Two Distant Businesses With Similar Names Butt Heads on the Internet

A Tale of Woe and Lessons Learned

Note: A much shorter, less detailed version of this column is available on the Leading-Edge Law Group website.

What will your business do when an online-confusion disaster strikes?

Let’s suppose your business operates locally or regionally, such as only in central Virginia. Out of the blue, you discover a business with roughly the same name that sells roughly the same goods or services operating in a distant part of the United States – California, perhaps. Call that other business your “online rival.”

The online rival uses a website domain name similar to yours. Both businesses appear in Google search results, jostling for the top spot. Both businesses have mobile phone apps with similar names. Each shows up high in app store searches.

The name similarity confuses some people. Sometimes, your customer service representatives get calls about problems meant for your online rival. Confused people get frustrated and post negative online reviews about your company. The similarity causes some people to invoice or pay the wrong company. Also, some other business paperwork is mistakenly sent to the wrong company.

Two Credit Unions Clash in Cyberspace

What I described isn’t hypothetical. It happened to a couple of credit unions: UFirst Federal Credit Union, which operates in upstate New York, and UFirst Credit Union, which operates in Salt Lake City, Utah.

The credit unions started with different names. One was SUNY Plattsburgh Federal Credit Union, and the other was the University of Utah Employees Credit Union. Each changed its name to feature “UFirst” to appeal to a broader marketplace and range of people.

The New York credit union made the change in 2006, and the Utah one did so in 2022. When considering a name change, the Utah credit union discovered the New York credit union with a similar name but thought it was okay to proceed because the New York credit union had not applied for federal trademark registration for its UFirst name.

After the Utah credit union made a name change, all of the problems I described above broke out: butting up against each other in Google search results and app store listings, calls from customers to the wrong credit union, frustrated customers (which led to negative online reviews), and misrouted payments, invoices, and other paperwork.

Unfortunately, due to a recent court ruling, it appears the two credit unions must live with the confusion unless one or both change their names.

The New York Credit Union Strikes Out in Court

Under trademark law, when two similar businesses use confusingly similar names, the senior user in a geographic marketplace has superior rights to use its name there, so the junior user can’t use its name in that area.

The New York credit union (the first one to use the UFirst name) sued the Utah credit union for trademark infringement to try to force it to change its name everywhere. The lawsuit failed.

The federal trial court denied granting a nationwide injunction to the New York credit union. Prior to the Utah credit union changing its name, the New York credit union had a few customers in the Utah area because those people had moved from upstate New York to Utah. The court held that wasn’t enough presence in the Utah marketplace to give the New York credit union dibs on using the name in Utah.

The court also held that the Utah credit union chose its name in good faith because it wasn’t trying to capitalize on the name of the far-away New York credit union. If the New York credit union could have proven that the Utah credit union had intended to try to capitalize on consumer recognition of the New York credit union’s UFirst name, then the Utah credit union might have been required to change its name in the future.

The New York credit union then requested an injunction preventing the Utah credit union from doing business in eight northeastern states. The federal court rejected that request because the New York credit union didn’t prove it had established its name and business throughout that territory.

Neither Credit Union Can Monopolize the Internet, so Confusion Will Continue

Importantly, the New York credit union argued that it should have the exclusive right to use the UFirst name on the Internet because it launched a website and app using the UFirst name before the Utah credit union. The New York credit union was hoping to prevent the Utah credit union from using its name on the Internet, which would have probably forced the Utah credit union to change its name.

The court held that the Internet isn’t a separate geographic territory in which a party can monopolize the use of a trademark by getting there first. It held that trademark rights can be established only in physical geographic territories, and you do so by doing business in them – getting customers and sales. Accordingly, the court held that the parties must live with the confusion created by each credit union's Internet presence under the UFirst name.

*****

What a mess! What could have been done to prevent this disaster from happening? Each credit union made mistakes and is suffering as a result.

1. Name Selection

Don’t pick a business name highly similar to one already used by another business in the same or similar industry, even if that business is geographically remote.

The Utah credit union should not have chosen the UFirst name after it saw the use by the New York credit union. While the Utah credit union didn’t lose the lawsuit, some of its customers have been confused, and it may face limits on geographic expansion.

Also, don’t pick a name that’s generic, merely descriptive, commonplace, or likely to become commonplace. You can’t have trademark rights in a generic name (such as “credit union”).

You can’t have trademark rights in a merely descriptive name unless you prove the public recognizes that name is referring to you. Geographic terms are merely descriptive. Thus, for example, you can’t have trademark rights to the name “Richmond Credit Union” unless you can prove the public recognizes that as pointing to a specific credit union.

In the case of this fight between the New York and Utah credit unions, the name “UFirst” is fairly strong – it isn’t generic or descriptive. In fact, it’s pretty good because of the double entendre. It refers to the university-centered origin of each credit union and is phonetically equivalent to saying, “you first,” which implies putting the customer first.

But this sort of name might become commonplace in the banking industry, which frequently markets upon purporting to put the customer first. Banks are horrible about adopting essentially the same names. Many unrelated banks in different places have adopted names featuring words such as peoples, citizens, community, first, united, American, farmers, commerce, and liberty. In the Internet age, choosing such a name begs for problems and litigation.

While the New York credit union created potential problems for itself by choosing a name likely to be adopted by other banks and credit unions, the Utah credit union made a bigger mistake by thinking it would have no problem with adopting essentially the same name in a different part of the country. It was foreseeable that there would be problems because of websites, online banking, and the possibility that the New York credit union would expand geographically.

2. Federal Trademark Registration

Federal trademark registration does not create trademark rights; it only strengthens them. You can establish common-law trademark rights just by using your trademark in a geographic marketplace.

But you can obtain national trademark rights through a federal trademark registration. Doing so won’t wipe out any common-law trademark rights others had before when you apply for registration, but it gives you senior trademark rights throughout the country for anything happening after the date on which you apply.

The New York credit union should have applied for federal trademark registration as soon as it chose to adopt the UFirst name. That would have given it first dibs on using the name in Utah and elsewhere before the Utah credit union chose the same name.

If the New York credit union had gotten a federal trademark registration, by law, that would have put the Utah credit union on notice that it was choosing a problematic name. That would have helped the New York credit union in its legal battle.

3. Trademark Infringement Watching and Policing

The New York credit union should have not only sought immediate trademark registration once it adopted the UFirst name but also immediately instituted a program of having a trademark lawyer watch for infringements and police them.

Here, the New York credit union should have detected the adoption of an identical name by the Utah credit union as soon as it appeared in corporate or banking filings or on the Internet. It then should have immediately written to the Utah credit union warning it not to implement the matching name and outlining the potential legal consequences.

If it had done so, the New York credit union might not have been able to stop the Utah credit union from adopting an identical name unless and until the New York credit union established a customer base in Utah. But the New York credit union could have taken steps to make the Utah credit union uncomfortable, which probably would have persuaded the Utah credit union not to use the UFirst name.

*****

As usual, the lawyers are the only winners in this sad tale. As the kids say, “Billable hours are undefeated.”

I estimate each side spent about 35 times more money fighting this issue than it would’ve spent handling it right from the beginning. I reckon each side spent about $750,000 in legal fees and costs in the fight. On top of that, this litigation has been a huge time suck for each side’s management. In big-time litigation, management distraction is often more painful to a company than huge legal bills.

Think of it this way: Paying for preventive trademark legal work is like buying strong locks and an alarm system. Skipping it is like paying to rebuild after a looting attack or three-alarm fire.

Written on July 30, 2024

by John B. Farmer

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