Somebody got a trademark for a domain I own. I am planning to launch my service in a week

I have a domain name, (lets call it XYZ.com) which I have owned for about an year and a related service that I have been developing for about an year too. I just searched the trademark database, and turns out someone filed for a trademark for 'XYZ' on June 15th, and their "Published for Opposition" date is October 23, 2012 (which is a month from now). They already have a product in the market, which is not exactly the same as my service, but it is related. My service is online data backup, and their device is a physical device that you connect to your computer to backup your data. However, their trademark application says Portable computer storage devices, namely, high-speed storage subsystems for storage and backup of electronic data either locally or via a telecommunications network; blank hard computer discs; memory boards for personal computers, which I think covers my service. They have the XYZ.net domain.

I am planning to launch my service next week. Do they have a strong case to sue me, once I launch? Can I file a "Request to Extend Time to Oppose" before October 23, 2012? Also, do I need a lawyer to file this request, or is it a simple thing that I can do myself? If yes, where can I find more information about how to do it?

What other steps should I take to protect my domain and my service (and myself) from any legal troubles?

What would your grounds for challenging be? They currently have a related product on the market with the same name as the one you plan to use in the future. Owning a domain name doesn't usually grant you any real protection or status. More importantly, and I say this as an attorney, why would you want to spend your startup money on litigation? If you haven't yet released your product, I am almost certain that it would be cheaper to rename your product than it would be to become involved in trademark litigation.

In the future, you can file an intent to use applications with the USPTO. This will help prevent this type of issue in the future. And to prevent legal issues in the future, you should do a trademark search before you spend any real money on branding. Also, if you are looking to prevent legal issues, challenging a trademark application isn't the best way to do that. Unfortunately, from the very limited facts you have given, it would seem like you would be on the losing end of any trademark battle, but discussing the details with an attorney would probably be worth it if you are married to the current name.

As to the specific question of filing the extension, in theory you could do it yourself, but I would talk to an attorney first to discuss the grounds for your challenge.

Owning an Internet domain does not necessarily give you the right to use it.

The trademark application you're concerned about is a registration of the mark. Unregistered trademarks are a totally valid way to build a brand and protected by U.S. trademark law. So even if they hadn't registered the mark, they can still rightly claim infringement if you launched a similar product with a similar name. They have a right to build a brand and seek protection from those who might introduce confusion in the marketplace.

Since the other company's trademark application has been published for oppositon, the USPTO has already researched and cleared the company to claim the mark unless someone has a valid reason to deny their use of the trademark. Your only basis to challenge the mark is if you can demonstrate branded use in the marketplace prior to their use or prior registration of a similar mark for future use.

You'll want the same protection if you spend years building your product and mark. What if someone manages to register a domain that could confuse potential customers into doing business with them based on the reputation and brand you've built? That reasonable protection is what trademark law is all about.

Check with an patent/trademark attorney. I suspect your options will be to not use a domain that violates their mark, or offer to sell them the domain if they have interest.

I would pursue two things:

1. Get legal help and figure out if there is a viable strategy for challenging their trademark - either in whole or in part (perhaps they are going too broadly given what they actually do now). This will be more difficult or perhaps not possible if you have not been actively in business using this brand name in some way. I am not a lawyer, but I think that if you can't demonstrate some prior use, then this will be tough play. Still it is important to get proper advice and give it a try.
2. Start looking for another brand name to use for your service. One assumes the brand name you have is pretty strong given that both you and they came up with the same thing, so this is probably painful to consider.

Also, keep in mind that one day, if the other company is very successful, you may be able to sell them the .com version of the domain name for a goodly sum. a la box.net becoming box.com. ~$1M. http://www.dotweekly.com/box-com-sold-for-about-1-million-to-box-net/