Lulu sues Hulu; you know why

Web publisher takes on NBC, News Corp. site

Bob Young doesn't fear a fight.

In his previous life, he helped start and run Red Hat, the Raleigh company that took on software titan Microsoft.

Now he's top dog at Internet publisher Lulu and he's getting set to scrap with Hulu, a Web venture with a strikingly similar name backed by media giants NBC and Rupert Murdoch's News Corp.

Morrisville-based Lulu claims Hulu is an illegal copycat of its name and business strategy. In a complaint filed Wednesday in the U.S. District Court in Raleigh, Lulu alleges Hulu wants to usurp its position in the digital media market by confusing the audience.

The lawsuit accuses the venture of trademark infringement, deceptive trade practices and cyber piracy. It comes less than a week after NBC and News Corp. selected the name Hulu. The site is scheduled to start in October.

"We have spent more than five years and tens of millions of dollars in investment successfully building the Lulu brand and Web site," Young said. "Then we come to work last Thursday and discover a new firm with a phonetically identical name announced plans to do what we are already doing."

NBC and News Corp. were mum on the lawsuit Thursday. "We have no comment regarding any litigation," said Hulu spokeswoman Christina Lee.

That could be a sign the suit is an open and shut case, Young said. His company is asking the court to bar Hulu from registering the name, or any name "confusingly similar" to Lulu.

Young founded Lulu in 2002 as a self-publishing Web site where authors could establish intellectual property rights and market their work. Lulu makes money taking a cut of sales generated by self-publishers.

The company has blossomed into a multimedia venue for consumers and purveyors of video, music, art and other published works. It now claims 1.2 million registered users and a growth rate of nearly 15,000 users each week.

Like YouTube, Lulu is riding the explosion of high-speed internet and online content trading. NBC and News Corp. are keen to enter that space to pump content from their TV networks and film studios.

"This is a game changer for Internet video," Peter Chernin, president and chief operating officer of News Corp., said in announcing the venture last month. The venture predicts reaching 96 percent of U.S. broadband users through distribution deals with AOL, MSN, MySpace and Yahoo.

So why the name Hulu?

"Objectively, Hulu is short, easy to spell, easy to pronounce, and rhymes with itself," NBC Universal CEO Jason Kilar wrote in a statement last week. "Subjectively, Hulu strikes us as an inherently fun name, one that captures the spirit of the service we're building."

Young isn't buying it.

"They're credible and should have known better," he said. "If it were just a little startup, we probably would have tried to engage them in a conversation to first point out the mistake. But these guys are multibillion-dollar corporations. We have to assume that with the credibility of their investors, they know what they're doing and are doing it intentionally."

Young noted the word "hulu" means cease and desist in Swahili.

While at Red Hat, Young helped carry the Linux software publisher and its open-source software movement from relative obscurity to corporate standard. The company is now the world's largest distributor of the Linux operating system, one of the top competitors to proprietary systems from Microsoft.

Despite relishing his companies' underdog status, Young said he has been in the business world 29 years and had never filed a lawsuit until now.

While at Red Hat, he also took the company public, a strategy he may carry over to Lulu when it reaches the right size -- about $100 million in annual sales, Young said. He expects Lulu, which has 109 employees in the United States, Canada and England, to have $25 million in sales this year and double its annual revenue for the near future.

But gone is the possibility of trading on a U.S. stock exchange under the symbol "LULU." Canadian clothing maker Lululemon Athletica snatched that symbol when it started trading in July.

"Isn't that annoying," Young chuckled. "They beat us to it."