The Etsy Sellers Getting Sued for Using a Smiley Face

“I’d like to tell you a story about how The Smiley Company go about making the world a ‘kinder place’,” Lilian Wendy-Bunting, who’s using an alias for privacy reasons, tells VICE. “It’s a story about how The Smiley Company aggressively sued myself and over 700 online stores with one SAD lawsuit.”

Now, you probably have some questions. What’s The Smiley Company, you might be wondering. What’s a SAD lawsuit? And what does any of this have to do with the friendly ol’ smiley face?

To answer those questions, first we have to go back to 1963. In Worcester, Massachusetts, a freelance artist called Harvey Ball got a commission from an insurance company looking for an uplifting design to boost employee morale. Ball draws a bright yellow circle with black oval eyes and a beaming smile. His design would go on to adorn Levi’s jeans, Rubik’s cubes and Happy Meals, and even inspired a whole new language of “smiley” symbols – now better known as emojis. It wasn't Ball who would see the lucrative fruits of his labour though, because he never filed a trademark. That bit of long-sighted entrepreneurialism was undertaken in 1971, by French journalist Franklin Loufrani, who claims to have invented the smiley face himself for the newspaper France-Soir.

As the symbol entered mass culture, Loufrani capitalised on the trademark by licensing it out to companies for commercial use. In the mid 90s, Loufrani’s son Nicholas founded The Smiley Company and secured trademarks for the “smiley” brand name in 100 countries around the world. Jump forward to today, and The Smiley Company and its subsidiary SmileyWorld works with companies like Nutella, Clinique, Coca-Cola and Dunkin’ Donuts, and makes around $500m in revenue per year. Nicholas told VICE that the Smiley Company is not based on Ball’s invention (“it’s like saying that Lacoste owes its brand to someone who organised safari tours on the Nile and offered to his clients a pen with a crocodile logo on it!”), but his father put it in simpler words. “When it comes to commercial use, registration is what counts,” Franklin Loufrani told the New York Times in 2006: “I hit the casino jackpot.”

In the summer of 2023, Wendy-Bunting and hundreds of others found this out the hard way. “We were first alerted to something being wrong when our Etsy store was suddenly suspended one day in August,” she tells VICE. “At the time, there were some stories in the press about Etsy withholding monies from sellers and freezing their accounts, so we thought it was something to do with that and would sort itself out.”

When days went by without any contact from Etsy though, Wendy-Bunting and her store partner became more concerned. “After being suspended for about a week we received an email from Etsy legal explaining our account was ‘temporarily suspended’ due to a legal matter that involved us,” Wendy-Bunting says. “The email contained a Dropbox link, which contained a long list of confusing legal letters all issued by some lawyers acting on behalf of The Smiley Company issued in Florida, USA.”

In this folder there was also a restraining order, which meant Etsy was instructed to suspend their accounts, and a document called a Schedule A. “We learnt this was actually the name of this type of lawsuit,” Wendy-Bunting explains: “A ‘Schedule A’ Defendants lawsuit, nicknamed a ‘SAD lawsuit’.”

In The Smiley Company’s case, the use of a lawsuit literally called “SAD” seems almost too on the nose to be true. But these intellectual property (IP) lawsuits are becoming a staple of US legal firms representing large corporate clients and brands. Essentially, they allow companies to accuse a large number of defendants of trademark infringement at once, in a single lawsuit, all for the low complaint filing fee of $402. And, unlike in most other lawsuits where defendants are served a notice, defendants in a SAD lawsuit may only discover they’re being sued when their online marketplace account is frozen. Safe to say, SAD lawsuits are controversial. Indeed, even Wikipedia describes it as “an abusive frivolous lawsuit which exploits logistical technicalities of federal copyright law regarding counterfeit goods”. 

One company that does love SAD lawsuits? The Smiley Company.

“The Smiley Company owns a large number of trademarks,” says Talha Fazlani, a litigator at IP specialists Freeman Harris. “As The Smiley Company becomes a lifestyle brand, they would need to protect their trademark more aggressively and this includes filing claims for trademark infringement against sellers who use their trademark ‘smiley’ to sell any goods,” she explains. “Mix in overzealous lawyers who like to protect their client's trademarks and make money as a result, on a website like Etsy, which has an IP infringement process in place – you get the perfect recipe for mass infringement claims.”

In Wendy-Bunting’s case, the listing that had caught The Smiley Company’s attention was an embroidered patch of a melting smiley face. “We designed and drew the motif from scratch and it was entirely our own,” she says. “It wasn’t even a smiling face like depicted in their trademark.”

At this stage, she still believed the whole thing was a misunderstanding: “They can’t sue UK rave culture.” But then she learned it wasn’t the design that was the issue. “Everyone in the lawsuit had been guilty of only one thing,” Wendy-Bunting says: “Using the word ‘smiley’ in our listing titles, descriptions or even tags.” One woman was sued over a grinning capybara pin badge, which she’d described as “smiley” in the listing.

“Smiley as a brand invest a big part of its revenues in marketing, sales and creative product development. So do our licensees and retailers,” Nicolas Loufrani told VICE. “When third parties use our brand name for product categories we commercialise, this is unfair competition.” 

“There is a perception that The Smiley Company’s trade mark registrations are unfair,” says Eu Jin Ong, an associate solicitor for legal firm Irwin Mitchell, “because they amount to a monopoly over something which should be in the public domain: a smile.” The sense of unfairness is exacerbated, he suggests, by The Smiley Company’s “pattern of enforcement practices against Etsy sellers, many of whom are small businesses run by individuals”.

Loufrani insists that he has personally been “trying to connect with Etsy to find a positive solution to the problem for at least three years, after having been approached by Etsy vendors who had their listings removed by our anti piracy agent and contacted us to find ways to work together.” The issue, as he outlines it, is that the Smiley Company is “not structured to work with lots of small vendors”.

Unfortunately, the law is on Goliath’s side. “It doesn’t matter that the word “smiley” is common, or generic,” explains Éamon Chawke, a partner at IP law firm Briffa. “The common, generic word “Apple”, and the common, generic Nike “tick” symbol are two of the most recognisable trademarks in the world. It doesn’t matter that the word “smiley” has been around for ages [...] Trademarks are not subject to novelty and trademarks can in theory last forever.”

For the people on the other side of a trademark infringement lawsuit, the impact can be devastating. “Last year my Etsy shop closed without any warning or email,” says Mies, who’s name has been changed for privacy reasons, like others in this piece. “A week later I received an email [informing me] that I have been involved in a United States federal lawsuit.”

Understandably, she completely freaked out: “I had a major panic attack, to the point of vomiting.” After a few days of frantic Googling, she decided to reply. “I said that I had no knowledge of this and I didn’t think I was infringing.” Mies was given the “chance” to settle for signing an NDA and paying a one-time fee of $2,500: “Obviously, I didn’t have this money.”

Kelly’s story is almost identical. “I was on holiday and woke up to find that my shop had been closed down,” she tells VICE. Some of her graphic design templates, which feature motifs like pumpkins and cute ghosts, used the word “smiley” in their listing. “I'd left my full time job only a month previous to pursue my Etsy career, and suddenly I had nothing,” she says. “I had just started on antidepressants for a generalised anxiety disorder and I went into full-blown panic mode.”

Before receiving an email from their legal team, Kelly had never even heard of The Smiley Company. “As far as I was aware, generic shapes could not be trademarked,” she says. “It seemed absurd.” But it was very real. “If we didn’t want to pay they would see us in court, our store would remain closed and a judgement usually in the region of $100,000 would be sought against us,” Wendy-Bunting says. “Our stores were being held for ransom in front of our eyes – we felt like we were being scammed.”

Left in the dark for weeks, many defendants turned to the internet. Luckily, they found each other in panicked Reddit threads and online forums. They didn’t know it then, but this was their case’s turning point. “When we received the original email we jumped online to Reddit to see if we could find anyone else, and we immediately found a post about our exact situation,” Wendy-Bunting says. Understandably, confusion was rife, but the relief in finding a support group was palpable. “The support was phenomenal,” Kelly recalls. Mies joined the group too: “I got loads of advice and found others who are also in the lawsuit. This was what got me through – I was not alone.”

Soon the group had connected with around 100 people. “Some people were quite understandably extremely distressed,” Wendy-Bunting says, adding that a few had already paid up out of fear. Some “didn’t even speak English as the lawsuit was only issued to non-US stores,” she adds. “It lends itself in [The Smiley Company’s] favour that people can’t understand the legal documents provided and can’t seek legal representation so easily in another country.”

Despite these hurdles, the group swung into action. “We fought as a group and continued to deny the lawsuit and throw low ball offers,” Wendy-Bunting recounts. “We would not take no for an answer.” They soon agreed they needed proper legal representation. “Eventually, a seller based in Europe came to our group and said they had contact with a brilliant lawyer based in the USA who was on standby waiting to help. The cost for one seller to hire him was too great, but if a few people could band together, he was willing to assist the sellers as a group.”

Up to this point, everyone had been using aliases to protect their privacy, so sending all their information to an unknown lawyer overseas was daunting. But, as Wendy-Bunting puts it, “our backs were against the wall. A group of us signed up agreeing that we would rather pay a lawyer a few hundred dollars than let [The Smiley Company] get a penny from us.”

As soon as they were in contact with the lawyer, their worries disappeared. “He took their lawsuit to pieces through a few swift emails and he contested the smiley face motif even being entitled to a trademark,” Wendy-Bunting explains. A meeting with The Smiley Company’s legal team was put in the diary, then cancelled last minute. The next morning, this turned out to be good news. “The sheer joy that met me when I opened Discord was indescribable,” Wendy-Bunting says. The lawsuit had been dropped for everyone who hadn’t already settled: “When asked why nearly all of us had been dismissed, the lawyer said ‘we just found Etsy sellers to be very passionate’. I think that means we caused the most issues.”

As the days went by, the sellers were still suspended from Etsy, which Wendy-Bunting put down to The Smiley Company dragging their feet about letting the platform know that the lawsuit was dismissed. Then they noticed that a court hearing had originally been set for just a couple of days' time, and a group of them decided that they wanted to face the judge to air their grievances.

On the hearing date, Wendy-Bunting and a few others sat patiently in front of Zoom, anxiously waiting to see if it would even go ahead. Everyone was there under aliases – including ones like “sad face” and “frowning emoji”. When the judge logged on, she addressed each member one by one – patiently reading their onscreen names – and heard their cases. She ordered The Smiley Company’s lawyer to immediately contact Etsy and tell them to reopen the stores. It made for a surreal experience: “In no way shape or form,” says Wendy-Bunting, “did I expect to be in court in Florida via Zoom speaking to a judge in my living room.”

Lawyers for the Smiley Company told VICE that it had already dismissed the Etsy defendants who had not already settled prior to this hearing. Etsy’s process to reactivate accounts, they said, was “out of Smiley’s control”, but the company had offered to follow up with Etsy to make sure the accounts were restored regardless. 

Their stores were back up and running within a few days. “It was all over in about four weeks, but it had felt like a lifetime,” Wendy-Bunting says. Now, she looks back on the ordeal as “a terrible nightmare”: “We’d lost a lot of income and the stress was off the scale. If I hadn’t met others from my case I honestly don’t know what I would have done.”

“A simple cease and desist would have been enough,” Kelly tells VICE today, “but they held our shops at ransom, freezing our assets, then expecting us to pay back thousands of pounds with no income. It was ludicrous.” 

Loufrani maintains that Smiley’s practices are “common to most big IPs” and that it is “unfair” to single out the company, adding that the SAD lawsuits were initiated “only very recently” by an anti-piracy firm hired solely to remove listings of sellers using their trademark. “As soon as I realised last year that some Etsy vendors were involved, I immediately asked my legal team to tell our anti-piracy firm to stop pursuing them, and to not collect money from them,” he told VICE. 

This group of Etsy sellers may have got their lawsuits dismissed, but Wendy-Bunting suspects her group only escaped having to pay huge sums of money because they all stuck together, and made themselves a nuisance. But for anyone else considering an Etsy side hustle, just remember: Sadness can lurk behind a smile.

Update: This article was updated on 1 Feb, 2024 to include comments from Nicholas Loufrani and the Smiley Company.