David Enters the Chat: The Latest David and Goliath Story in the Lopsided Power-Dynamics Saga Playing Out in the Trademark Arena

Now comes David, a small tech startup in Skokie, Illinois that manufactures nanofabrication instruments it calls Tera-Fabs, which it has owned the trademark for since 2017. The Illinois company, formally known as TERA-print, currently has its horns locked with Tesla and SpaceX over Tesla’s proposed use of the term Terafab as the name of its semiconductor foundry in Texas, which has an estimated cost of $16.8 billion and will span about 100 million square feet. Shortly after Tesla filed U.S. trademark applications for the terms “Terafab” and “Tesla Terafab”, lil’ David issued a cease-and-desist letter claiming that Tesla’s use of the terms would cause consumer confusion, given that the company is using its Tera-Fab mark as the name for its desktop photolithography system for bioengineering and sensor research, and they’re probably right.

The test for likelihood of confusion does not rely on whether marks are identical, but on whether regular consumers, who normally lack the technical savvy to understand the difference anyway, might believe the goods or services come from the same place. In this case, Tesla is relying on a rather nuanced distinction to say that the average consumer is not likely to be confused by its proposed use of a mark that is very similar to TERA-print’s “Tera-Fabs”. In its recently-filed complaint requesting that the court issue a declaratory judgement that the marks are not confusingly similar, Tesla stated that the chances of confusion are “vanishingly small”.

There is some precedent for a small business going after a larger business to protect its trademark rights. In 1961, Burger King found itself embroiled in a dispute with a smaller company, also named Burger King, when it registered its trademark in Illinois despite the smaller company already having established common law usage and having filed an Illinois State trademark registration. The smaller Burger King had been operating in the area since 1952 when the larger Burger King filed for federal registration and opened a restaurant about 20 miles away from the original Burger King. The court agreed that the larger Burger King infringed the smaller Burger King’s trademark rights when it started using the Burger King mark in the same area where the smaller restaurant was operating and granted the smaller Burger King exclusive rights to use “Burger King” within a 20-mile radius of the small town where the restaurant was located.

This case doesn’t raise the same legal issues as the Burger King case, but it is a really good example of how small companies take on the Goliath’s of the world, and often win. Contact me today to discuss your long-term trademark defense strategy and how we can protect one of your most valuable assets, your brand.