The entrepreuner’s naming trap 2: Lack of due diligence

Financial advisor Sid Blum had been running his own firm, GreenLight Fee Only Advisors, for more than three years when in April he received a threatening legal letter from Greenlight Capital Inc., the hedge fund led by legendary short-seller David Einhorn.

The letter ordered Mr. Blum to stop using the GreenLight name. The hedge fund followed up by filing a lawsuit in May.

The misstep cost Mr. Blum’s firm $10,000 in legal fees, according to Investment News. And as part of a settlement reached in July, he agreed to change the name of the firm to GreatLight Fee Only Advisors LLC.

“People don’t understand how much work there is to start a new business,” said Stevan Lieberman, an attorney with the intellectual-property law firm Greenberg & Lieberman LLC. “If they’re going to do it, they better do it right or they’re setting themselves up for failure.”

In Mr. Blum’s case, he checked with the state of Illinois and also completed some Google searches but didn’t find the hedge fund company in those searches.

“It was a headache. It just comes out of nowhere,” he said. “It’s not something you expected or something you would have thought of. Then you’re in the middle of it dealing with it every day.”

All too often people start businesses and underestimate the importance of legally securing a name. Mr. Blum was fortunate that his firm’s errors-and-omissions-insurance policy covered the bulk of the legal fees. But he’s not taking any chances this time. After his firm settled the suit with the hedge fund company, he filed a trademark for GreatLight Fee Only Advisors.

One thought on “The entrepreuner’s naming trap 2: Lack of due diligence

  1. Pingback: Ready, Fire, Aim : Stage One (of Four): Infancy | Venture Capital Resources

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