January 8, 2008

This 23-page PDF from the U.S. District Court of Alabama should serve as a cautionary tale about what can happen if you choose a new name that’s too similar to someone else’s – especially when you’re in the same market.

It all started on March 26, 2005 when BF Goodrich Employees Federal Credit Union chose to become ‘The Credit Union of Alabama Federal Credit Union‘ (sic, there are indeed two references to “credit union” in the name). This irked ‘Alabama Credit Union,’ who immediately fired off a cease-and-desist.

Alabama Credit Union then appealed to NCUA, asking them to rescind the name change. The NCUA declined to get involved.

The Alabama Credit Union Administration protested The Credit Union of Alabama’s choice in name, saying it would “cause confusion and was not in the best interest” of either credit union.

One party sued another and vice versa. Alabama Credit Union accused The Credit Union of Alabama of:

• deceptive trade practices
• unfair competition
• common law trademark infringement

The Credit Union of Alabama counter-sued for:

• cybersquatting
• tortious interference
• mail fraud
• RICO violations
• fraudulent suppression
• unfair competition
• conspiracy

Alabama Credit Union was awarded a summary judgment on all points related to The Credit Union of Alabama’s countersuit.

At least one member of The Credit Union of Alabama isn’t too happy about all this legal wrangling. In a letter to The Tuscaloosa News, Jerry Logan said, “The money spent on this lawsuit could have been returned to the member-owners in more dividends and also to the employees in a well-deserved raise. Instead it has gone to an attorney.”

Key Question: How will the courts view the fact that there are 17 credit unions with the word “Alabama” in their name, including ‘Alabama Central Credit Union‘ and nine others whose names start with “Alabama?”

Reality Check: The NCUA may approve a name change, but that doesn’t mean you won’t get sued for trademark infringement. The NCUA only performs cursory examinations of trade names. It seldom – if ever – gets involved in trade name battles, even when they’ve okay’d a new name under dispute. The US Patent & Trademark Office oversees all federal trademarks, not the NCUA.

Bottom Line: Which option do you think would cost more? Hiring an experienced naming firm? Or settling these lawsuits…and potentially having to rename again?

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Previous related stories from The Financial Brand:

• Advanta forces Avanta to become ‘Altana’
• Banks, credit unions grapple with their monikers
• Credit union sues bank over trademarked scarlet letter
• Ohio bank learns hard lesson about trademark law

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