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One Bank’s $1 Million Naming Mistake

Alliance Bank has prevailed in a trademark lawsuit against Customers 1st Bank who must now destroy all materials containing the Customer 1st name and find a replacement. Immediately.

Only a few months ago, Customers 1st was known as New Century Bank. Discussions about changing the New Century name first arose when ABC News incorrectly used the Philadelphia bank’s logo in a report on the failure of New Century Mortgage in California. Ooops…

In January 2010, someone at New Century Bank proposed the name Customers 1st, so another executive did a search on Google and GoDaddy where he found and both available.

After not one but two failures of banks bearing the New Century moniker, CEO Jay Sidhu had enough. Almost immediately following the second “New Century” seizure, he demanded the switch to Customers 1st be implemented with haste.

“Alliance should not be punished for New Century’s precipitous behavior.”
— Preliminary injunction
against New Century

The problem was, however, that Alliance Bank held a registered trademark for Customer First, the name of its flagship checking product, since 2007.

New Century also tried securing its own registered trademark for Customers 1st, but the USPTO refused separate applications for five variants of the Customers 1st name, citing likely confusion with Alliance’s branded product.

Reality Check: The name of any financial institutions’ products can indeed prevent you from picking a similar moniker for your bank or credit union, especially if someone is claiming a trademark on it. And they don’t even have to be direct competitor. They could be on the opposite side of the country.

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On July 27, 2010, the US District Court for the Eastern District of Pennsylvania granted Alliance Bank’s request for a preliminary injunction. Judge Slomsky, in his 60-page judgment, called New Century’s move to Customers 1st “impulsive,” and shot down every argument they offered in their defense.

Adding another layer to the story are two other banks who have also used the exact same name — Customer First — for their checking products. Indeed the very first Google search result for “Customer First Checking” points to First National Bank in Omaha. They have four different Customer First checking accounts in total. There was also Bay Bank in Washington with a Customer First Checking account, but they were shut down by the FDIC in late July, 2010. Has Alliance Bank pursued these trademark infringers with the same zeal as it did with New Century/Customers 1st? Or are they guilty of selective enforcement?

There’s another bank in Texas about to launch with Customer First as their name. They’ve already got a website up at Hopefully they won’t pull the trigger and move forward with the name. They are playing with trademark fire.

This bank is at least the second ‘Customer First’ in the financial industry, maybe the third?

Ironically, in the midst of all these trademark issues, Alliance Bank thought it would be a good idea to trademark its own name, so it filed Alliance for USPTO registration in July, 2010 while its case against New Century wove through the courts. But… a bank in California has held a registered trademark for Alliance Bank since 1998. However, the California Alliance just got bought up by California Bank & Trust earlier this year (yes, California Bank & Trust’s name has been registered with the USPTO since 2005). There’s no word yet as to whether they intend to retire the Alliance Bank brand and trademark.

Bottom Line: New Century Bank estimates it has already invested $500,000 into the change to Customers 1st, plus it expects to blow another $500,000 on whatever name it picks next. Tragically, they ignored advice from a trademark lawyer, believing instead that Alliance wouldn’t sue. Had they bothered to read the attorney’s recommendation (which they didn’t), they would have almost surely saved the bank a half million. (New Century should be grateful the judge didn’t order them to buy negative search keywords, as another judge did in a suit over the Orion Bank name.)

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Key Takeaways: This situation illustrates the importance of picking a unique name for your bank or credit union. The whole point of branding is differentiation. If your name looks like- or sounds like something other financial institutions are using, the rest of your brand will have to work that much harder to distinguish itself.

If you’re ever in a name change situation, don’t ever pick a new name that “sounds financial” or feels familiar. If a name looks, feels and/or sounds “financial,” it’s almost surely used by some financial institution somewhere. You could very well end up losing a lawsuit and having to start over from scratch.

Further Reading: A 60-page PDF of the ruling is available by clicking here. It’s a fascinating case study in financial naming and trademarks, outlining a number of legal issues. Read through it and you’ll probably learn something new about trademark law.

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  1. Good point Brady. I failed to mention in the original article that had New Century Bank been named something unique in the first place, none of this would have ever happened.

    What happened to New Century is the same thing that happened to no fewer than four separate Heritage Community Banks in New Jersey, South Carolina, Tennessee and Missouri after 60 Minutes did a blow-by-blow story on the FDIC’s seizure of a Heritage Community Bank in Chicago.

    Any financial institution using words from either of the following two articles in its name could be at risk of facing (1) brand confusion by consumers and the media, (2) trademark legal issues, and (3) a less distinct brand.

  2. New Century may end up spending $1 mil. on two name change efforts, but in terms of brand perceptions among its customers and communities, I’d bet the overall cost/damage will end up being much more than the physical dollars spent to change the names. New Century has already adopted the Customer 1st name (as evidenced by visiting the bank’s website), so I’m sure there was some kind of communications with customers to make them aware of the change. As with most name changes in today’s volatile marketplace, the initial name change likely raised questions with current customers and the bank’s community about the bank’s overall viability. This uncertainty will only be compounded when the bank admits making this expensive mistake and changes its name again (along with all signage, ads, etc.).

    In trying to protect its brand from negative perceptions, it sounds like New Century got exactly what it was trying to avoid. Now, does the management team adopt an entirely new name, or just revert back to the New Century name?

  3. Brady, that’s a good point about damage to the bank’s brand, image and reputation. It’s going to take a pretty big blow, no doubt about it.

    I also imagine that the Board isn’t too thrilled with management right now, and it probably isn’t the $1 million that they are upset about. Same thing goes for shareholders. It would be very interesting to sit in on the next shareholders meeting. I expect it won’t be pretty.

    Regarding your comment on customer communications about the name change, the 60-page PDF summarizes what New Century did, and none of it sounds very strategic. The willy-nilly approach included a terse email, “We are now Customers1st,” some vinyl wraps around their exterior signs and changes to the website.

    Initially, New Century had planned for an August rollout, timed to take place after shareholders approved “Customers1st.” But the recent failure of yet another “New Century” sent the bank into a tizzy; they made rash decisions. As the judge suggests, New Century’s actions were hasty, precipitous and impetuous. One could probably go further and call it a reckless, self-defeating disregard for trademark law.

    There’s really no other way to describe this than a colossal f-up. It was entirely avoidable. A little patience and a dash of due-diligence would have seen this situation resolve itself with a much different conclusion.

  4. Conducting the proper due-diligence and research before a name change (or selecting a name for a startup) may be the most important takeaway here. However, this example also speaks to the desperate need for name differentiation among financial institutions. So many names are the same or similar. With troubled/failed/acquired institution news being broadcast nationally, institutions must look beyond their immediate market areas when making choices relative to names. In many ways, institutions with safe/overused names set themselves up for these challenges.

  5. The new name for New Century/Customers 1st will be Customers USA. The bank just acquired a bank with USA in the name. This is a predictable formula, and the kind that leads to names like AOL Time Warner.

      This naming strategy usually stems from one or more of the following reasons:
      The acquired brand has significant equity.
      The two organizations are concerned what might happen if one of the brands disappears (consumer confidence vs. confusion).
      Fewer customers will defect if their brand is retained instead of immediately phased away.
      The two organizations are similarly sized and want to blend brands.
      The acquiring organization needed to promise the CEO/Board of the acquired company that it would retain the brand as a condition of the deal.

    In the New Century/Customers1st situation, I don’t think any of those reasons apply. They are probably assuming this is the least-disruptive option to move forward with. But I think the word “USA” just happened to come along at a time when people inside New Century/Customers 1st had names on their brains. Had New Century acquired another bank, who knows what their name could be today.

  6. Lori Philo-Cook says:

    Okay, I’m confused. There are lots of banks and credit unions with the same or very similar names. If they are not in your market/state, why does it matter? Is it because some are trademarked nationally and some are trademarked at the state level? Could you please clarify?

    I have always trademarked bank names, taglines, and some product names at the state level. In fact, I had “Customer First Service” trademarked for a bank in one state (but only in that state) many years ago (about 18). And, it has been renewed since then. So no one can use it in that state, but wouldn’t see why it couldn’t be used in other states.

    What am I missing?

  7. Hi Lori,

    The state vs. federal trademark issue is one that commonly confuses most financial marketers, leaving many of them improperly protected.

    In essentially every aspect of the judicial system, federal law will trump state law. If you have a federally-registered trademark through the USPTO, you are pretty much entitled to exclusive use that trademark in the US (there are some limitations and restrictions that apply).

    Hypothetical: A tiny credit union in California chooses “Awesome Financial” as its name and quickly gets a USPTO trademark. Then a few years later, some big bank in New York with billions of dollars in assets also changes names to “Awesome Financial.” Now, whenever someone searches Google for “Awesome Financial,” the credit union gets pushed wayyy back in the results. That isn’t fair, is it? The NY bank is depriving the CA credit union of business it could be getting via Google searches. At the very least, the NY bank is undermining the CA credit union’s search engine marketing efforts.

    In this internet-based society where everything is available to everyone through Google, a state-level trademark doesn’t really cut it anymore. The USPTO is almost always a good idea.

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