Property, intangible

The main lesson here is be careful who you go into business with, or at least have an agreement that keeps them from backstabbing you.

Defendant William Brady was the president of a company called Xponential, Inc. d/b/a EKR. EKR was a consulting firm that assisted startups with business strategy, marketing, creative services, and technology infrastructure.

Entrepreneur Stephen Dalby had an idea for a nationwide cellular network and smartphones safe for children and teenagers. He hired EKR to assist with his new business and invited Brady and EKR to participate as founding partners. Dalby, Brady and two others became the officers and directors of newly formed Tyndale Technology.

Tyndale hired EKR to come up with possible names for the new company. EKR proposed “Gabb” and “Troomi.” Tyndale chose “Gabb” and rebranded Tyndale as “Gabb Wireless.” Sometime after the naming engagement, Tyndale entered into an agreement with EKR for website development that said that “all selected materials, artwork, and/or digital deliverables produced by EKR, its employees, agents or assistants” would be “work for hire.” This language is according to the complaint. From what I can see, the agreement is not of record in the litigation, which may have made all the difference.

Brady later cut ties with Gabb and formed defendant Troomi Wireless. On May 5, 2020, Brady filed a trademark application for TROOMI for “Cell phones; Smartphones; Tablet computers.” Gabb later discovered Brady’s new business, which competed directly with Gabb Wireless.

Gabb filed its own trademark application for TROOMI for “Downloadable electronic game software designed for kids for use on wireless devices, mobile and cellular phones, and smart watches,” on the basis that Gabb had intended to keep Troomi as a name that it could use for related goods and services. Gabb then filed a lawsuit against Troomi Wireless, Brady and others. The complaint alleged causes of action under § 43(a) of the Lanham Act, the Computer Fraud and Abuse Act, and for a declaratory judgment that Gabb Wireless owns the mark TROOMI. Troomi filed a motion to dismiss the Lanham Act claims for the failure to state a claim.

The court easily granted the motion. There was a fundamental problem with Gabb’s claim – it didn’t own any trademark rights in the word TROOMI as a simple matter of priority. Troomi Wireless filed an intent-to-use application before Gabb filed an application. Gabb’s application was on an intent-to-use basis and Gabb admitted that it wasn’t using the mark yet.

As to the “work for hire” agreement, Gabb had a novel theory:

While an independent creator of the mark might have a superior claim to Gabb if it began using the mark first in commerce, efforts Brady undertook to use the mark were done on behalf of Gabb, and subject to an assignment. By creating this mark for hire, and agreeing to assign ownership of it to Gabb, Brady cannot simply re-create the mark for Defendants and act as if he were the first user.

Well, I guess yes he can. Gabb cited Lurzer GmbH v. American Showcase, Inc., 75 F. Supp. 2d 98 (S.D.N.Y 1998) for the proposition that a court can assign a trademark, but in that case it was a remedy for infringement. The Gabb court begged to differ that it was applicable here: “Gabb does not allege any facts showing it has a trademark for the court to protect. Accordingly, the remedy provided in Lurzer is not an appropriate remedy under the circumstances pled here.”

I don’t know what the website design agreement might have said, although I assume nothing helpful. The agreement was after the naming occurred and appears to be directed at copyrightable content, not trademarks. So it may not have been helpful anyway, but the fact that it wasn’t incorporated into the pleadings meant that it essentially could be ignored.

This case strikes me as trying to use a screwdriver to drive in a nail. Brady may have been a wrongdoer, but neither he nor Troomi were trademark infringers. There might have been a breach of contract, or a breach of fiduciary duty, but not a trademark infringement. But only trademark infringement and CFAA (for Brady’s access to documents) were pled.

A breach of contract claim would be an interesting animal, too. Suppose that the trademark had clearly been assigned, but Troomi used it anyway – what then? There wasn’t any infringement. A breach of contract claim requires damages, but what damage did Gabb suffer from Brady’s use of the TROOMI mark?

So what do you think is a better name for the business, GABB or TROOMI? I am curious about Brady’s motive. I assume he thought he could do better than Gabb with the business idea.

Gabb Wireless, Inc. v. Troomi Wireless, Inc., No. 2:21-cv-253-TC-DAO (D. Utah Jan. 14, 2022)

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