The United States District Court for the Northern District of California recently granted a Motion for Summary Judgment in case that should remind potential plaintiffs not to sleep on their rights. In Dropbox, Inc. v. Thru Inc., the Court granted Dropbox, Inc. summary judgment on Thru, Inc.’s counterclaims for trademark infringement under the Lanham Act (Federal Law), trademark infringement under California common law, unfair competition under California Law, and cancellation of Dropbox, Inc.’s Federal trademark registration.
In trademark law, if one party used a trademark prior to another party in for similar goods or services and in the same region, the first party will usually be able to stop the second party from using the trademark with those goods or services. Thru Inc. used the trademark DROPBOX for file sharing software in 2004, four years prior to use of the DROPBOX trademark by Dropbox, Inc. Thru Inc. learned about Dropbox and its use of the DROPBOX trademark in 2009. But Thru Inc. didn’t take any action until 2008 when Counsel for Thru Inc. asserted its priority in communications with Dropbox, Inc. Thru failed to file any sort of action until 2014 when it filed a Petition for Cancellation against the Federal Trademark Registration that had by that time issued to Dropbox, Inc. for the DROPBOX trademark. Dropbox, Inc. eventually countered by filing the suit in the Northern District of California.
Through discovery, Dropbox, Inc. learned that Thru Inc. was well aware of its use of the DROPBOX trademark as well as its business dealings from 2009 to 2014, when it eventually filed the Petition for Cancellation. Several Email chains involving Thru Inc. executives referred the perceived infringement of the DROPBOX trademark as a “lottery ticket” to be cashed in by filing a lawsuit at the time when Dropbox, Inc. was attempting to take its business public through an Initial Public Offering. Rather than filing a lawsuit to enforce the rights the facts show it should have had in the trademark, Thru Inc. waited until the most opportune time as it watched Dropbox, Inc. gain in both popularity and users.
Watching Dropbox, Inc. grow wound up costing Thru Inc. the ability to enforce the rights it had in the DROPBOX trademark. Trademark owners need to be mindful that acting in a timely fashion to stop an infringement is usually going to be a more effective approach than counting on a big payday down the road.