Trademark Infringement: An IT Service Provider Forgets to Do his Trademark Research
An infringement of rights can happen faster than you think – and it’s important to act prudently in this case. How not to do it, on the other hand, is shown by the example of an IT service provider who created a website, including brand name and logo, for a sports club. Unfortunately, the brand already existed, so the service provider’s client received a written warning. We tell you how the IT service provider then also ended up adding to the damages.
Creating a Brand without Doing the Research
An IT service provider created a website for a sports club, including their name and logo. Unfortunately, a fitness studio had already trademarked the name in 2006. The only difference was that the IT service provider separated the two words in the trademark with an “and”, while the fitness studio used “&”.
Legally, this resulted in a violation of competition law due to the risk of confusion between the two company names. This led to the sports club receiving a warning a short time later including a cease-and-desist letter from the fitness studio’s legal team. The client forwarded this warning to the IT service provider, who then made an expensive mistake.
Big brands in particular are actually obliged to defend their trademarks – because if they don’t they can loose the rights to their own brand. That this can sometimes seem a bit exaggerated is shown by the case of the pay-TV channel Sky in this article: Lawsuits Against Game Developers: 5 Real Cases from the Video Game Industry
IT Service Provider Negotiates on his Own
Instead of reporting the damage event directly to exali’s customer service team, he decided to negotiate on his own with the other party’s lawyer. A quick and, unfortunately, somewhat hasty reaction, because it involved him directly in the damage event – so he was promptly included in the lawyer’s revised cease-and-desist letter. The first version had only included the sports club.
But it wasn’t just the cease-and-desist letter that was changed – due to the additional expenses of the legal team, the fine increased from originally 900 euros to now almost 2.000 euros. That’s when the IT service provider remembered his Professional Indemnity Insurance and reported the damage event to one of our insurance experts at exali, who forwarded the case to the insurer.
Professional Indemnity Insurance Covers the Costs for the Original Warning
The insurer’s legal team quickly realised that the written warning had been justified due to the violation of competition law and that further negotiations would only drive up the costs. After the IT service provider had sent a copy of the signed cease-and-desist letter to the insurer, the insurer assumed the costs for the original written warning in the amount of 900 euros (less the deductible).
However, the Professional Indemnity Insurance did not cover the settlement fee of almost 1.000 euros, which resulted from the unauthorised negotiations between the IT service provider and the team of lawyers from the fitness studio. The reason for this is that the cost was not associated with compensation, but was a fee (so-called conciliation fee) that the lawyer charged for the order to modify the cease-and-desist letter.
You’ve Received a Written Warning: This Is how you Respond Correctly
This damage event shows all to well that negotiating on your own after receiving a written warning is not a good idea. Instead, you should ALWAYS have both the warning and the cease-and-desist letter, which is usually attached, checked by a lawyer or, in the best case, your Professional Indemnity Insurance.
In that particular case, for example, it could have been clarified from the outset whether the IT service provider was liable at all. He only received a fee of 200 euros for the job – so the client’s claim to extensive trademark research would not have been justified.
Comprehensively Covered with Professional Indemnity Insurance – in the Event of Errors or Legal Infringements
Regardless of whether a programming error has crept in, installed software isn’t working properly or trademark research isn’t done before creating a website: With Professional Indemnity Insurance, you are comprehensively insured for your own mistakes as well as for legal infringements (e.g. trademark law, copyright law, competition law). If a real damage event occurs, the insurer will check at its own expense whether a claim for damages is justified – unjustified claims will be defended against on your behalf, while justified claims will be settled.
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