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I, John Cpaatty, am a CPA and an attorney and I am the president of Small, a Washington professional corporation. I represent Small in this action, have personal knowledge of the facts stated in this declaration and am competent to testify as to their truth.

1. Small, in its complaint, asked that the "Big TaxHQ" service mark be canceled, for a determination of infringement with respect to the use of that mark, and for a declaratory judgment restricting the use of Big's "TaxHQ" trademark to the goods and services set forth in Big's "TaxHQ" registration.

2. Section 7(c) of the Lanham Act grants nationwide priority with respect to a given trademark or service mark, effective upon the filing of the application for the trademark or service mark, and contingent upon the registration of the trademark or service mark. John Cpaatty applied for registration of the service mark "TaxHQ" on September 9, 2004, and the service mark was registered October 7, 2005.

3. Defendant Big filed an application for registration with the United States Patent and Trademark Office on March 10, 2005, alleging first use of the service mark "Big TaxHQ" on February 25, 2005. Small asked that this mark be cancelled in its complaint in this action.

4. Defendant Big filed an application for registration of the trademark "TaxHQ" on November 26, 2004. That application alleged that "TaxHQ" had first been used as the name of a newsletter in 1997.

5. Defendant Big has provided copies of its newsletter to Small during the course of discovery in this matter. Those newsletters make it clear that the last issue of the newsletter entitled "TaxHQ" was the issue for Winter 2004. Thereafter, the name "TaxHQ" was abandoned as the name of the newsletter. The next three issues (beginning with Spring, 2005) were entitled "Big Notes", and subsequent issues were entitled "Big News" (Exhibit A). A. Nother Person, in his declaration in support of defendant's application for preliminary injunction, acknowledged that Big had abandoned the use of the name "TaxHQ" for its newsletter, and stated that Big renamed the newsletter as "Big News". There has been no "TaxHQ" newsletter published since January 1, 2005 and the Person declaration clearly demonstrates an intent not to resume use. Big filed its application for registration of "TaxHQ" for a "publication/newsletter for internal company events. Products and services information, vehicle for communication between company officials and clients and calendar events" on Nov. 26, 2004. On July 9, 2005 the USPTO advised Big that its identification of goods was unacceptable (Exhibit A), and gave Big six months to amend to avoid abandonment. Over four months later (November 19, 2005), Big amended its application to identify the goods to which "TaxHQ" related as "newsletter in the field of client notices of product and service updates, calendar of events, customer surveys, new services in the field of public information services". Mr. Person swore that this statement was true, and made with the knowledge that willful false statements may jeopardize the validity of the application and any registration resulting therefrom. At the time this representation was made to the USPTO, there was no "TaxHQ" newsletter in existence, and there had been no such "TaxHQ" newsletter in existence for over six months. (Exhibit A). As previously stated, there has been no "TaxHQ" newsletter at any time thereafter, and the use of"TaxHQ" as the name of Big's newsletter had in fact been abandoned more than a year before the registration of "TaxHQ" for a newsletter was granted (May 19, 2006). The official file from the USPTO with respect to the "TaxHQ" trademark shows that the USPTO was never advised of any of these facts.

6. Mr. Person, in his deposition, acknowledged that Big receives inquiries from entrepreneurs (individuals who want to incorporate a start up business) for services.

7. Mr. Person, in his deposition, testified that entrepreneurs are not serviced by Big or even permitted access to the commercially meaningful portions of its website, but are instead referred to the NewBiz Company ("NB").

8. Mr. Person, in his deposition, stated that NB is an entirely separate sister corporation .

9. Mr. Person, during his deposition, indicated that the target market for NB is entrepreneurs.

10. X. Big Employee, in his affidavit filed in this matter and confirmed in the course of his deposition, stated that care was taken to be sure that law firms, accounting firms and large corporations did not contact NB since the schedule of Big fees for accounting firms, law firms and large corporations was higher than the schedule of fees for NB, and the business was thus more profitable (Employee affidavit 2, paragraph 5, attached as Exhibit B).

11. Small's main site is on the domain "abouttax.com." Records of Network Solutions, Inc. (Exhibit C) disclose that the domain name "abouttax.net" was reserved by Big on July 2, 2007, two days after the date of the cease and desist letter sent by Big to Small (June 30, 2007). The decision to reserve that domain name was made in the course of a conference between Big Official (a key executive of Big) and a key executive of the NewBiz Company, as disclosed by Mr. Official during his deposition. Thereafter, at a time not presently known, but clearly subsequent to the filing of this lawsuit, Big' s website was placed on the internet under the domain name "abouttax.net" (Exhibit C).

12. In Paragraph 12 of the defendant's answer and verified (by Mr. Person) counterclaim, Big stated that it first learned of Plaintiff's 'infringing" acts in June, 2007. Big admits that there was a telephone conversation between Big Official and John Cpaatty of Small in the Fall of 2004. Big denied that Cpaatty told Big Official that Cpaatty had tried to reserve the domain name "TaxHQ.com" for his tax and legal services in the nature of determining choice of entity questions, including tax document preparation and the formation of corporate entities, or that Cpaatty told Big Official that he had used the "TaxHQ" mark as a service mark for his tax and legal services in the nature of determining choice of entity questions, including tax document preparation and the formation of corporate entities, or that Cpaatty told Big Official that he had received calls on his newpaper ad from a number of other states and particularly from California. Defendant even denied knowledge of Small's trademark registration in October, 2005. (Defendant's responses to Small's first set of requests for admissions, numbers 17 through 21). Discovery demonstrates that Cpaatty sent an email to Big on October 31, 2004, that a 27 minute telephone call was placed from Cpaatty's telephone number to Big's number on November 1, 2004, that Cpaatty has a recording of that conversation and a transcript of that recording, and that Big Official sent Cpaatty the first page of a few of the "TaxHQ" newsletters on November 8, 2004. X. Big Employee, in his affidavit filed in this matter (confirmed by his deposition testimony) confirmed that he had been told by a key executive of Big, or possibly by Big Official, that someone in the northwest had been using the name TaxHQ, and the company was upset about it, but it wasn't going to be a problem. Joan Searcher, in her deposition in this matter, confirmed that it was the regular practice of Big, when performing a trademark search for its own account, to do a complete search, consisting of a search of pending and registered marks with the United States Patent and Trademark Office, state law registrations, and a common law search. Searcher further testified that a common law search would include a review of telephone directories, and that such a comprehensive report would normally be approximately 200 pages in length. In interrogatory 19 of its first set of interrogatories directed to Big, Small asked Big with respect to the relationship of Big and the NewBiz Company and that if Big provides the NewBiz Company with potential customers, "state precisely and in detail the manner in which you do so." Big responded (Sept 24) that if it receives inquiries for services that Big believes "are more suitably served" by the NewBiz Company, it forwards those inquiries to the NewBiz Company. Plaintiff repeatedly pressed Big for a responsive answer to interrogatory 19, and Big continually avoided the issue. Just prior to the Person deposition on Oct. 12, Big objected to Rule 30(b)(6) status for Mr. Person (contrary to all that had gone before) but nevertheless suggested that Plaintiff direct its inquiry with respect to the NewBiz Company connection to Mr. Person at his deposition. Mr. Person confirmed the fact that entrepreneurs are sent to the NewBiz Company at his deposition, but Big continues to avoid a direct official and final company response to Interrogatory 19.

13. John Cpaatty ("Cpaatty") is a licensed certified public accountant, was admitted to the Washington State Bar Association in 1982 and has practiced accountancy and law there since that time.

14. In the course of that practice, Cpaatty observed that entrepreneurs were often foregoing competent advice with respect to choice of entity and other tax-related matters, including entity formation.

15. Cpaatty streamlined the traditional customized approach to such matters he'd learned from a competent mentor and adapted over the years and added this service to his tax analysis approach to choice of entity questions. He was able to provide quality service at a price entrepreneurs could afford and at the same time be able to recognize potential pitfalls (e.g. the sale of securities) which untrained persons could not comprehend. Cpaatty employed the "TaxHQ" mark as a service mark for his services. The mark was at all times used in interstate commerce. At all times prior to registration, the symbol "SM" appeared in conjunction with the mark, to make clear Cpaatty's claims of intellectual property rights with respect to the service mark. An application for the registration of Cpaatty's "TaxHQ" service mark was filed with the USPTO on September 9, 2004. The USPTO registered the service mark in Cpaatty's name on October 7, 2005. This application was the first application filed by either of the parties and the first registration granted to either of the parties. Cpaatty learned of Big in late October, 2004 and gave Big notice of Cpaatty's use of "TaxHQ" mark as a service mark on November 1, 2004.

16. In apparent recognition of its problems with respect to Cpaatty's "TaxHQ" service mark, Big filed an application for registration of what it called "Big TaxHQ" (Big's "TaxHQ") in March, 2005, attempting to distinguish the "Big TaxHQ" service mark from Cpaatty's "TaxHQ" service mark by adding the identifier "Big", adding design features, and keeping its claims well clear of the claims Cpaatty had made when he filed his senior application. At one point in the process, Big even described its service as "warehouse storage of corporate documents obtainable through online services"

17. This use occurred on Big's new WebSite, where the words "Big TaxHQ" appear on every page of the site as it existed prior to this lawsuit.

18. The services of Small (the licensee and now the assignee of John T. Cpaatty) have been accessible throughout the United States and the world.

19. Cpaatty and Small (Cpaatty's licensee and now assignee) became aware of Big, its newsletter and its web site plans when Cpaatty talked to Big Official, a key employee of Big, for twenty-seven minutes on November 1, 2004. Cpaatty initiated the contact and informed Official, in detail, of Cpaatty's use of the "TaxHQ" service mark.

20. Cpaatty considered what Official told him about Big's use of "TaxHQ" as the name of a newsletter. This careful examination led Cpaatty to believe that there was no competition between Big and Cpaatty, even if use of the mark for the newsletter was given a very broad interpretation and considered as if expanded into services, since Cpaatty targeted entrepreneurs, as opposed to Big's target market of major accounting and law firms and major corporations. Big's claims with the USPTO were different, and did not appear to pose a competitive threat or be likely to confuse either the accounting firm/law firm/major corporation market on the one hand or the entrepreneur market on the other. Small analyzed the situation in the same way when it received Big's cease and desist letter in early July, 2007, and it filed this suit seeking a declaratory judgment for precisely that reason. Cpaatty remembered a call from X. Big Employee, who had solicited business from Small earlier in the year, coincidentally telling Cpaatty at the time that he had previously worked for Big and recognized Small's "TaxHQ" service mark as the one he heard about when he worked for Big. Cpaatty had, fortuitously, recorded his conversation with Official of November 1 2004, so that he could analyze it to determine the relative rights of the parties. Cpaatty contacted Employee in hopes that Employee could provide third party confirmation of what Cpaatty knew to be true with respect to Big's full knowledge of Small's use. Upon questioning, Employee confirmed that he had been told, before Big established its web site in early 2005, that Big was aware of another user in the northwest, but that it wasn't going be a problem. Upon further questioning of Mr. Employee, Cpaatty learned that while Big did not in fact serve the entrepreneur market directly it did so indirectly, through NB. When this information was confirmed by another former employee of Big, Cpaatty sought direct confirmation of that fact through discovery directed to Big. That discovery is discussed in #14, above. To summarize, Big's witness with the most direct knowledge (William Person) confirms Mr. Employee's testimony in his affidavit and in his deposition that Big does not service the entrepreneur market directly, but instead refers entrepreneurs to its sister corporation, NB.

21. Both William Person and another Big employee confirmed, during the course of their recent depositions, that the original corporate applicant on Big's TaxHQ filing with the USPTO did not in fact exist as a corporation, either at the date of filing (November 26, 2004) or at any other time.

22. On the home page of the NB web site, a copy of which is attached hereto as Exhibit E (as it appeared on September 1, 2007), NB represents that it has been in existence since 1950. Mr. Person, in his deposition, and Big, in its response to interrogatory No.5 of Small's second set of interrogatories, both confirm that NB was in fact incorporated in the 1970s.

23. Taking into account the expense of newspaper advertising during the period 2001 through 2007, salaries of employees related to the creation and maintenance of the web site, advertising, and Internet access and equipment fees, Cpaatty and Small have invested between $50,000 and $100,000 in cash in the creation and maintenance of the business associated with "TaxHQ" and an estimated $100,000 to $200,000 in Cpaatty's time.

24. I declare under penalty of perjury that the foregoing is true and correct.

Executed on October 24, 2007.