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E-Lend Me Your Ears: A Planned IPO and a Nettlesome Lawsuit

A Virginia-based nonprofit sues E-Loan over its name -- and it's all just part of the territory.

Don't forget to check out this morning's early installment of SiliconStreet.com.

One of the nastiest tricks in the IPO playbook is to sue a competitor just as it's about to go public. For example,

Barnes & Noble

(BKS) - Get Barnes & Noble, Inc. Report

did it to

Amazon

(AMZN) - Get Amazon.com, Inc. Report

in 1997 when it challenged the online retailer's "Earth's Biggest Bookstore" claim.

The tactic is nastier still when the "company" doing the suing is a nonprofit organization. Witness the most recent amendment to

E-Loan's

registration statement, which discloses that

EduCap

, a Herndon, Va., do-gooder group that makes loans to students, has problems with E-Loan's name.

According to E-Loan's Tuesday filing with the

Securities and Exchange Commission

, EduCap has been warning the Dublin, Calif.-based online mortgage broker for about a year that E-Loan is infringing on EduCap's trademark, "The E-Loan." EduCap stepped up the heat this month, E-Loan says in its filing, and "has demanded that E-Loan cease and desist all use of the trademark and has indicated that it will seek damages if the parties are unable to reach an amicable solution."

That's what a certain friend of mine would call an "owie," especially considering that E-Loan has embarked on a major advertising campaign to promote its brand.

E-Loan says it will defend itself vigorously, and these types of suits typically prove to be more of a nuisance than a real concern. The fact that a check of numerous pages at EduCap's Web site reveals not one use of "The E-Loan" might hurt the group's claim. But the suit is an annoyance a company doesn't want to have as its trying to raise funds from public investors.

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Incidentally, a friend of E-Loan called to take issue with the implication in a

piece here last week that if E-Loan were to fail to complete its IPO, it wouldn't have other sources of cash. Obviously, that would be a rotten implication and therefore wasn't intended. A company that's raised money from

Benchmark Capital

,

Softbank

(full disclosure: a minority investor in

TheStreet.com Inc.

(TSCM)

, publisher of this Web site) and French billionaire

Bernard Arnault

wouldn't have any trouble finding more.

A pesky suit and nit-picky criticisms of one's finances are all a part of the high profile that comes with going public, however. As

Herb Greenberg

wondered recently in

Fortune

, why would any company want to go public at all and have vermin like Herb and me poking around in its affairs?

Some Things Never Change

Overheard from a newly paper-rich employee of a Net company that recently completed a successful initial public offering: "Before our IPO, I couldn't get my broker to return my phone call. Now, she's calling me."

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a monthly column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.