Letters of Intent

Pankaj Raval (00:04)
Hello and welcome back to Letters of Intent, the podcast for risk takers and deal makers. I'm Pankaj Raval founder of Carbon Law Group, and I'm here today co-host and corporate attorney at Carbon Law Group, Sahil Chaudry. Sahil, how are you today?

Sahil (00:15)
Hey, I'm doing great. And today we're continuing our series on trademarks and branding. That is, know, Pankaj, one of your favorite topics. And we've been digging into some of the most common and costly mistakes businesses can make. And today we get to explore a very costly mistake that was made, well,

I guess we'll analyze it and I'm going to ask you a few questions about this case to see what mistakes were made in the case of dealing with this trademark. Today, we're turning to a story ripped from the headlines. Elon Musk's X-corp has just settled a trademark lawsuit brought by a Florida mass tort ad agency over the X-name. Like most things Musk touches, the story is not as simple as it looks, but this time, there's no chainsaw

So Bungage, what we're gonna do is let's first talk about the law. What is a trademark and why should it matter to a brand?

Pankaj Raval (01:00)
You

perfect, yes. This is something I've nerded many years now. I think about probably 18th year in doing trademark work. And because, I was doing it even before I a lawyer. I was working for another lawyer in law school handling trademarks for him. So I've had a lot of experience and a is effectively, legal a source identifier.

So when we think about some of the first trademarks, East Company, there's a lot of corporations from turn of 18th century that the first kind out there. And really, they're there identify the source of the most important thing about trademarks. And one of the critical analysis we do when thinking about trademark infringement is,

Is there a likelihood of confusion? are the consumers gonna be confused by the source of these goods? If I am buying something with a swoosh on it, is it from Nike or is it from source? And most likely, swoosh has been extremely well known, is considered a famous mark because it's everywhere and people now associate that swoosh with this brand and the quality of the goods that they're going to be getting. Same with Lululemon, you're gonna be getting a certain type of goods. So you can think about this in so many different contexts across so many different channels of trade, but fundamentally they are source identifiers and they're here to help protect consumers. That's why we have something called the Lanham Act. The Lanham Act is essentially the trademark laws codified by the federal government and the reason the federal government can actually regulate trademarks is because of the commerce cause. People don't really always recognize this or know this, but the reason the federal government can even say anything or enforce trademark rights is because as long as a mark is traveling interstate or across state lines, now that implicates commerce clause and therefore the federal government can regulate it. If you were just using a mark in limited geographic location that's in one state, there's argument to be said that you cannot get federal protection because you're not using it in interstate commerce. So long answer to your question.

Sahil (03:05)
So does that mean that there are state trademarks and federal trademarks?

Pankaj Raval (03:09)
Exactly, yeah, so how there are definitely state trademarks so in pretty much any state reside in you can file a state trademark, but it only gives you really rights It doesn't give you a right to bring an action in federal court so value of a state is is limited because Yes, you could enforce it against other people in the state and there's also common law claims you can bring like unfair competition But if you have a federal trademark now if someone's using the same name you have in Maine, you're in California, you still have rights to enforce your mark against that person in Maine because you have federal protection now.

Sahil (03:45)
So this reminds me of the movie American Gangster where Frank Lucas is selling Blue Magic and he's talking to a competing drug dealer who is cutting his coke and diluting it and naming it Blue and Frank Lucas sits down with him and says, Blue a brand and people trust my quality.

Pankaj Raval (03:49)
Yes.

Uh-huh.

Sahil (04:04)
So when you have a trademark, even a drug dealer knows you need a source because when you have a brand, you need a source identifier because people need to know what quality they're getting. so now, Pankaj, I'm going to take, now that we've laid out the law in this kind of IRAG style format, we've laid out the rule. Okay, so now we're going to get into the analysis of a very interesting question.

Pankaj Raval (04:09)
You

Right.

Great example.

Sahil (04:30)
There's a company X Social Media. It's a Florida based ad agency that specializes in recruiting plaintiffs for mass tort So they had been operating under the name X Social Media long before Twitter rebranded to X in 2023. X Social Media alleges that when Musk's company rebranded, consumers were said their business lost revenue as a result. So here's my first question to you, Pankaj.

Why does it matter that Twitter changed their name to X? Is it really confusing for when you're thinking about a mass toward ad agency?

Pankaj Raval (05:05)
It is, know, honestly it is and the issue here is that this ad agency has been operating as a social media company, right? media. So that's also a critical component of this claim of infringement. If it was X-bakery, now I don't think their argument would be as strong, but they're operating the exact same trade channel. So when you're evaluating trademark infringement,

Court applies 13 different factors under something called the DuPont test. in the 9th Circuit, they have Sleekcraft factors, which are about nine factors, but fundamentally, some of those factors you can get the trade channels, you're looking at the commercial impression, the strength of the mark, there's actual confusion or So these are all elements that you would want to look at when you're looking at potential trademark infringement, and in this case,

What we know so far is that X-social media said that, we've been using this long before you were using this a social media company. Your use has caused consumer confusion. People don't know if they're contacting us or contacting, going to X which was previously, or formerly known as Twitter. that's the crux of this issue. media brought this claim because all of a sudden,

by Elon Musk rebranding to X, they have diluted the mark, the commercial impression, the strength of the mark of X social media and effectively harmed their business.

Sahil (06:24)
So this lawsuit a shakedown. Is that common where someone will just file a trademark infringement claim sort of frivolous? we don't know yet if this is frivolous or not, but just in your experience, do people do that? Do people actually file trademark infringement claims as a shakedown?

Pankaj Raval (06:41)
Absolutely, you know and I think shakedown is a loaded term. It obviously who's on what side to say it's a know the person bringing the claim could very well legitimately believe hey, we have absolute rights We have legal rights that we want to I think it's a lot of marketing I think it's a lot of on Elon Musk's legal team side Honestly to say it's a shakedown, you know, you hear this all the time where oh, you know They filed a claim but it it might be

Of course they're gonna say that. They're gonna say whatever works to make them look better, but realistically I think this is a classic case of someone with a lot of money doing what he wants and knowing that probably someone can't fight for that long and he's probably gonna prevail in the end and that's kind of what happened. They ended up changing their name settlement. We don't know what all the settlement terms were, but X-social media did end up changing their name, which is not surprising because

Most people don't have $500,000 to spend on litigating these kind of cases or more.

Sahil (07:39)
That's right, the settlement was in a Florida federal court September 15th and the company's asked for the case to be dismissed with prejudice, which means X-social media cannot refile the same claim again. One intriguing twist, like you mentioned, the founder of X-social media stated that after the settlement, will change its

mass tort ad agency. So the terms were not disclosed as you discussed, so we don't know how much money has changed hands. Are any important takeaways that we can pull from this conflict even though this case settled in terms of trademarks?

Pankaj Raval (08:11)
Absolutely, I it's good to know that as a plaintiff, have rights. If you file your trademark, you file it correctly, make sure it's done correctly. We've had clients file it using these online legal services and did it incorrectly and that really positioning when they went to enforce it. So one thing I try to remind all my clients of is that,

Getting a trademark, filing a trademark, yes, we can help you with that and that's become a little bit more straightforward over the years. can always get an office action, you can always get a refusal by the USPTO. once you that trademark, you've gotta enforce it.

Otherwise you're gonna lose your rights. So you've got to be monitoring. We have a trademark watch service here that people can find out more about. But like we have monitoring services because that's critical to keeping your rights enforcing your rights. And you've got to do it soon, right? If someone's using that name for a while you're not monitoring your mark, again, that will now dilute rights to potentially enforce it. So you've got to be on top of it. You've got to be on top of your branding and making sure you're vigilant with policing your

Thanks.

Sahil (09:08)
So let's say you're a large corporation and you're ready for a rebrand. How do you make sure you're not going to run into a smaller player who's been using a similar name?

Pankaj Raval (09:18)
it's honestly, it's a business decision too. There's some strategy involved. I think just like Meta too, I'm sure Meta has had its fair share of trademark.

claims as well because they like that name and sometimes they say, you know what, we'll deal with it. We'll deal with the potential legal issues that arise and any lawsuits and we'll throw a lot of money at it. We'll try to drown them in legal fees and eventually people will acquiesce, which generally happens and it's a sad truth that unfortunately justice is not equally distributed and the reality is that if

If

you're a smaller player and on your mark, you can do so much. You can take it so far, but at some point you'll probably have to settle and hopefully you can get a decent amount of money out of the case to you kind of rebrand and find another name, but unfortunately we sometimes are at the whim of these very large players, and if you don't have the resources to fight them, you gotta figure out how you can.

address the potential to your brand.

Sahil (10:15)
So X Corp. leaned on the idea that X social media and others with X in their name were operating without issue for years. They use this peaceful coexistence argument. Is that a legitimate argument?

Pankaj Raval (10:27)
It is an argument, mean is it a legitimate argument? does have some weight, that saying hey, have not been by this the few years, so therefore why should they be confused going forward? I think it's a strong argument of defense, but I don't know if it's really true. Proving that is a lot harder, and who's to say that consumers are not confused? Who's to say that? And oftentimes proving consumers

consumer

confusion is not easy. You have to get surveys. There's a lot of different ways to do it that can be expensive, but proving it always easy. just because they've coexisted doesn't mean that there's not consumer confusion. I it's a convenient argument for them to make that saying, hey, they've peacefully coexisted, but who's to say that consumers have not been confused? That's just them making the assertion without any kind of real evidence backing it up.

Sahil (11:11)
So I want to ease out some lessons from this because settlements a lot. It's hard to know. We don't know what the dollar figure was. hard to say who won or who lost. But in your assessment, if we had to pick a winner, who won and who lost here?

Pankaj Raval (11:26)
I would say, without knowing what the amount is, we've had these cases come up for us. We've had major celebrities use names that we said that they cannot use. it's public now, but I'm not sure how much I can actually talk about it, but there's a major celebrity who...

has a smoothie named after her, that gives any insights. had cosmetics brand and she wanted to use a name filed a trademark for that our clients had. And it was very clear that our clients had this mark, have been using the mark, very strong rights in that mark, and reached out to us and we wanna have a coexistence, we wanna use this name too, we don't think it's gonna interfere with your rights. We said no, we think it will.

they

went ahead anyways. And after amount of litigation, they settled and clients ended up changing their name. And I think they might have sold their business actually in that situation. They actually might have just sold the trademark to them and just cashed out. So hey, maybe that was an opportunity for them to say, hey, okay, we can get some money out of this and do something else. And...

and it may have worked out for them. In this situation, would say X probably won at the end because they have billions and billions of dollars to throw at this. They have extremely strong mark. mean, X is also a kind of a, I think Twitter was a great name, honestly, because you tweet someone, a verb for that. There's no verb for when message someone on X. Yeah, X someone. mean, that sounds weird, sounds terrible.

Sahil (12:43)
X someone. Yeah.

Pankaj Raval (12:48)
think

their even brand was a great idea, but I think Elon also was kind of obsessed with this X term and name. So think one of his kids is named X, like he has hit another company with X in it too before, so.

Sahil (12:54)
Right.

Pankaj Raval (13:00)
But yeah, I mean I would say at the end probably XX1, the other company was a significant payout for the rebrand, probably be okay going forward, yeah.

Sahil (13:11)
Yeah.

Well, okay. So is this, you know, because if I'm a smaller company and I'm looking at this,

I'm thinking, wow, even if I have a trademark, I'm still at risk because if a whale comes around, larger player comes says, I want your Is this a warning to smaller players to avoid single letter trademarks or, you know, there are only so many single letters in the alphabet. that you can use for your trademark. my question. Can David beat Goliath?

Pankaj Raval (13:40)
think David Goliath. I want to believe David can beat Goliath. The question is, are the resources? How much can in beating Goliath? Because this long and arduous. It's expensive. And I want people to recognize that. They need to understand that, these are complicated issues

take a long time to resolve. And the people generally with the biggest war chest are the the bigger figuring out if they're gonna prevail or Because even X-social media got maybe 50 million, 100

it's probably not a huge amount X and they could probably appeal it still, right? So even then would take time for to win. I would say David beat you have to be creative and strategic about it in terms of how you approach Goliath.

Sahil (14:25)
Well, and I think in both of these instances, actually the instance where you talked about your client who did have the trademark and then was approached by a larger player who said, let's have a peaceful coexistence agreement. And in this case as well with X social media, in both cases they got paid. So there is an argument there for, yeah, in fact, a larger player might come around, but if you do have your trademark secure,

you might be able to secure a payday for yourself based on that mark if the price is right for you. Is that a lesson we can tease out of this as well?

Pankaj Raval (14:57)
Right, right, exactly.

Absolutely, absolutely. think definitely. mean, the lesson you get from this is that it's much better to have a mark than not have a mark. Even if it's a simple mark like X, I mean, X is actually a great mark. It's distinctive because when it comes to trademark the more distinctive your mark, the better. So Xerox, Nike, these are marks that are distinct to the brands that they represent.

Sony, arbitrary terms related to the goods that branding. So when you're thinking about a mark, the more distinctive it can make it, the more unique, more unquote arbitrary or fanciful in the legal are the better marks and those are gonna be the stronger marks they're gonna have greater rights in. If you have a generic mark, so the interesting thing is like X-social media I think rebranded to, what was it like?

like just some mass tort ad agency, right? That's a pretty people know exactly what they do, but are they gonna have strong trademark rights in it? Probably not. Because mass tort ad agency is generic for what they're doing. So I wouldn't say that's the strongest brand, but at least then people would know what they're doing. So there's pros and cons to that. if someone else comes along and say, hey,

Sahil (15:45)
mass toward ad agency.

Pankaj Raval (16:07)
We're also a mass tort ad agency. They're gonna have a hard that person from using that term as well, which is why you want distinctive marks general and trademarks so people can associate your goods or services as opposed to figure mass tort ad agency am I working with.

Sahil (16:23)
And this is why you need to call Carbon Law Group when you are pilot, when you're building your business, because these are complicated issues. There are a lot of complexities. There's a lot of money involved. Legal claims are not just about the law. They're about the perception, market confusion, dollars lost or gain reputation, and sometimes just negotiation leverage. And you need a gladiator in the ring with you. And that's why you need to come to us. So.

Pankaj Raval (16:27)
Hahaha

Hahaha

Sahil (16:50)
Bunkers, that's it for today. If you own a business or you're thinking about rebranding or care at all about how names and marks intersect with law, keep an eye on trademark law, intellectual property. It sounds less sexy than Mars is doing right now, but it costs real money when people get tangled and Musk is paying attention to it should you.

Pankaj Raval (17:11)
gonna end with, are you not amused? Are you not amused?

Sahil (17:12)
Yeah. Yes! Are you not amused?

I

present to you your gladiator the battle of IP.

Pankaj Raval (17:20)
Exactly. No, this is great, great chat. Sahil, and thank you again

for these great questions. Yeah, and I think I'll just kind of end with saying also that, know, these are complex issues that do come up and, you know, this is a 20 minute kind of piece discussing them, but you're looking through the docket even of that X social media case. I mean, there was hundreds of different filings done with that case. So there's a lot that happened.

and a lot of back and forth, but when it comes to protecting your rights, we are here to guide you, to advise you, and to really help you grow your business and your brand.

Sahil (17:55)
Awesome. Well, to all you risk takers and deal makers, we'll see you next time. Remember to like, subscribe, and follow us on LinkedIn, Spotify, on all the social media platforms that you follow. on there too, and we look forward to talking to you next time.

Pankaj Raval (18:10)
Yes. Thanks a lot.