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Industry takes trademarks to the bank

Published January 1, 2014

Editor's note: This article ran in the January 2014 issue of Bicycle Retailer & Industry News

You can't ride them on the street, dirt or track, but you can take them to the bank, and trademarks have been a currency and a source of dispute in the bike industry at least since 1898. That's when the Kodak camera company successfully sued the maker of Kodak bicycles, arguing that the bike's name devalued its trademark.

Ignaz Schwinn had begun making bikes a few years earlier, and the prolific inventor knew the value of intellectual property, including patents and trademarks. Throughout the 20th century, Schwinn scrupulously — but gently — protected its patents and roughly 300 trademarks. Industry consultant Jay Townley was responsible for protecting trademarks at Schwinn for many years prior to his leaving the company in 1990.

Townley said that in most cases, Schwinn was able to resolve trademark issues without threat of lawsuit.

"It was a lot more friendly then," Townley said. "Schwinn controlled its trademarks and made efforts to police them if we found someone in violation. But if we found someone in violation, we would gently talk first, before we pulled our lawyers on them. We would pick up the phone and explain our position and say, 'here's why we'd like you to agree to cease and desist."

One of Townley's jobs was to ensure that Schwinn retained rights to all its trademarks, which meant demonstrating that all of them remained in commercial use. That required Schwinn to document that each trade name was used in interstate commerce every few years.

If a Schwinn model had been off the market for a time, Townley had a system in place, made more convenient by the corporate headquarters proximity to its factory.

"I would go down to the prototype shop in the factory, and have them make up a chainguard with the model name on it for three bikes. We would either screen the name or make a decal to put on the chain guard. Then we would ship the bikes to another of our distribution centers. We would usually ship them from Chicago to California. We would document the whole thing and that was sufficient to retain the trademark," he said.

Schwinn used this system for models like the Black Phantom, and some of the Crate series models that went in and out of production, such as the green Pea Picker and the yellow Lemon Peeler. Typically, Townley said, the distributor that received the bikes would swap out the chainguard for a model name that could be sold.

Interestingly, Townley said Chevrolet never complained about Schwinn's use of the name Sting-Ray and Corvette on its bikes.

"There was no conflict there, Chevy made cars, we made bikes," he said. In some cases, however, car brands and bike brands have been unable to co-exist happily. Trek, for example, filed suit against Subaru in 2012 over the Subaru CrossTrek auto name. Trek dropped the suit in mid-December this year, just a week after the furor over the Roubaix trademark.

Other bike brands have had their own adventures in trademark protection, and there are enough odd coincidences and war stories to fuel an all-night trade show beer session. Fuji Bikes, which figured importantly in the Roubaix dispute, has had a variety of run-ins over the years.

In Japan, Fuji owned the rights to the trademark for use on any vehicle, and was able to force Fuji Heavy Industries (another Japanese company unrelated to the bike company) to change the name of its Fuji Rabbit scooter in the 1960s. The company adopted a new trademark for its vehicles: Subaru.

In 1988, Nishiki was successful in forcing a new mountain bike brand, Cascade Bicycle Company, to change its name, because Nishiki used the Cascade name for a bike model. Cascade Bicycle Company changed its name to Kona.

Pat Cunnane, the CEO of Advanced Sports International, now Fuji's parent company, learned the value of trademarks early in his career, while working for Ross Bicycle.

"In 1982, we spent a small fortune on the launch of a new mountain bike model at the first Interbike show. It was a $320 bike called the Force 1," Cunnane remembered. It was Ross' first production mountain bike and was made in Pennsylvania.

But soon after the elaborate launch, the California retailer and BMX brand Hank & Frank, which sold a Force 1 BMX frame, forced Ross the change the name of the bike (it was renamed the Mt. Hood).

"Ever since, I've been paranoid about bike names," Cunnane said. "I still have a Ross Force 1 poster to remind me."

Schwinn's protection of its intellectual property turned out to be key. Although it couldn't keep the company from going bankrupt in 1992, its trademarks and patents were by that time its most valuable asset.

However, Schwinn managers had been unable to completely protect its most valuable trademark, the Schwinn name itself. In 1988 the company invested in the Csepel bike factory in Budapest, Hungary, but was prevented by local law from registering the Schwinn name there. After the bankruptcy, the factory's other investors continued selling bikes under the Schwinn Csepel name in Europe, independently of the U.S.-based brand, which is now owned by Dorel. According to its website, the Hungarian company stopped using the Schwinn brand in 2012.

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