The mere pending threat of trademark litigation can shut down small platforms, even if it never goes to trial
Anthony James Dispoto, 2015 - J.D. Candidate 2015, University of San Diego School of Law. “Protecting Small Businesses against Trademark Bullying: Creating a Federal Law to Remove the Disparity of Leverage Trademark Holders Maintain over Small Business,” 16 SAN DIEGO INT'l L.J. 457 (2015). Hein Online, accessed via University of Michigan //DH
In a unanimous decision, the Supreme Court seemed to agree that there were higher costs to a business because of infringement claims and it warned in Already, LLC v. Nike, Inc. that litigation produces limitations in the marketplace and that other costs could arise from the threat of trademark infringement:
[C]harges of trademark infringement can be disruptive to the good business relations between the manufacturer alleged to have been an infringer and its distributors, retailers, and investors. The mere pendency of litigation can mean that other actors in the marketplace may be reluctant to have future dealings with the alleged infringer. 86
In other words, the threat of trademark litigation is effecting the marketplace.
Circumstantial evidence supports the Supreme Court's statement concerning litigation's threatening effect on the marketplace." Within the past decade, the injunctions, attorney's fees, and damages ordered by courts in trademark actions have dropped by approximately ninety-nine percent; however, the number of trademark infringement claims filed is ascending on a yearly basis.88 This demonstrates that while more cases are being filed, a substantial number of them are being resolved in the prelitigation stages.
Professors Kenneth Port and Leah Chan Grinvald believe the result of bringing trademark infringement cases is at least in part due to companies' improper desire to expand their market share and thereby impose greater costs onto the market. 89 The greater market costs are caused by greater legal costs, which companies must calculate as additional investment and may become a barrier to entry for new market entrants. 90 With a higher likelihood that they will have to face legal action to stay in the market, similar to the Chick-fil-A/Eat More Kale case above, potential entrants might stay away from the market altogether. 91 By dissuading potential entrants, the marketplace is affected, because the market's efficiency will suffer due to less competition and less need to innovate, the market's suppliers will have fewer individuals to sell to, and the consumer will have fewer choices, thus diminishing the effectiveness of the trademark laws meant to protect those individuals. 92