American Red Cross vs. J&J: licensing and image key to federal lawsuit.

The dust-up between two giants of their industries--pharmaceutical firm Johnson & Johnson (J&J) and the American Red Cross (ARC)--has placed a spotlight on licensing and trademarks for nonprofits.

The legal dispute "certainly makes everyone conscious of controlling their trademarks," said David Hessekiel, president of the Cause Marketing Forum, based in Rye, N.Y. "Nonprofit brands can be very valuable assets and leaders of nonprofit organizations should use this as a wakeup call to get counsel on the proper steps for protecting their intellectual property; that's the number one lesson."

After several months of trying to settle a dispute over use of the Red Cross symbol, J&J filed suit in U.S. District Court in New York. The New Brunswick, N.J.-based pharmaceutical firm, in a complaint filed Aug. 8, contends the Red Cross "started a campaign to trademark to several businesses for commercial purposes all types of products being sold in many different retail and other commercial outlets...in direct violation of a federal statute protecting the mark as well as in violation of our longstanding trademark rights."

The Red Cross in recent years has entered agreements with companies--in some cases J&J competitors--to market products, such as disaster preparedness and related kits with the Red Cross emblem. For example, Learning Curve and Target stores used the symbol on first aid kits, competing directly with J&J first aid kits. J&J is asking for proceeds, plus interest, punitive damages and attorney fees related to the legal action, and for the products themselves so they can be destroyed.

"For a multibillion-dollar drug company to claim that the Red Cross violated a criminal statute that was created to protect the humanitarian mission of the Red Cross--simply so that J&J can make more money--is obscene," said Mark W. Everson, Red Cross president and CEO.

"I'm sure the Red Cross felt quite comfortable to do what they did. I don't know what else they could've done to avoid this situation," Hessekiel said. "I don't think many nonprofits are in this situation where another business claims to have rights to commercialize their name."

It's not the first time--nor the last--that a nonprofit has found itself in a legal battle over their trademark.

Ten years ago it was the American Medical Association (AMA) that was sued by Sunbeam Corp. after withdrawing from a five-year, multimillion-dollar contract. The Chicago-based AMA would have exclusively endorsed the appliance manufacturer's products, such as blood pressure monitors and heating pads. The deal, however, drew immediate criticism amid ethics concerns and within six months AMA's president and several executives left the organization.

There are nonprofits being formed every week that create names and seek a URL only to find that another organization already claimed it.

"In the planning and the creation of a nonprofit brand, there's a lot of homework that goes into it to make sure you're not infringing on someone else's trademark, or not entering a cluttered space where it's causing problems later on," Hessekiel said.

Some nonprofits have developed policies and guidelines to specifically address the issue of trademarks and licensing. The American Diabetes Association (ADA), headquartered in Alexandria, Va., applies a set of guiding principles when determining whether to partner with a corporation and license the use of its logo or trademark.

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"Sometimes cause marketing is the right thing to do, sometimes it's not the way to go," said Nancy Stinson-Harris, managing director, corporate development. Corporate support accounts for less than 10 percent of total income for the ADA, she added.

The ADA was in discussions with Burger King to create "better for you" food options, intrigued by the idea of helping to educate people about making better food choices, according to Stinson-Harris. Talks lasted about a year with internal debate for and against, she said, but ultimately ADA opted not to pursue the partnership, missing out on the potential for approximately $3 million in revenue.

In another case, ADA entered into a multi-year agreement with Cadbury-Schweppes, maker of Diet Snapple iced tea and Diet Rite soda, to use its logo on some products. "Rather than criticize, we decided to work with the soda industry," Stinson-Harris said. "It was a tremendous opportunity for getting messages out and providing healthy tips to consumers.

The J&J-Red Cross dispute, Hessekiel said, "does show that odd things happen when it comes to the rights of imagery, phrases and trademarks so one should police that."