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The Lemonade
Stand Circa 2000: A Boy, a Site, a $10 Million Lawsuit
A New Jersey teenager sues Black Entertainment Television over
a URL
[See the end of this article for the outcome of the case.]
Aaron Doades, of Millburn,
N.J., is a devoted and precocious rap
fan. In 1996, at age 10, he used his allowance money to create a Web site
about his favorite stars. It featured photos, links to record companies, and
lyrics.
Now Doades —
with the help of his father — is embroiled in a very adult lawsuit with a big
company that shut his site down over alleged trademark violations, and he's
seeking $10 million in damages. He's also delving into one of the most
nettlesome legal issues on the Net — whether one party can turn another's
trademark into a URL.
Doades' story
shows how treacherous trademark issues can be on the Web — for entrepreneurs
of any age. It also reveals a particular danger of the medium for kids. It's
easier for computer-savvy youngsters to start Web businesses than lemonade
stands, with no one the wiser about their age. But their lack of
sophistication can get them into adult legal trouble.
Doades'
problems started in early 1998, when he moved his fledgling site from America
Online to the Web. He registered his baby as Rapcity.com with the domain-name
registry, Network Solutions Inc. Two months later, Doades
saw an ad for Rap City,
an afternoon music show on the cable channel of Washington (D.C.)-based Black
Entertainment Television Inc. Doades, then
12, knew that companies own brand names. So, he e-mailed BET, asking if he
could use Rap City.
BET officials refused. Then Doades asked if
he could keep the Rapcity.com URL if he called the site "Tha Hood." Doades
says BET never responded, so he deleted references to Rap
City but kept the address.
By 1999, Doades'
site was taking off. It was on several search engines. CDNow,
Rolling Stone, and AskJeeves.com ran ads on the site, and some independent
record companies asked Doades to sell their
CDs for a commission.
Then last May, he ran into grown-up trouble. BET's attorneys sent him a cease-and-desist letter,
warning that he was violating a trademark the multibillion-dollar
entertainment company had held since the early 1990s. In August, the domain
name registry NSI shut Rapcity.com down, following
its procedures in cases of disputed URLs. After BET showed documentation of
its trademark, NSI told Doades
he could transfer rapcity.com to BET or register a new URL while he disputed BET's claim. If he did neither, NSI
would shut his site down, which it did in August. (NSI
refuses to comment because of the pending litigation.) Soon after, Doades
and his father, Ronald sued BET and NSI.
BET makes no apologies for its aggressive
stance — even toward an eighth-grade adversary. "What we are doing is
what anyone with multimedia properties is doing. We are protecting our
intellectual property from being infringed online," says Byron Marchant, executive vice-president and general counsel
for BET. Marchant says BET didn't know Doades'
age until he sued. (The court papers call him an "infant," a legal
term for minor.)
"There are formal ways to deal with the
use of trademarks, and that is to get a license from a company and negotiate
it," says Marchant. Sending a letter instead
of "engaging in a formal negotiation to find out if a name can be
licensed is not the proper avenue for moving forward," he adds.
It's hard to imagine someone Doades'
age negotiating a licensing deal with a major company — minors can't sign
legally binding contracts. That raises a troubling question: Was anyone
supervising the boy's hobby-turned-business? His father says neither he nor
his wife monitored Aaron's Web activities closely. "This was his thing,
and I wasn't involved," says Ronald. Nor did they know of his correspondence
with BET until last January, a few months before the cease-and-desist letter
arrived. Aaron confided then in a cousin —
an ex-lawyer — at his bar mitzvah, his father says. After the cousin advised
him to do nothing, he told his mother about his predicament, all according to
Dad.
Actually, Doades
fell into a trap that catches plenty of adult Web entrepreneurs. They fail to
check with the U.S. Patent & Trademark Office to see if a name has been
trademarked before they turn it into a Web handle. Domain name registries,
such as NSI, will only confirm that no one else has
registered a given URL. They don't say if it's trademarked.
Big companies are increasingly aggressive about
challenging domain names that they believe encroach on their trademarks. And
Congress recently gave them fresh clout to protect their interests. A
provision in the most recent federal spending bill imposes up to $100,000 in
penalties for "cybersquatters" who
register Web addresses for trademarked names, then force companies to pay
high sums to get them back.
Why are Doades
and his family taking on BET in court? It's partly the principle — a big
company shouldn't elbow a little guy aside like that, says the elder Doades.
"We have no interest in the money
whatsoever." He says they chose the $10 million figure to get attention,
though Aaron deserves compensation for losing his site, he adds. Aaron
estimates he made a few thousand dollars a year until last summer when his
revenues got as high as $800 dollars a month. Aaron says they told BET they'd
give up the URL for $100,000 two months ago. BET counteroffered
$4,000, which they rejected. A BET spokesman said the company has no comment.
Doades' lawyer, Mitchell
J. Kassoff (www.franatty.cnc.net),
insists that the law is in the boy's favor. "[BET's]
trademark record from the U.S. Patent & Trademark Office says it is for
television programming," not the Web, he says. BET counters that for the past five years,
it has used the name on its own Web site, which is part of the Microsoft
Network, MSBET.com.
It's hard to say how a judge will rule in the Doades
case, assuming it goes forward. (BET and NSI are
trying to have it dismissed.) "Courts are clear that just getting a URL
doesn't give you a trademark right," says Curtis Karnow,
an intellectual-property expert and partner at Sonnenschein,
Nath & Rosenthal in San
Francisco. Yet, he adds, if a trademark holder fails
to act quickly enough to stop someone from using the trademark as a Web
handle, courts may rule against it. BET claims it asserted its rights to the
name Rap City
in a timely fashion. The case is expected to be heard this winter in the U.S.
District Court for the Southern District of New York.
None of this has quenched Aaron Doades'
ardor for Internet endeavors or rap music. He's building a new site named
World Wide Rap (www.wwrap.com).
Only this time, he's checking the Patent Office site to see if the name is
trademarked — and he's consulting a lawyer. "I want to keep going and
make a new Web site. I want to get this behind me," he says. Spoken like
a battle-scarred Web veteran.
By Jeremy Quittner
in New
York
jeremy_quittner@businessweek.com
P.S. The case was settled in favor of Mr.
Kassoff’s clients for a confidential amount.
Mr. Kassoff’s clients stated, “We are absolutely thrilled with the way
you handled this.” “We want to
personally thank you. We really,
honestly, couldn’t have gotten this settlement without your expertise and
negotiating skills. Thank you so
much.”
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