Decisions

Dropping the Name Did Not End the Lawsuit

OpenAI stopped using the io brand months ago and still settled with iyO this week. The concession arrived after the complaint had been amended.

DecisionsBy Servola Tech Desk2026-07-285 min read

AI-assisted, edited by humans. | Editor-in-Chief: Leon Soliman | Editorial standards

Dropping the Name Did Not End the Lawsuit

A two-letter name and thirteen months

In June 2025 Judge Trina L. Thompson of the Northern District of California signed a temporary restraining order stopping OpenAI from using the name io for a hardware product. The plaintiff was iyO Inc., a small wearable-technology company with a federally registered IYO trademark. The defendant was OpenAI and Io Products Inc., the hardware venture it had brought in-house with Jony Ive, in one of the most heavily covered product announcements of the year.

OpenAI appealed and lost. The Ninth Circuit heard argument in November 2025 and affirmed the order in December, in a memorandum from Circuit Judges Sidney R. Thomas, Daniel A. Bress and Salvador Mendoza Jr. In April 2026 Judge Thompson went further and granted a full preliminary injunction, barring OpenAI from using in commerce any mark confusingly similar to iyO's.

On Monday, 27 July, the parties told the court they had settled. They asked for the case to be paused a week while the agreement was finalised, one day before a hearing on OpenAI's motion to strike or dismiss. The terms were not disclosed. Thirteen months, one district judge, a three-judge appellate panel and two injunctions, over two letters.

The concession that arrived too late

The detail that makes this a decision story rather than a trademark story is in OpenAI's own statement. The company said that earlier this year it had decided not to use the io name. It gave up the disputed asset, and it still had to settle in July.

The reason is that by then the case was no longer only about the name. iyO had amended its complaint to add trade-secret claims, and OpenAI's response was a motion to strike or dismiss that amendment, which is the procedural signature of a defendant trying to get back to the smaller dispute. Dropping a brand answers a trademark claim. It does nothing at all about an allegation that something else was taken.

That is the transferable lesson, and it is a timing lesson rather than a legal one. Conceding a contested asset is a genuine remedy while the contested asset is the whole case. Once a plaintiff has amended past it, the concession costs you the asset and buys you nothing, because the claim it would have settled is no longer the claim you are facing. The window is narrow and it closes on the plaintiff's schedule.

Note also what the concession does to your own position. Standing down on the name after an injunction is not a neutral commercial choice; it is an act that a court, a funder and a counterparty all read as a concession on the merits. If you are going to give something up, the value of doing it early is not only that it is cheaper. It is that early enough, it still looks like a decision rather than a result.

Litigation funding removed the attrition option

The strategic assumption a large company usually makes against a small plaintiff is that the small plaintiff runs out of money before the large one runs out of patience. It is rarely written down and it is very often correct. In this case it was wrong, because iyO secured backing from a litigation funder.

Third-party funding is the quiet structural change in commercial disputes over the last decade, and its effect is precisely to break that assumption. A funded claimant has the balance sheet of an investor and the incentives of a plaintiff. Nothing visible about the company changes. The size of its offices, its headcount and its revenue all stay exactly where they were, which is why the other side often does not adjust.

For an owner the practical instruction is short: before choosing to fight rather than settle, establish whether the counterparty is funded. It is usually discoverable, and it is the single fact that most changes the expected cost of the path you are about to pick. A dispute you can win on stamina against an unfunded opponent is a dispute you have to win on the merits against a funded one.

There is a second-order point for anyone on the other side of that equation. If you are the smaller party with a strong claim and no budget, funding is now a realistic route, and the existence of that route is part of why counterparties should take early settlement offers more seriously than they used to.

Where the clearance decision actually sits

Most companies treat name clearance as a formality that happens somewhere before launch. This case relocates it. OpenAI announced the io brand publicly, with a great deal of attention, and the restraining order followed within weeks. The announcement is what created the record of use in commerce that a trademark plaintiff needs, and it is also what made the dispute expensive to lose quietly.

So the decision to clear a mark is not a legal task sitting before shipment. It sits before announcement, which in practice means before the launch date is set, because a cleared alternative name is cheap in March and impossible in June. In Europe the same sequence applies with different offices, whether that is the Intellectual Property Office and the EU register for a British company or the equivalent national register elsewhere, and the preliminary-injunction risk is if anything faster to arrive on this side of the Atlantic.

Run the check in the order the risk arrives: register first, then the announcement, then the product. A name is one of the very few product decisions that a court can reverse for you at a time of someone else's choosing, and this one was reversed twice.

Frequently asked questions

Did OpenAI lose the case?

There was no ruling on the merits. OpenAI lost the interim stages: a restraining order in June 2025, an affirmance of it by the Ninth Circuit in December, and a preliminary injunction in April 2026. The case then settled in July on undisclosed terms, so no court decided who was ultimately right.

Why does an amended complaint matter so much?

Because it changes what has to be settled. A claim about a name can be resolved by giving up the name. A trade-secret claim added later cannot, since it alleges something separate was taken. Once the amendment lands, a defendant who concedes the original point still has the newer claim in front of it.

How early should a name be cleared?

Before it is announced publicly, and ideally before the launch date is committed. Clearance searches and registry checks are inexpensive relative to a rebrand, and the announcement is the event that both creates the evidence of use and makes a later change costly and visible.

Two letters and thirteen months is an expensive way to learn that a concession is only worth what it settles. Give up the contested thing while it is still the whole argument, or accept that you will be giving it up anyway and paying for the rest.

OpenAIiyOtrademarklitigation fundingJony Iveproduct naming

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