It may appear to be merely a lawsuit about trademark infringement, but "Pinterest versus Pintrips" is a battle to see who has the steeliest nerves -- the online scrapbooking sensation or the fare-comparison tool.
The case may turn legally on who has the right to use the word "pin" in certain contexts. But the broader battle is more dramatic than that. This is a high-stakes game of chicken.
Pintrips, a small startup that has never raised significant investment, is facing big legal bills if it continues with its plan to defend itself in court.
Last year it cost $300,000 (as a median average) to fight a trademark infringement case in the US, inclusive of all costs from start to final judgment, for cases with less than $1 million at risk, according to a survey of members of the American Intellectual Property Law Association. Some Commercial General Liability (CGL) insurance policies do cover the expenses of trademark infringement, after deductibles.
Pinterest, for its part, is also vulnerable. While it can more easily afford a phalanx of attorneys (having received $225 million in Series E funding last autumn alone), a court defeat could drastically defer its IPO dreams. An unfavorable ruling in the case could hurt its market valuation, too.
Trademark infringement cases require judges to make decisions that are subjective, say legal experts. Given that subjective factor, having a full trial poses a risk to both sides.
Monopoly use of the word "pin"
Pinterest claims monopoly rights on using "pin" in certain digital contexts. Last October, Pinterest filed the suit in the US District Court for the Northern District of California, arguing that the startup's use of the word "pin" represents trademark infringement and dilution.
On January 7, Pintrips responded by filing a motion to dismiss with a California court.
The case's outcome will affect how other companies may use the word "pin," says counsel for Pintrips, Frank Bernstein, partner at Kenyon & Kenyon.
Bernstein emphasized to Tnooz that "pin" is a generic term:
"If Pinterest is successful, it will hamper the ability of other companies to accurately describe what they do with the technological function of 'pinning' -- which is common to lots of digital products. Other companies would have to use very cumbersome language to describe a core piece of functionality for many websites. It would set a dangerous standard and be very anticompetitive."
Bernstein cited the case of Continental Airlines Inc. v. United Airlines Inc., in which Continental claimed that "e-ticket" was one of its trademarked terms -- but a judge ruled that e-ticket was a generic term any airline could use.
Consumer confusion?
Trademark infringement typically turns on consumer confusion, says Jeff Sladkus, managing partner of The Sladkus Law Group in the Atlanta area.
"Imagine you set up a business selling bicycles, and brand them as Ford Bikes. You would probably be infringing on the famous automaker's trademark by fooling people into thinking that you're affiliated with it."
So one issue a judge would consider is the likelihood that a visitor to Pintrips would think it is affiliated with Pinterest because of how it uses the word pin.
Two companies, two services
Pinterest is a platform founded in 2009 that has become widely used to share images. Travel images are especially popular, with more than 660 million travel items "pinned" on the site since it was founded. It has also been working closely with travel brands on a project called Pinterest Place Pins.
Meanwhile Pintrips was originally unveiled in December 2012 as a way for travelers to search flights, pin any they’re interested in, and track changes to a flight's price and availability across multiple sites (for instance, comparing a flight from JetBlue with one from Orbitz and one from Skyscanner -- all on one digital "board".
The company says in its filing that its technology is completely unlike a social network and has nothing to do with sharing visual images.
Needle in a legal haystack
Pinterest may feel emboldened to pursue the trademark lawsuit -- which is stronger than filing a complaint -- because it has opposed six trademark registrations by other businesses that were using the pin prefix -- and it has won all six cases.
A Pinterest spokesperson emphasized to Tnooz that the US patent and trademark office has approved Pinterest's application for the "pin" mark.
But not everything has gone its way. Earlier this month, the European Trademark Office ruled that Pinterest doesn't own the name "Pinterest" on the Continent. The company is fighting the ruling.
Sladkus, who has argued about 50/50 for plaintiffs and defendants in trademark infringement cases, thinks the Pinterest case looks weak, "just going by what's in the motions that have been filed so far."
"From my understanding of term of pin, when you talk about pinning something online, you’re talking about posting something in a specific location.
In my opinion, this term has taken on a generic capacity, whether it is a geographical designation on Google Maps, or pinning the location of an activity you're taking part in and posting a status update about on Facebook, or pinning an application shortcut to your taskbar in Microsoft Windows."
Consumer confusion?
Eric Goldman, director of the High Tech Law Institute at Santa Clara University and a former Silicon Valley attorney, says that deciding what's "generic" isn't always easy.
He cites the case of gaming company Zynga, which successfully sued against other game companies that used the word "ville" in their product names:
"On the one hand, it's accepted that everyone should be free to use 'ville' as it's a generic suffix to add on to words. But in the context of online gaming, consumers may not really believe that 'ville' is generic.
Similarly, whether Pinterest has achieved that level of notoriety will be a subjective factor in the judge's decision, he says.
A potentially expensive fight
For this trademark lawsuit, Pintrips may have to provide a survey of evidence to prove the genericness of "pin", especially in the face of Pinterest's successful trademark application. That fight could involve a lot of billable hours.
On the other hand, if a judge dismisses the case with prejudice, he or she could insist that the plaintiff pay the legal fees of the defendant. Yet outcomes like that are rare, says Goldman.
Goldman's instinct tells him that the court will decide that the case merits a trial, meaning that Pintrips' motion to dismiss the case with prejudice won't be granted. If that prediction comes true, it will be a business decision for the two parties to decide which is financially smarter: pursuing legal action or settling.
Social similarity?
In April 2013, Pintrips told Tnooz that it planned to launch additional social sharing options to enable users to brag about their deal-spotting skills.
Someone who had, say, pinned fare deals on flights between London and Chicago to a board could easily share that board with others. The plan was to make the boards optimized for search engines such as Google to find.
But those public boards of flights haven't materialized.
A spokesperson for Pintrips called those boards a "marketing" plan, and distinguished them, which haven't seen light of day, from the company's core technology.
"Pintrip's technology is set up to help meet the needs of comparing flights and prices from disparate sites."
How can startups avoid a trademark lawsuit?
The case may be the sign of increasing trademark disputes. Last month, vacation rental giant HomeAway filed suit against rival site Airbnb for an ad campaign it claims uses a birdhouse symbol that's confusingly close to its own trademarked birdhouse symbol.
Making an effort to develop a truly distinctive name is the best legal and competitive defense, say experts.
Skadlus advises startups:
"Move away from using terms that are generic or highly descriptive for the type of product or service you’re offering. The best way is to pick one that has an arbitrary significance to what you're selling."
Goldman has this advice:
"Descriptive trademarks, such as a computer retailer named Computerland or a clothier named Dress Barn, don't require much imagination from consumers, and US trademark doesn't protect those names as well as possible.
Made-up words, like Oreo or Verizon, require branding work to educate consumers what the names means, so those trademarks are much more easy to defend in court."
He also recommends entrepreneurs be cautious about defensive domain registrations.
As for Pinterest and Pintrips, the trademark lawsuit may implicitly hinge on the relatively popularity of their services. In other words, have the judge or jury ever used Pinterest or Pintrips themselves? Says Goldman:
"Some judges assume they're usually the last to adopt new technologies, so that if even they have heard of something, it's probably achieved some kind of brand saturation. That can affect their decision making."
NB: One of Tnooz's nodes is Timothy O’Neil-Dunne, who is an advisor to Pintrips.