Copyright Trademarks

Hello I Am Elliot: The Startup’s IP Nightmare

On July 2, in New York’s Southern District, global e-commerce startup (“Hello I Am Elliot”) brought an action into Court for trademark and copyright infringement against Derek J. Sine and Vander Group, another e-commerce company. Sine was Vice President of Vander Group, and together the parties were business affiliates of Hello I Am Elliot, licensed to use its intellectual property for marketing.

Hello I Am Elliot brought suit after Sine and Vander Group allegedly breached its affiliate agreement and intellectual property licenses by claiming ownership of the Hello I Am Elliot brand and software. The problem with this action was that Hello I Am Elliot’s alleged trademark and copyright (“the ‘Elliot’ mark” & “Elliot’s computer code”) were both unregistered.

Copyright Action

Hello I Am Elliot’s copyright claim sought a declaratory judgment for copyright infringement against Sine and Vander Group. The Court dismissed the startup’s claim ruling that there must be an actual controversy between the parties; and even if there was an actual controversy, a plaintiff cannot bring a copyright infringement suit until preregistration or registration of the copyright claim has been made.

Hello I Am Elliot’s complaint alleged that Sine and Vander Group claimed ownership to Hello I Am Elliot’s computer code by using it on Vander Group’s website in 2017. What was missing was a plea over how Vander Group claiming ownership would hurt Hello I Am Elliot.

Hello I Am Elliot contradicted itself in its Complaint by stating that Vander Group would not be able to access the Elliot computer code even if it wanted to. Ultimately, Hello I Am Elliot failed to state any potential way that Vander Group could cause it copyright harm. Although Hello I Am Elliot may have thought it was proving that Vander Group was wrongly claiming ownership to the Hello I Am Elliot computer code, the startup was proving that Vander Group was unable to commit the copyright infringement at issue.

Even if the startup clarified its potential harm, it failed to allege an independent cause of action. The Copyright Act does not supply a cause of action for relief sought over copyright infringement without an actual registered copyright. Hello I Am Elliot’s Complaint wrongly asserted a cause of action for copyright infringement because, without preregistration or registration of the copyright, copyright infringement is not possible.

It is important to note that a copyright is created the moment information is fixed into tangible form. Copyright registration; however, is a separate process through the U.S. Copyright Office and, without registering, copyright owners are not eligible to bring suit for copyright infringement.

Trademark Action

Under the Lanham Act, to prevail on a trademark infringement claim, a plaintiff must show that his or her mark is entitled to protection, and defendant’s use of that mark is likely to cause confusion. A trademark is protectable if it is either validly registered through the USPTO or is, on its own, a qualifying unregistered trademark.

Hello I am Elliot did not register its trademark, therefore the Court examined whether the Elliot mark qualified as an unregistered mark. Sine and Vander group argued that the Elliot mark was descriptive at best because it was a personal name. Hello I Am Elliot argued that the Elliot mark was arbitrary because the mark was not connected to a real person.

Trademark owners—with marks like the Elliot mark—want their mark to be considered arbitrary. In Court, an arbitrary mark is considered creative since it has nothing to do with the product or service being offered. With this creativity, there is no need to prove secondary meaning which is a tougher burden to prove. The party challenged by or challenging a mark like the Elliot mark would want the mark to be descriptive because then it needs secondary meaning.

In the Southern District of New York, personal names are generally regarded as descriptive; therefore, Hello I Am Elliot was required to prove secondary meaning for the Elliot mark. In this situation, secondary meaning would be acquired if Hello I Am Elliot were able to show that the Elliot mark brought a consumer in the relevant market’s mind to think of global e-commerce opposed to a name for boys.

Hello I Am Elliot was required to address how the Elliot mark would either be arbitrary, or have secondary meaning in its complaint, but the startup failed which led to it being characterized as descriptive. With this holding, trademark infringement became impossible.

In the Court’s secondary meaning analysis it considered Hello I Am Elliot’s: (1) advertising expenditures; (2) consumer surveys; (3) sales success; (4) unsolicited media coverage of the product; (5) attempts to plagiarize the mark; and (6) the length and exclusivity of the mark’s use.

Hello I Am Elliot spent nearly $700,000 in marketing since 2017. The problem was that the start-up failed to plead in Court that the marketing material was both successful and toward building the Elliot mark’s brand, or in other words, for promoting the Elliot mark. Hello I Am Elliot spending large amounts on marketing was not relevant without additional proof that the marketing was a success and for the trademark that was at issue.

Additionally, Hello I Am Elliot failed to allege any facts relating to consumer surveys or recognition of the Elliot mark.

Similarly to the problem with the advertising, Hello I Am Elliot’s complaint failed to show that its sale success was specifically towards what was at issue—the Elliot mark. Hello I Am Elliot claimed to accrue $13,000 in sales, and use by 300 merchants. Even if this were accepted as true, the Court highlighted in its opinion that the Southern District has only recognized much higher sale numbers. The Court cited to a case where a plaintiff showed $3 million dollars in sales success as what would be indisputable evidence. This evidence was overwhelming compared to what Hello I Am Elliot pleaded in its complaint.

Hello I Am Elliot pointed to its success in raising venture capital in amounts up to $3 million. The Court did not consider this because that was not relevant. The Court was looking to consider how much consumer interest was associated with the Elliot mark’s brand, and not how much capital the startup could raise through investors.

Hello I Am Elliot pointed to all of its media coverage associated with the Elliot mark’s brand, but failed to properly plead that the coverage was unsolicited and not through its own promotion.

Lastly, Hello I Am Elliot talked about its consistent use of the Elliot mark for over three years. Unfortunately for the startup, the Southern District considers five years of continuous use of a mark as what is necessary for prima facie evidence for continuous and exclusive use.

The Court held that Hello I Am Elliot did not allege sufficient facts to support an inference of secondary meaning, “or come close to doing so,” for that matter. If Hello I Am Elliot registered its trademark with the United States Patent and Trademark Office when first starting up, this issue may have not even gotten to Court.