered “Thru Dropbox” but made no attempt to challenge Dropbox’s application for the term “DROPBOX” in 2009. Instead, it sat back and watched as Dropbox grabbed market share. Five years after it filed its application, the trademark was awarded to Dropbox. Only then did Thru, Inc. act, so to speak. It acted like the horrified victim of Dropbox’s motion for declaratory judgment, one that would uncontestably award the “Dropbox” registration solely to the cloud storage service. Thru countersued, claiming infringement. Bad move.
During the lawsuit, discovery by Dropbox uncovered Thru Inc.’s master plan. Emails showed company officials actually referred to the “Thru Dropbox” trademark registration as a “lottery ticket” that would pay off as soon as Dropbox went public. As the court pointed out while handing bits and pieces of Thru’s thoroughly-chewed ass back to it, referring to a dormant trademark registration as a “lottery ticket” is like counting your yachts before you’ve purchased them. It demonstrates bad faith — the sort of thing that generally leads to lawsuit losses and hefty legal fee liability.
And here come the financial losses Thru clearly didn’t figure into its “lottery ticket” calculations. The presiding judge has awarded more than $2 million in legal fees to Dropbox. From the order [PDF]:
The Court awards $1,761,781.50 in fees, $419,610.41 in nontaxable costs, and $116,040.18 in taxable costs.
As the court points out multiple times in the order, everything Thru did reeks of bad faith. The “slow walk” of its trademark enforcement to coincide with Dropbox’s IPO. The references to the unenforced trademark as a golden ticket to unearned riches. The numerous false statements made during early depositions.
Of course, Thru Inc. had plenty of arguments left, especially now that it’s own money was on the line. But the court doesn’t have much sympathy for Thru’s financial hole of its own creation.
Thru… argues that such a large fee award would be unfair given that it spent 27% of its annual revenue “on a lawsuit it tried hard to avoid.” As noted above, the record clearly belies the claim that Thru tried hard to avoid this litigation, and a significant portion of the expense incurred by Dropbox came as a result of Thru?s bad faith litigation conduct.
Dropbox likely won’t see any of this until after the Ninth Circuit Appeals Court has disposed of the case. Thru Inc. immediately appealed the adverse ruling handed down last year, but I can’t imagine the Appeals Court is going to take a look at this and see that the trademark slow-walkers have somehow been screwed out of their IP “lottery ticket.” All it’s going to do is add more Dropbox billable hours Thru Inc. will have to pay for.