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 customersfirstbank.com and customers1stbank.com 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.

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 customerfirstbank.com. Hopefully they won’t pull the trigger and move forward with the name. They are playing with trademark fire.

CUSTOMER FIRST IN TEXAS
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.)

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.

On Thursday, September 4, an ad from Silver State Bank asked, “Why do so many of Nevada’s strongest businesses trust Silver State Bank?”

The answer? “Security” and “protection.”

The next day, the bank was seized by federal and state regulators.

Apparently people weren’t buying the bank’s “you can trust us” sales pitch. When you lose people’s trust, you lose their deposits. In the two months prior to the bank’s seizure, customers pulled $264 million of the $1.7 billion on deposit at Silver State.

“A run on deposits
is what kills banks.”
— Tim Coffey
VP/Research, FIG Partners

“A run on deposits is what kills banks,” said Tim Coffey, VP/Research for FIG Partners, in an interview in the Las Vegas Review Journal. “It happened that way in the Great Depression, and it’s happening again.”

Reality Check:

• People already don’t trust banks. Most financial institutions are seen as greedy and self-serving.
• Situations like this, where Silver State advertised blatant lies, don’t help financial institutions shake this image or build any credibility
• People’s B.S. detectors trigger alerts whenever they hear someone say “Trust Me.” Images of used-car salesmen go through their minds.

Key Takeaway: It takes more than just words to earn people’s trust. Reminding people that your financial institution is “safe, sound, secure and stable” is an important communications strategy these days. Just remember: Marketing can’t ever create a sense of trust. As with all our relationships, trust is something earned — usually over time.

In his own blog, Gene Blishen, CEO of Mount Lehman Credit Union, reveals the process by which he chose ‘Textus’ as the name of a mobile phone banking system his credit union is now offering.

The service, known as SMS, allows people to perform certain banking services over their mobile phones by sending text messages.

Blishen said he invited input from “all 10 staff members,” noting that “discussions like these, at this level, are a neat attribute of this credit union. Everyone gets involved, everyone has input.”

But then they got stuck on generational differences: the younger staff aligned under one name, the older under another.

So what did he do? He turned to his friends on Twitter:

“Over the last months there is a group, well it really isn’t a group it is an undefined bunch of people associated with credit unions that actively twitter. Why not throw this one out to the pack of experts and see what comes up? There were some great suggestions but one stood out (thank you Ron!) Textus. This was proposed to the group and was quickly accepted. We now have a new name for a new product.”

Blishen adds his final reflections on using an ad hoc naming committee:

“When I look at this process it is so simple. I imagine we ‘should’ have hired the experts, done the focus groups, etc. etc. etc. Would they have understood the product enough to come up with any better names? It just seems so fitting that the name came through Twitter. A tech name for a tech product from a tech bunch of people.”

If Blishen’s credit union was in the United States, he’d only have to worry about two trademarks on file with the USPTO, one of which is dead and the other is for first aid kits. (Not much to worry about there.)

Bottom Line: Blishen is right. Hiring “experts” might have yielded names as good as ‘Textus,’ but better names? Not likely.