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Entrepreneur, the Magazine That Sues Entrepreneurs

 
The curious case of Entrepreneur Media Inc., which never rests in
its quest to nurture—and afflict—other startups

By Paul M. Barrett
     May 19 (Bloomberg BusinessWeek) -- Entrepreneur Media Inc.
sells the idea of the self-made little guy getting ahead. Based
in Irvine, Calif., EMI, as the company is known, publishes
Entrepreneur, a monthly magazine with a circulation of 607,000
and a colorful history. According to newspaper reports, the
periodical's founder and former owner, Chase Revel, once tried
robbing banks for a living. Today, EMI conducts seminars
revealing "business success secrets" of a more mainstream nature.
It markets instructional CDs and sells advertising to package
deliverers, health insurers, and franchisers such as Wahoo's Fish
Taco restaurants. In other words, EMI caters to all things
entrepreneurial. Strangely, it also smashes the dreams of the
self- starters it aims to serve.
     Daniel R. Castro, a serial entrepreneur in Austin, Tex.,
received a stern letter from EMI's lawyers last September
ordering him to "cease and desist" using his new website,
EntrepreneurOlogy.com. In his day, Castro, 50, has started a law
firm, a mortgage company, and a real estate-lending outfit. He
employs a half-dozen people full-time and coordinates the work of
a platoon of brokers. He also delivers motivational speeches to
other business owners and hopes the new website will provide an
online home for a workshop series. "I was dumbfounded," he says
of the cease-and-desist letter. Like a lot of people who work for
themselves, he doesn't like to be told what to do. "Their
problem," he says of EMI, "was that they didn't know who they
were picking on."
     An attorney with the corporate law firm Latham & Watkins
informed Castro that EMI owns the U.S. trademark for the word
"entrepreneur." With 2,000 lawyers in 31 offices around the
world, Latham polices EMI's intellectual property aggressively.
The firm even instructed Castro to surrender his domain name to
EMI. "If you fail to abide by these demands," the letter said,
"Entrepreneur Media will have no choice but to take appropriate
action to prevent continued use of an infringing mark and domain
name."
     The archetypal trademark—for McDonald's (MCD) or Xerox,
say—prevents competitors from using a distinctive word that might
cause consumers to assume they were buying a product made by the
mark holder. To Castro and others, "entrepreneur" seems
different. "How can you trademark a commonly used word, derived
from the French, that's hundreds of years old?" he asks. And more
to the point, "why would the publisher of Entrepreneur magazine
be bullying entrepreneurs?"
     Since the early 1980s, EMI has sued or threatened to sue
scores of businesses and organizations it claims infringed its
trademarks. EMI won't provide a tally of its targets, but it
almost always prevails.
     Scott Smith, a public-relations man in Sacramento, Calif.,
fought back and paid the price. A federal judge ruled in 2003
that he had to drop EntrepreneurPR as his firm name, stop
publishing a quarterly compilation of press releases called
Entrepreneur Illustrated, and pay EMI more than $1 million in
damages and attorneys' fees. "They crushed me, and I had to file
for personal bankruptcy," says Smith, who is still contesting
what he owes the publisher.
     EMI goes after a broad spectrum of businesses, ranging from
Internet startups to a fledgling clothing manufacturer. In 2001
it persuaded the nonprofit Donald H. Jones Center for
Entrepreneurship at Carnegie Mellon University to change the
title of its quarterly alumni newsletter, The Entrepreneur. In
2004 it stopped 3Entrepreneurs, a San Diego apparel company, from
putting the phrase "Entrepreneur Generation" on T-shirts,
sweaters, and hats. At present, EMI is skirmishing with the
Entrepreneur Hall of Fame and Museum, a one-man website based in
Glen Cove, N.Y., with aspirations of someday occupying a
brick-and-mortar facility. "Entrepreneur is the enemy of
entrepreneurs," says the hall of fame's proprietor, Mitch
Schlimer, who began his career selling New York-style soft
pretzels from a street cart with his grandfather.
     Demonized by those it pursues, EMI's legal strategy benefits
from the momentum of a larger judicial trend. "The point of
federal trademark law is to prevent consumer confusion," explains
Mark A. Lemley, an intellectual property scholar at Stanford Law
School. "In recent decades, though, courts have expanded the idea
of consumer confusion so much that you have businesses like
Entrepreneur Media stifling other, smaller businesses whose goods
or services just aren't likely to interfere with consumers making
well-informed decisions." In EMI's case, the professor adds,
"it's particularly ironic because the trademark holder is in the
business of helping the kinds of people and businesses it's
suing."
     EMI sees no irony, let alone bullying. In an e-mail, the
company's lead attorney at Latham, Perry J. Viscounty, says his
client "vigorously enforces its trademark rights in appropriate
circumstances, when a third-party use is likely to cause
confusion in the marketplace." In a separate letter, the company
adds: "EMI has been forced to take action against individuals,
small businesses, and large businesses." EMI asserts that the
action against apparel maker 3Entrepreneurs was appropriate
because the publisher has also produced clothing with its
trademarked "entrepreneur" logo. "EMI has taken no action against
unrelated applications and uses," the company continues, pointing
to the example of Brother International's use of "Entrepreneur"
on sewing machines. Viscounty notes that Bloomberg LP, owner of
Bloomberg Businessweek, also "has a history of taking action,
where appropriate, to protect its rights when consumer confusion
is likely." He ticks off several examples, including Bloomberg LP
v. Bloomberg Mortgage, a successful suit filed in federal court
in New York in 2002, and ongoing efforts to protect the company's
Bloomberg Launchpad trademark for computer programs and software.
     While Viscounty is correct that many intellectual property
owners enforce their rights to the fullest extent of the law, the
comparison with Bloomberg or any other corporation has a flaw:
Unlike EMI, most companies don't make a practice of suing the
very people they hope to attract.

Chase Revel, who started Entrepreneur in the early 1970s, was a
leading purveyor of goods and services related to the swift
acquisition of wealth. His published works include 184 Businesses
Anyone Can Start and Make a Lot of Money and 168 More Businesses
Anyone Can Start and Make a Lot of Money. Revel's ideas ran the
gamut from the seductive and legal to the nefarious and illegal.
In 1966 he was sentenced to four years in prison under his given
name, John Leonard Burke, for attempting to rob four banks in
Houston in one day, according to articles published 20 years
later by the Los Angeles Times. Revel (then Burke) hired helpers
to deliver letters warning bank tellers that their children had
been kidnapped. (Revel researched which employees had school-age
kids.) The notes stated that the children would be returned only
if the tellers surrendered large canvas bags stuffed with cash.
In fact, no children had been snatched, and the scheme collapsed
almost immediately.
     Settling in Los Angeles after his release, Revel started
Entrepreneur and, in 1979, registered the trademark for
"entrepreneur." He promptly began to enforce the mark—for
example, by having his attorney send a cease-and-desist letter to
the Entrepreneur Assn. at the University of California's Graduate
School of Management in Los Angeles in November 1980. In 1987,
Revel sold a majority stake in Entrepreneur to an investor group
led by businessman Peter J. Shea and later offloaded the rest.
The trademark went along with the magazine.
     After moving on to other pursuits, Revel continued to have
scrapes with the authorities. As recently as 2006 he denied
wrongdoing and paid $27,500 in a settlement of civil allegations
by the Federal Trade Commission that he created false advertising
for Gero Vita dietary supplements. According to public records,
Revel, now 74, owns a home in Oceanside, Calif. A man who
answered the phone there hung up immediately, and a message went
unreturned.

In its letter, EMI asserts that "while Mr. Revel has an
interesting history, he and his alleged actions have no relevance
to EMI's operations or efforts to enforce its intellectual
property rights." Revel, the company adds, "has had nothing to do
with, and no contact with, EMI for almost 30 years." Shea, the
company's current owner and chief executive officer, has no
desire to talk to "a competing publication" about his magazine's
distant past or its trademark enforcement policies, the letter
states. In an interview with the magazine World Trademark Review
in 2009, Shea, who earlier made a fortune marketing a simulated
version of stained glass, said: "Basically, we're trying to
protect our brand."
     Smith, the Sacramento public-relations man, counters that
EMI protects its brand by rolling over tiny capitalists and using
lawsuit damages as a source of income revenue. He presents
himself as the quintessential victim of what he calls EMI's
maltreatment. "There's no way my little firm representing small
businesses would be confused with a national magazine," he
complains. "This is a scam."
     The federal courts disagreed. In 2003 a U.S. district judge
in Los Angeles found that both Smith's company, EntrepreneurPR,
and Entrepreneur magazine "printed publications geared for small
businesses." Testimony showed that some of Smith's clients "were
under the mistaken belief that there was an affiliation between
Entrepreneur and EntrepreneurPR," the judge added. In 2004 the
U.S. Court of Appeals for the Ninth Circuit in San Francisco
affirmed the ruling of willful infringement. Smith has changed
the name of his company to BizStarz, laid off his half-dozen
employees, and works out of his home.
     "Smith's own actions caused the demise of his business," EMI
says in its letter. "Rather than focusing his remaining resources
on his rebranded company and half-dozen employees, Smith
squandered the company's time and money on an ill-advised
appeal."
     Castro, the Austin real estate broker, also doubts anyone
would mix up his website EntrepreneurOlogy.com with Entrepreneur.
"I mean, how is 'entrepreneurology,' a word I have to admit you
can barely pronounce, going to cut into their business?" he asks.
EMI's main website is entrepreneur.com. It also has a
Spanish-language site called entrepreneurenespanol.com.
     In addition to selling residential real estate, Castro has a
law license and courtroom experience. He responded to EMI's
cease-and-desist letter by preemptively suing the publisher in
federal court in Austin. "It was Castro who leapt to litigation,"
says EMI. In April a federal judge dismissed 12 of Castro's 14
claims but said he could continue to pursue his allegation that
EMI's core trademark is invalid. As described in his court
papers, Castro's argument is that "the public has not come to
associate the word 'entrepreneur' exclusively with EMI's products
or services." The word, he adds, "is a generic noun that is in
the public domain."
     "Generic" is a crucial term of art in intellectual property
law. A judicial determination of generic status ordinarily dooms
a trademark. Even distinctive marks that become generic can lose
their legal protection; cellophane and aspirin are but two
examples.
     EMI argues in its court filings in Austin that "Castro's
entire argument miscomprehends and misstates" trademark law. In
connection with business media, "entrepreneur" is not generic,
EMI contends; it has acquired "secondary meaning," another term
of art that refers to a seemingly ordinary word that has come to
be associated with a particular company's products. "Time," for
example, has been trademarked to identify a magazine, even though
the word also refers to hours and minutes, EMI maintains. Castro
can make use of "entrepreneur" in its descriptive sense ("Hello,
my name is Daniel Castro, and I am an entrepreneur"), but he may
not use the word as the name for a communications business, EMI
says.
     To prevent a trademark from deteriorating, cellophane-style,
into a generic term, courts encourage mark holders to protect
their interests. "EMI has the right and obligation to police and
enforce its trademark rights, or risk diminishing or altogether
losing those rights," the company argues in its court papers.
     In the litigious precincts of intellectual property, the
aggressor inevitably finds itself chasing its own tail—and EMI
and its lawyers have actually tried to use the "generic" argument
to their advantage. In 2008, Ernst & Young, one of the Big Four
accounting firms, sued EMI in federal court in New York, alleging
that the publisher violated its trademark for an Entrepreneur of
the Year award. The dispute over the prize dates to 1994, when
Ernst first sent EMI a cease-and-desist missive aimed at
Entrepreneur's similarly named award. EMI fired back in a lawsuit
in California that Ernst's award trademark cannot be infringed
because "entrepreneur of the year" is a generic term. In the end,
Ernst and EMI settled their differences confidentially and out of
court. EMI changed its award name slightly (nominations for
"Entrepreneur Magazine's Entrepreneur of 2011" are now open),
while Ernst is celebrating the 25th anniversary of its
trademarked Entrepreneur of the Year program.
     This year, as in years past, the real winners don't even
have to enter. They are the many lawyers who profitably stoke the
perennial flames of intellectual property antagonism. They may
not be entrepreneurs, but EMI has certainly bulked up their bank
accounts.

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