Starbucks sues South Dakota company over trademark row
Sunday, July 17, 2011
OMAHA, Neb. (AP) — Starbucks has sued a South Dakota information technology company over a dispute concerning both companies' use of the initials "SDN."
Starbucks recently filed the lawsuit against South Dakota Network LLC in federal court in Omaha, noting that the South Dakota company has an office in Omaha.
The lawsuit is pre-emptive, with Starbucks saying it has received letters from the South Dakota company's lawyer demanding that the Seattle-based coffee giant stop its use of "SDN" to refer to a website and smartphone application offered to Starbucks' customers.
Starbucks says the trouble began last year after it launched the Starbucks Digital Network, a website for use in Starbucks stores. Starbucks also offers a smartphone app called myStarbucks. The lawsuit says Starbucks sometimes uses the acronym SDN to refer to its website, and that the Starbucks' app icon appears on phone screens with a star and the acronym SDN.
South Dakota Network does business as SDN Communications and is a broadband service provider for businesses owned by South Dakota's independent telephone companies, who started SDN more than 20 years ago. SDN Communications operates the biggest fiber-optic network in the region.
The South Dakota company owns several "SDN" registered trademarks for use in a plethora of services, including broadband communications.
"We intend to defend our trademark that we secured," said Vernon Brown, marketing director for SDN Communications. "We've tried to come to an agreement with them, to no avail. It shocked us that suddenly, they were suing us. We're this home-grown, rural South Dakota company that did its trademark homework."
It's unclear why Starbucks sued in a Nebraska court, Brown said. Starbucks says in its lawsuit that it believes the South Dakota company "regularly conducts business with the District of Nebraska."
"We've scratched our heads on that," Brown said. "We do a very limited amount of business in Nebraska. We're a South Dakota-based company in Sioux Falls. The bulk of our business is in South Dakota, by far."
A Starbucks spokesman was not able to shed light on why the Omaha court was chosen.
"We needed to file it in a district that had personal jurisdiction over both parties," Starbucks spokesman Alan Hilowitz said. "We do business in Nebraska and so does South Dakota Network."
But Starbucks also does business in South Dakota, Hilowitz acknowledged.
The lawsuit said that a cease-and-desist letter from SDN Communications' lawyer, coupled with the inability of the two sides to reach an agreement on the use of SDN, placed Starbucks in apprehension of a trademark-infringement lawsuit and threatens "Starbucks' substantial investment in the Starbucks Digital Network."
"Starbucks' use of the acronym SDN is only used as a shorthand reference to its Starbucks Digital Network website and is not used to promote Wi-Fi services or any services other than the Starbucks Digital Network website that is available exclusively to Starbucks' in-store customers," the lawsuit says.
Starbucks is asking the federal court to issue a declaration that Starbucks' use of SDN as an acronym for its digital network does not violate U.S. trademark laws or infringe upon the trademark of SDN Communications.
The lawsuit also seeks to keep SDN Communications from suing Starbucks over the use of the acronym and asks that the South Dakota company pay Starbucks' legal fees incurred by the lawsuit.
Brown insisted that Starbucks' use of the acronym is tantamount to trademark infringement.
"Our biggest concern ... is the potential confusion it causes for customers," Brown said.
Starbucks rejects that concern.
"There's not really much confusion risk with the two," Hilowitz said.