What’s in a name? If you’re not careful, your company name can end up costing you big.
When we took out first tranche of VC money, one of the conditions was that we change our name. Prior to that we were calling ourselves I Squared Learning. A stupid name, I know.
We used some of the funds to hire an outside marketing firm to find a better name. They presented several possibilities. Distil was our favorite. It had some great ideas behind it (distiling knowledge), was memorable, and seemed ripe with branding potential.
Our lawyer suggested that we add something more to the name. It is hard to protect a name based on an actual word. Can’t trademark it, can’t prevent others from using it. So we went with Distil Interactive. Our lawyer also suggested we do a more thorough search. Hire an IP specialist to evaluate the name, do an exhaustive trademark search, and other prudent measures.
We declined. It wasn’t really because of the extra cost. Frankly we were just tired of the whole naming process and wanted to move on to more fruitful endeavors — like building product and winning customers.
Two years went by. We were building our brand. Gaining traction and recognition in the marketplace. Things seemed to be going well.
Then we got the cease and desist letter. Disti, a US company in the same space as us, had a trademark on “Disti”. Not Distil, but “Disti”. They claimed that we were violating there trademark and that they had suffered damages as a result.
We had a quick call with our lawyer. The test for these types of claims, he explained, was if a reasonable person could mistake the two names in the marketplace. Usually the burden of proof rests with the party owning they trademark. In our case they would need to show that “Disti” and “Distil” could be confused. Possible, but might be expensive if we chose to fight it. The more interesting question was why now?
“I think I know…,” Steve, my co-founder, offered.
Distil had been at a trade-show. The organizers had tracked down Steve to come on stage and present an award or such. He had no idea why they had done this but gamely went along. While on stage he realized that Disti had paid a fee to sponsor the award. The organizers had confused Disti with Distil (I guess our marketing and brand awareness were working) and brought Steve up on stage as the “sponsor” of the award.
Steve didn’t really know what to do, so he played along. After the award ceremony was over he let the organizers know of their mistake. The organizers were quick to do the right thing, contacted Disti and made other arrangements regarding the award they had sponsored. But that was the triggering event. The cease and desist letter came shortly after.
“Did you do a Trademark search when registering the new name?” our attorney asked. What difference would that have made? Plenty. Had we done the Trademark search with a reputable firm that turned up nothing, we might have had a defense. At the very least we could limit damages to what was actually incurred (which wasn’t much) since we hadn’t knowingly violated the Trademark.
But as it stood now, Disti had proof that there was confusion between the two names. They owned a trademark on their name — we didn’t. And we hadn’t done a thorough due diligence on our ability to use the name Distil. If they wanted, Disti had us over a barrel.
In my opinion Disti did everything right. They were quite polite and cordial, even understanding, in our discussions. As soon as they realized there was a potential for confusion, they contacted us. Not once in our discussions did they ask for damages. All they wanted was for us to stop using the name Distil so that further misunderstanding could be avoided.
For our part, we contacted them promptly and asked for time to evaluate our options (which they granted). We knew that we might be selling Distil, but didn’t want to say anything until we were certain. Once the board had approved the sale, we contacted them, explained that if the sale went through the new organization wouldn’t be using the name Distil. If the sale didn’t go through we would change the name. Disti was agreeable to that plan.
The big take away here — my lesson learned — is that your company name is one of the most important decisions you will make. It may seem like a small thing, but when you are getting traction and building a brand, the last thing you want is to change your public persona midstream. At the very least you don’t want the distraction of dealing with a cease and desist letter.
Take advantage of the services, like Trademark searches, name searches, and a real legal opinion on the protectability of your name. Doing a domain name and DBA search is a first step, but not a guarantee that there won’t be conflicts. In our case our name was registered in Canada and Disti was registered in the US, which is one reason the DBA search did not reveal the potential conflict.
Luckily the mistake “only” cost a few thousand dollars in legal fees. Under different circumstances this could have cost of tens of thousands of dollars to fix.
What’s in a name? Potentially more trouble than you realize. Spend the time and money to protect yourself from day one.