Business Week January 6, 2000
|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.
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.”