Honest Policing of Trademarks Pays Off, While Bad Faith Will Make You Pay

By:  Erica Paige Fang

Most of us have used, or at least have heard of, Dropbox, Inc., the file hosting service company that has seen great success in the last few years.  In 2009, Dropbox applied for federal trademark registration for the mark DROPBOX.  At that time, Thru, Inc. had been using the mark THRU DROPBOX to describe a feature in its software, and included the TM symbol next to the mark.  However, Thru, Inc. decided to hold off on challenging the applied for mark, a decision that may haunt the company for some time. 

In 2014, five years after filing for registration with the USPTO, Dropbox, Inc. was awarded rights to the trademark “DROPBOX” and filed a motion for declaratory judgment against Thru, Inc.  In response, Thru, Inc. countersued, claiming infringement on their mark.  Through the process of discovery, Dropbox uncovered internal emails between Thru, Inc. officials discussing strategically holding off opposing Dropbox’s use of the trademark until the company launched their Initial Public Offering.  Thru, Inc. company officials went so far as to refer to the THRU DROPBOX registration as their lottery ticket.   Ultimately, in November 2016, a California federal judge held Thru, Inc. cannot challenge the registered mark DROPBOX because Thru, Inc. intentionally delayed filing the infringement lawsuit against Dropbox, Inc. in and attempt to increase leverage and the value of its claims.  Further, Thru, Inc. was not able to adequately explain why they did not join other companies, such as Officeware, in asserting trademark rights before the USPTO in a timely manner.  Officeware is a company that opposed Dropbox’s registration of DROPBOX, and so Dropbox, Inc. acquired the trademark rights from Officeware. 

The story does not end there.  Due to the bad faith by Thru, Inc. in waiting to bring claims of infringement, and referring to the unenforced trademark as a lottery ticket, the Court has awarded over $2 million in legal fees to Dropbox, Inc.  The judge states multiple times throughout the order that the “slow walk” of trademark enforcement to coincide with Dropbox’s IPO was not a coincidence, and could not believe a file sync and share company remained unaware of Dropbox until as late as 2011 as Thru, Inc. tried to claim. 

What could have been done differently?   First, when Thru, Inc. decided to use the mark THRU DROPBOX, they should have registered with the USPTO to strengthen their rights and also put examiners and others on notice of the mark’s use in commerce.  Second, Thru, Inc. should have acted in good faith, and upon notice of a potential infringement, determined a legal strategy and act on that strategy.  Being proactive about trademark enforcement and protection can save you a pretty penny!

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.