Startups Vs. Startups: App Developer Gets Sued By Lightbank-Backed WhosHere

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So here’s a story that hopefully will be an eye-opener for entrepreneurs and startups, while providing a painful peek into trademark harassment and the importance of due diligence. It goes a little something like this: About two years ago, software engineer Brian Hamachek decided to build an app first on Windows Mobile (how some horror stories have been known to begin), then on Windows Phone, that enables location-based chat — and calling. In other words, call and chat with new friends who live close by, for free. He called it Who’s Near Me Live.

Long story short: A Lightbank-backed startup called myRete owns and operates a similar app called WhosHere, which was founded two years earlier. Well, they didn’t like the name Brian had chosen for the app — claimed it was too similar — so they asked him to change it. At first, he said “why no thank you,” but then they hit him with a C&D and then a lawsuit, so he acquiesced. Sounds like standard stuff for startup vs. incumbent, right? Well, it doesn’t end there.

Remember, this account is one-sided, and only tells Hamachek’s side of the story. [WhosHere's response is now included below.] We’ve reached out to WhosHere co-founder and COO Stephen Smith as well as WhosHere PR and will update when we learn more. After having slowly built his user base to about 400K (with limited revenues), he decided to expand and launch an iPhone app. Fellow writer and awesome person Sarah Perez covered the app’s launch for TC. According to Brian’s account of events, that’s when things turned sue-y — or, sour, if you prefer.

But don’t blame TechCrunch. Brian had changed his app’s name to WNM and moved all appearances of “Who’s Near Me Live” under the more prominent “WNMs” on the homepage, social channels, etc. The name still appeared, but Brian made it clear that the name was now “WNM.” WhosHere had apparently thanked him and things remained gravy for about a year — until the TechCrunch post. Seeing that WNM was getting some coverage, WhosHere slapped him with a federal lawsuit, alleging trademark infringement, unfair competition, cybersquating, and breach of contract.

They apparently gave him two choices (paraphrased, put simply): Hand over all your assets to us, or shut everything down completely. (See Brian’s description here.) Obviously, the WNM founder wasn’t particularly thrilled with either of those ideas, but even after exchanging emails with those on the other side, things remained unresolved.

Locked in a stalemate, WhosHere pushed for a default judgement and sent Hamachek the resulting paperwork. Not long after, he received a notice saying that he’d missed the deadline to file a response to the lawsuit. Unaware of any proposed deadline, he dug around and found that the page that included the terms had been cleverly (or dickishly) removed from the paperwork he was sent.

Now he has 7 days to “lawyer up,” and respond. In his words:

I have less than 7 days to find an affordable, but competent, lawyer, request the default be put aside, and respond to their accusations. The lawyers I have spoken to thus far are asking me for at least a $10,000 retainer just to get started on the process and I don’t have those kind of resources laying around. I have spent 2 years building this project into something of a success, sacrificing my time, sleep, and social life for this app every waking day. I fear without help in the next couple days, everything may have been wasted.

The WNM founder today posted the above, non-abridged story to his blog, asking the startup community for support and advice — and included a “Donate” button should readers want to give to the cause. The post found some traction on Hacker News, and he tells us that he’s been surprised (and humbled) to find a community ready to support him, or at least lob pearls of wisdom from the comment section.

He also tells us that there’s more back story. About two years ago, having devised the idea for Who’s Near Me Live, he contacted Smith. Knowing they were already working on a similar app and service, he wanted to build a Windows Mobile version of WhosHere for them. After a back and forth that lasted about two weeks, Smith decided that they didn’t want to take on Hamachek’s services, but they encouraged him to build it himself and see what kind of traction he was able to get.

According to Hamachek, Smith told him that if the app found a user base, they would consider bringing him on, or taking the next step. (Psych!) It took awhile as Brian worked on Who’s Near Me Live in his spare time, working at cloud storage startup, Storsimple, full-time. But a year later, Hamachek says that Smith reached out to him and asked him politely to change the name. When he refused, he received the C&D letter and a lawsuit.

For entrepreneurs and founders out there, as Johnny_Law suggests in the comment section of Hamachek’s post, it’s at this point that he should have retained the services of a lawyerin’ type. But, understandably, not wanting to pay an armload, and, as he says, believing that two reasonable parties would/should be able to work things out, he declined to do that and just accepted the need to change the name.

He might also have removed all incidences of “Who’s Near Me Live” from the site, but he didn’t do that either. He might also have chosen a better name to begin with, but thinking there was enough differentiation, he didn’t bother. A mistake many would make, and, after all, hindsight is 20/20. (Also why sites like Trademarkia exist.)

In regard to the missing “deadline” from WhosHere’s second, federal lawsuit, as Hamachek has since learned, this can be standard practice for lawyers looking to take advantage of those defendants who are unfamiliar with IP/Trademark law and the litigation process. And it seems to have worked, sadly proving their point.

So, while it’s difficult not to see all this as being a bit underhanded, again, as JohnnyLaw points out, painting WhosHere as the “bad guy” may be a little bit misguided. Although, admittedly, if Hamachek’s account is true, it does seem rought. It could also just be a play for 400K users and some SEO. (Again, we’re waiting for a response from WhosHere.)

While Hamachek says he’s open to fully changing the name and removing any appearance of “Who’s Near Me,” he says that the lawsuits seem to be evidence that WhosHere is no longer satisfied with a name change, they want the whole kit-and-kaboodle. So, as a result, he’s currently looking for lawyers and hopes that they can still negotiate a fair result, although the two parties may be beyond that at this point.

A friend who works at one of the biggest business litigation firms told me that courts usually don’t have a lot of sympathy for those that miss filing deadlines. If that happens because one was improperly served or there was a procedural defect in play, avoiding the default is easier. If, instead, the lawyers can prove they did everything right, it generally depends on the judge. And even if there is a default, WhosHere would have to collect the judgement, at which point they may go back to court, where a judge may be more willing to hear the merits rather than resolve on a technicality.

But, again, the moral is: If someone sticks you with a lawsuit, hire a lawyer. And to the bullies: Listen to Bart Simpson (above).

You can find Brian’s post here and myRete is here.

What do you think? How can both startup get back to building their products and avoid the distraction of litigation?

UPDATE: WhosHere responded on Zendesk, you can read their response below:

We are not patent trolls, we are entrepreneurs and developers, and here’s what we’re struggling with.

We founded WhosHere in 2008. Mr. Hamacheck approached us in 2010 to integrate his idea for a Windows Mobile version into WhosHere. At that point, we had built a successful app on iOS with just us two founders doing everything from coding to customer service. We had to make a decision on where to put our resources and declined his offer.

We bootstrapped WhosHere for 3 years, through 4 million users and into a profitable company when we met with and ultimately took an investment from Lightbank last summer. We were exceptionally proud of everything we had built including our brand name.

After we declined the opportunity to integrate a yet-to-be-built Windows Mobile version, Mr. Hamachek said he was going to go ahead and develop his own app. Our only response was, ‘fine, but please don’t trade on our brand name. We’ve invested a lot into WhosHere and our trademark.’

We felt that it would be unfair competition (and bad for the strength of our trademark) if we let another app in the space have a name that sounded very similar to WhosHere. We then politely asked him to rebrand. He agreed. When the original brand name came back this spring we felt sucker punched. Despite a lot of correspondence with Mr. Hamachek, we have arrived at this unfortunate point.

Two other data points that folks may find helpful:

We did not withhold any court documents from Mr. Hamachek. The documents filed with the court confirm that WhosHere has served Mr. Hamachek with all relevant documents.
Just a few weeks ago, we offered to partner with Mr. Hamachek. We offered to integrate his Windows Mobile work into WhosHere and offered a revenue share deal for $100,000, plus fees, for ongoing development (that is where the license agreement that Mr. Hamacheck references comes into play, but he left this upside out of his blog post). We truly expected a counter offer. But, when he rejected the offer outright, we asked him what he thought was fair. We never received a response.
The relevant emails are posted below.

To all the other entrepreneurs and developers out there, this is the bottom line for the two of us. We literally bet our life savings on this and years of zero vacations to bring WhosHere to where it is. We were both down to a week or two of savings when we turned WhosHere into a profitable company. Would you protect your company and its name?

Bryant Harris & Stephen Smith

UPDATE 2: The back and forth continues, and it looks like it’s headed to court. Brian Hamachek has responded to WhosHere’s comments in another blog post.

In response to this very candid email that I sent, I received a response which in my eyes clearly was taking advantage of my situation which I had just revealed to them. They had told me that I either had to give them WNM or basically shut it down. Yes, in exchange for my giving them WNM, they offered to pay 33% of the app’s revenue up to $100,000 (minus legal fees). I knew that if I gave them WNM though, it would never be implemented into their system. They would shut it down and I would never see a dime. Plus, this was never about the money. I was angry, well actually I was way beyond angry.

UPDATE 3: From Hamachek:

WhosHere states in their response that their only concern here is over the infringement upon their trademark. I would like to make a public offer to WhosHere that in exchange for their dismissing the lawsuit I will:

  • Within 48 hours remove every mention of “Who’s Near Me” from the WNM Live website, mobile apps, twitter account, ect.
  • I will enter into a contract stating that I will not use the name “Who’s Near Me” in any way going forward.

If this really is a matter of them protecting their trademark, I can’t see why they wouldn’t want to accept this offer. If they don’t accept it, it is obvious that this is about harming their competitors via the legal system.

Below you’ll find the original lawsuit and attachments in one: