What two words are worth $500,000 each? In the case of HOVERBOARD® The Space Chariot, those two word are “UL Certified.” (Yes, HOVERBOARD is a federally registered trademark; while it appears to be on the road to becoming generic, that’s a topic for another day.)
Why they are called HOVERBOARDs is beyond me. They clearly have wheels that touch the ground, but if kids (or those “young at heart” who prefer not to use their own horsepower) want to use their imagination, far be it for me to intervene. Most people have seen these devices on the street and have figured out that operating them relies on tilting them with your body weight, much like a Segway scooter. But unlike the Segway, these inventions have a history of bursting into flames at the most inconvenient of locations, which is why so many airlines have banned them from flights.
With such bad press, the myriad makers of HOVERBOARDs sought to assuage the public’s concerns by getting UL certifications. You might be familiar with Underwriter Laboratories’ circular logo containing the letters “UL” on the electric cords to many (and hopefully all) of your electronic devices. A product emblazoned with the mark can only enjoy that privilege after passing rigorous tests and an on-site visit by UL to the manufacturing facility where the product is made.
The Space Chariot, however, was so eager to start using the UL certification that it did not wait for UL’s report and official certification. Its website prematurely featured product listings for its HOVERBOARD as being UL-certified.
This relatively modest misuse of the certification mark ended up costing a lot of money. In a relatively straightforward decision finding trademark infringement, with willful intent that entitled the plaintiff to enhanced statutory damages, UL sought $2 million dollars in statutory damages. The judge “mercifully” determined that $2 million was too much. He said providing damages for willful infringement should not be a profit source for the plaintiff, but just enough to send a message. He reduced it to $1 million, which would still prove to be a lot of money for a very small company.
I thought this case was interesting, because it was the words that Space Chariot used, and not the products they were selling, that got them in trouble. I’ve written before about certification marks, but in that case it involved a transnational trade issue involving questions of jurisdiction. The facts of this case were less interesting, but the outcome is more disastrous for the infringing party. Faced with $1 million in statutory damages and a freeze on Space Chariot’s assets, its two owners promptly filed for bankruptcy.
After having furnished incomplete information about their various assets and being admonished by the court, they reported that the cost of complying plus their legal bills had forced them into insolvency. The next chapter of this saga is already clear: a fight over whether the judgment for willful trademark infringement is dischargeable under bankruptcy. You tell me!
Mark S. Kaufman
Kaufman & Kahn
747 Third Avenue
New York, NY 10017
Tel. (212) 293-5556
Fax. (212) 355-5009