Spurned brands: Muzmatch TM loss reveals risks for startups
All may be deemed fair in love and war but as muslim dating site Muzmatch discovered in its dispute with Tinder-owned Match Group, courts have a different view when it comes to trademarks.
On Wednesday, April 20, the Intellectual Property Enterprise Court (IPEC) in London determined that start-up Muzmatch had infringed on the trademarks of Match.com, ending a six-year legal battle.
Heartbreaking lesson
According to lawyers, the case offers some salutary lessons to start-ups, principally that new brands must be cautious in the early days or they may not find a happily ever after.
As Jesper Sellin, partner at Potter Clarkson in Sweden noted, Muzmatch now faces the possibility of having to completely rebrand its dating site after more than a decade of investment and marketing.
“Having been found to have fallen on the wrong side of passing off and trademark infringement in the IPEC, Muzmatch are now in the unenviable position of looking to undertake a forced name and brand overhaul,” he explained.
“This can be an arduous, costly and embarrassing process for any business, let alone for a fast-growing challenger brand looking to establish a firm foothold in a highly competitive commercial space such as the dating and online matchmaking market.”
The Match Group which also owns Match.com, Hinge and OKCupid, had sued Muzmatch over its trademark registration for “Muzmatch” in Europe and the US, accusing the start-up of “unfairly benefiting” from the company’s reputation and investment in its brand.
Match insisted that consumers would mistakenly assume Muzmatch was a “sub-brand” specifically targeted at Muslim users because of its use of “match” in its name, while Muzmatch countered that “match” was simply an English word associated with matchmaking.
Commenting on the decision, a Match spokesperson said: “We are pleased that the court recognised what we have known to be true: that Muzmatch has unfairly benefited from Match Group’s reputation and investment in its brand and was riding Match Group’s coattails for undeserved gain in this highly competitive market.
“We have, and will always protect the work, creativity and innovations of our employees, and are grateful that the court recognised this and ruled accordingly.”
Meanwhile, Muzmatch founder, Shahzad Younas, issued a statement saying that Muzmatch would file an appeal.
“For us, the trademark case, their objecting to us calling ourselves muzmatch— a brand that has existed for over 11 years—was something we would never give up without a fight. I strongly believe that ‘match’ is a commonly used English word, especially in matchmaking services like ours,” said Younas.
Long-term reputation
But according to Flavia Ştefura, a senior associate at MPR Partners, the reputation of the dominant market player held sway in court, resulting in a positive outcome for Match.
“While the word ‘match’ is arguably allusive to the provided goods and services for a business in which the activity is dating or the matrimonial market, the prior trademark proprietor, Match Group, prevailed by relying, among others, on the reputation of its trademarks gained by substantive investments,” she explained.
“Judge Nicholas Caddick ruled that the use of the word ‘match’ in Muzmatch’s name could have led consumers to believe its app was linked to Match Group, and therefore a risk of association existed.”
According to EU legislation and jurisprudence, she explained, the proprietor of an earlier trademark is entitled to prevent third parties from exploiting without consent the reputation and prestige of that prior trademark.
“The advantages gained by profiting from the reputation of another’s trademarks are deemed unfair advantages. The judge stated that ‘Muzmatch was, in effect, taking some of the benefit of that reputation and of that investment and was doing so without paying for it’.”
Fools rush in
The first steps to avoid trademark infringement and litigation costs would be best taken when setting the business when a trademark clearance due diligence should be undertaken, she advised.
Potter Clarkson’s Sellin agreed that the correct advice was vital to avoid the inevitable embarrassment and potentially expensive repercussions of losing legal action.
“Without undertaking these checks at an early stage to identify potential barriers to use, companies are taking on unnecessary legal and commercial risks,” he cautioned.
“Brands may end up—as has happened in this case—investing significant amounts of time and resources into developing and establishing a brand, only to be faced with having to incur the significant costs involved in fighting legal action and paying damages, repairing reputational damage, and being forced to redesign and rebrand if or when they are found to have infringed prior third-party rights later down the track,” said Sellin.
If shortcuts are taken in the beginning, a compulsory rebranding process at a later stage could lead to a loss of foothold in the marketplace that may be impossible to regain, warned Valentina Nieß, attorney at Noerr.
“There is the risk that any historic goodwill associated with the prior trademark will be lost and customers are unwilling to accept the new brand. This can lead to severe loss in business,” she said.
Magnus Hauge Greaker, partner at Thommessen, noted that any non-voluntary rebranding, as consequence of a trademark infringement, is challenging
“Although it may be desirable to pick a brand that in some way is descriptive for the goods or services that are offered, this involves certain risks as regards the possibility of obtaining and maintaining trademark protection for the brand as the general rule is that a trademark cannot be descriptive for the relevant goods and services,” he cautioned.
Brand rebound
There are other steps that brands in these scenarios can take, urged Nieß, “There are possibilities to mitigate this risk, for instance maintaining elements familiar to the customers as a colour scheme or specific part of a logo. For example, in case of the Washington “Redskins” brand becoming the “Commanders”, any controversial reference to Indians was dropped but the colour scheme was maintained as a way to bring the fan base along.”
Also, the brand should consider gradually building up use of a new brand, she advised. “This also allows the market for a promising consumer response before heavily investing in advertising or manufacturing under the new name.”
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