Small firm took on big one and won

Small firm took on big one and won

Trademark battles can be tough for little companies, but a Bellingham woman just beat apparel giant Nautica thanks to some East Coast law students. Also: Chinese investor left in dire straits after Path America deal, and Mercer Island home prices aren’t quite in the U.S. top 20.

It isn’t often that small, local companies go up against a nationally known brand and come out on top. But that’s what happened recently when the federal Trademark Trial and Appeal Board ruled in favor of Bellingham-based NautiGirl in a case brought by apparel giant Nautica.

Christine Palmerton used to frequent the Seattle Boat Show representing her yacht rental company, and she noticed there were few items of clothing or accessories directed at women. What little she saw wasn’t especially inspiring: “Seashells and whales don’t say anything about loving boating,” she says.

She decided to create a brand for female boaters that was fun and flirty, but also confident and ready to take the helm.

For her logo, Palmerton chose a determined-looking young woman in a green dress and scarf with blue, 1920s-style hair and a sailor’s cap. The woman holds a martini in one hand and the wheel of a ship in the other. A sign across the wheel says, “NautiGirl — dare to be naughty.”

She launched NautiGirl in January 2008 at the Boat Show, and received her trademark the following year. By 2011 she had sold the rental company to focus solely on NautiGirl, and was selling $50,000 a year in mugs, clothing and tote bags through her website, trade shows and a storefront in Bellingham that has since closed.

By 2013, she was gaining momentum and was on the cusp of hooking investors to take her business to the next level.

That’s when she received a letter from Nautica, a “water-inspired global lifestyle” apparel and accessories brand with hundreds of stores.

Nautica told her to cease and desist, claiming she was copying its logo, which has a sailboat.

A lawyer told her she would basically go bankrupt trying to fight the “corporate bullying” of a company as large as Nautica. “I wanted to curl up in the fetal position and cry,” she said. “But I pulled myself together, thinking this is not what NautiGirl is about.”

Palmerton caught wind of a clinic where law students would take on cases pro bono: Suffolk University Law School’s Intellectual Property and Entrepreneurship Clinic in Boston.

Over three years and 10 law students, the clinic fought NautiGirl’s case for free, saving Palmerton more than $200,000 in legal fees.

The Trademark Trial and Appeal Board looked at whether the NautiGirl trademark — logo, name and tag line — taken as a whole could be mistaken for Nautica’s trademark.

It concluded NautiGirl’s trademark is “so dissimilar in appearance, sound, connotation, and commercial impression that it is unlikely to engender confusion” with what it called the “fairly staid and conservative depiction of a sailboat logo over the word NAUTICA.”

Last month it dismissed Nautica’s effort to cancel Palmerton’s trademark. Spokespeople for Nautica said the company doesn’t comment on legal matters.

Suffolk Law graduate Christina Mott, now working as a clerk for the Superior Court of Massachusetts, said that while working on Palmerton’s case in 2013 and 2014 she ran across more than 100 similar cases Nautica had brought against other companies.

“A lot of small businesses are in the same boat and don’t have the resources to be able to withstand a three-year-long process to defend their intellectual property,” she said. “If (Palmerton) can win the David and Goliath fight against Nautica, it is possible for other small business owners.”

Now — after three years — Palmerton can get back to running and growing her business, which last year was down to $25,000 in sales, she said.

“I had to put my company on hold because I couldn’t get the investment I really needed, because the trademark was in jeopardy,” she said. “Without a trademark you can’t really take it the distance.”

Centralia housing most affordable

Mercer Island is Washington state’s most expensive housing market, while Centralia is the most affordable.

That’s according to the Coldwell Banker Home Listing Report for 2015, which ranks some 2,700 markets across the U.S. based on the average listing price of a four-bedroom, two-bathroom home in each area.

The average listing price for such a house in Washington is $404,638, placing it eighth among most expensive states. Hawaii, where the average price is $654,648, came in first.

On Mercer Island, the average price for a four-bedroom, two-bath home is $1.06 million. Bellevue, Redmond, Sammamish and Kirkland rounded out the top five.

The average listing price in Centralia, in comparison, is $181,067. Spokane Valley, Spokane, Spanaway and Kelso are also among the five cities in the state with most affordable-housing cities in the state.

Despite its million-dollar average, Mercer Island, however, didn’t crack the top 20 most expensive markets in the U.S., coming in at No. 23.

Cities in California dominated the most expensive housing markets, with Newport Beach No. 1 at $2.29 million.

The least expensive market in the study was Cleveland, Ohio, with an average listing price of $74,502.

The report uses statistical averages, as opposed to medians, “to make it useful to homebuyers in the market,” according to a Coldwell Banker spokeswoman.

It also removes outliers such as pricey Medina and Clyde Hill. All cities compared had to have at least 10 four-bedroom, two-bath listings.

Chinese investors worried about loss

Shanghai resident Li can’t bear to break the news to his wife and kids: They might lose their small apartment because their $500,000 investment in a downtown Seattle skyscraper project flopped.

The couple mortgaged their home to raise the funds to invest, hoping to get a U.S. visa through the EB-5 program so their 5- and 8-year-old sons can someday get an American education.

After being pitched to invest in Path America’s 40-story Potala Tower, the family borrowed the money from a Chinese bank, pledging their apartment as collateral, according to Li.

But the tower project at 2116 Fourth Ave. was suspended in August after federal regulators filed a civil fraud lawsuit against Everett-based Path America and its founder, Lobsang Dargey, of Bellevue.

“I really hope I can get my money back to get our home back from the bank,” said Li, 38, who sent an email to The Seattle Times describing his plight and asking for help. He agreed his story could be told if his full name was not used.

U.S. District Court Judge James Robart has granted refunds so far to 24 Path America investors whose funds were still in escrow.

But the interests of such investors are increasingly at odds with other investors whose money Path America has already tied up — those investors want to see the tower completed, or their visa prospects could be ruined.

The court appointed a receiver last month to run Path America and sort out what’s best for investors.

The Portland-based receiver, Michael Grassmueck, said in a court filing he had no objection “in principle” to refunds for Potala Tower investors whose money is sitting in escrow.

But a Seattle attorney for 11 Chinese investors granted refunds says the California escrow agency that has their money is dragging its feet — and time is of the essence to his clients if they want to invest in another project. The EB-5 program will expire on Dec. 11, unless extended by Congress.

“We’ve been frustrated with the delay and lack of cooperation we’ve received, but we’re confident these funds will ultimately be returned said attorney Kelly Sheridan.

The harsh reality facing the 170 Chinese investors and their families is that they bought into an illiquid partnership, hoping the construction of Path America’s $188 million Potala Tower would secure them so-called EB-5 visas to live permanently in the United States. (Another 80 Chinese nationals invested in the firm’s Farmer’s Market project, but those investors’s prospects are better because the Everett project is nearly complete.)

Foreigners who invest at least $500,000 in an eligible project that creates at least 10 full-time jobs over two years can apply for the EB-5 visa. Since 2010, more than two-thirds of approved petitions were from immigrants born in mainland China, federal records show.

Path America recruited Chinese nationals through brokers in China and at seminars in Shanghai and elsewhere. The brokers received a $45,000 finder’s fee for every investor who subscribed to the offering.

While EB-5 investors tend to be affluent, with a net worth over $1 million, Li doesn’t appear to fit that profile.

Li said he heard about Path America earlier this year from a broker who worked with Path America.

The broker said it was “a very low risk project which is handled by a very professional company,” and that his family had a “very high chance to get our money refunded after receiving the green cards,” Li said in an email.

On work trips to the United States, Li wrote, he was impressed by America’s clean air, “nice people” and superior education system.

“Like every parents do, we just want to give our kids better educations and health environments to grow up,” Li wrote.

So the couple decided to invest in Path America’s Potala Tower project.

“We certainly don’t have that much cash,” Li said. But they did have equity in the apartment they had worked 11 years to buy.

In addition to mortgaging their home, the couple also had to shell out about $70,000 for Path America’s administrative fee, an attorney to file the immigration petition and other charges, Li wrote.

In late July, the family’s $500,000 capital contribution was wired to Path America’s escrow agent in California.

A month later, Li was shocked to read about the SEC’s lawsuit against Dargey.

The SEC alleges that Dargey misappropriated tens of millions of dollars from the Potala Tower account for his personal use, including buying a home in Bellevue and commercial properties in Shoreline and Kirkland. Dargey has denied wrongdoing.

“I haven’t shared this news with my wife and kids yet because I don’t know how to explain to them we may potentially [have] lost our money, the green card and our only apartment,” Li wrote to The Seattle Times.

Attorney Steven Fogg, who along with Sheridan represents 11 Chinese investors in the tower project, said all of the investors he’s worked with were affluent, but he didn’t discount the possibility that a middle-class Chinese family might have invested in Path America.

“Many of these investors were coming through agencies,” Fogg said. “Could there be holes in that process? Perhaps.”


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