JOINT USE...FOR AWHILE
The parties continued to use TaxHQ from 2004 to 2007, each for their own purposes, without any further contact (see timeline). In 2007, however, just after Cpaatty had left for an extended trip, Small received a cease and desist letter from Big. For the uninitiated, a cease and desist letter, however worded, draws the proverbial line in the sand and tells the recipient that the sender intends to vigorously pursue trademark rights with respect to a given trademark and to compel the recipient to immediately cease using that trademark.
If you're going to understand the perils of infringement actions, you need to understand what happened next. Whether Big was right or wrong, it was beginning the classic strategy: hit your opponent with everything you've got to knock it out of the ballgame immediately. In this case, this included a demand that Small immediately cease and desist and that if it failed to do so immediately, Big would file a complaint in the United States District Court for trademark infringement, accompanied with a request for a preliminary injunction (to be followed by a permanent injunction) prohibiting Small from using the mark in question.
Here are some of the tactical considerations from the standpoint of the target of the attack (in this case, Small): (1) the difference in size between Big and Small (which in the normal case between bigger and smaller means that bigger can often have its way with smaller even if smaller has the better case, simply because smaller doesn't have the wherewithal to withstand the initial onslaught from bigger) (2) the concern that if Small did not knuckle under there would be a possibility that Big would file the infringement action in a distant U.S. District Court, forcing Small to hire lawyers in the distant jurisdiction (in this particular case, the economic disparity between Big and Small could be minimized if the action proceeded in the U.S. District Court for the Western District of Washington, since Cpaatty (a lawyer as well as a CPA) could appear in that court).
Here is where, frankly, the procedure Cpaatty and Small followed departed from the procedure you would be likely to follow (considering the fact that Cpaatty could represent Small, practically speaking, making it conceivable that Small could stand toe to toe with Big if the case were brought in the U.S. District Court for the Western District of Washington). Assuming Cpaatty believed in the strength of Small's case, a decision of this kind is still not easy to make, even if you don't have to pay massive legal fees to lawyers in a distant jurisdiction. Bottom line is that the old adage "a bad settlement is better than a good lawsuit" is often right on the money. However, preliminary inquiry of Big indicated that Big was not inclined to settle, especially knowing that it would be more difficult for Small to defend in light of the fact that Cpatty was away from the office for an extended period of time.
Nevertheless, and presumably knowing full well the massive amount of time the case could consume, Small preempted Big and filed a trademark infringement claim in the U.S. District Court for the Western District of Washington. Now both Big and Small were in the soup and the only question was how hot that soup was going to get. More.
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