Twitpic's logo. On second thought, naming the company Twitpic might not have been the wisest decision. Source: Twitpic.

Recently, Twitter (NYSE:TWTR) was in a twitter when it was revealed that a popular third-party photo-sharing application, Twitpic, would be shutting down. The reason for the shutdown, according to Twitpic founder Noah Everett, was Twitter itself.

In a blog post, Everett wrote:

Twitpic will be shutting down September 25th. You will be able to export all your photos and videos. We'll let everyone know when this feature is live in the next few days. ... A few weeks ago Twitter contacted our legal demanding that we abandon our trademark application or risk losing access to their API. This came as a shock to us since Twitpic has been around since early 2008, and our trademark application has been in the USPTO since 2009.

See, Twitter didn't force Twitpic to close down. Twitter merely refused to grant access to its application programming interface, or API, unless Twitpic gave up its trademark application. Here's why the result is the (mostly) the same.

First, a history lesson
To understand this dispute, it first helps to understand Twitter's history. Started in early 2006 as an idea to use the SMS service to communicate to groups, Twitter grew quickly: By 2008, users were tweeting 100 million times per quarter on aggregate. Part of its appeal was its quick, ambiguous, and at times messy nature.

One thing Twitter lacked, and Facebook and other social media sites had, was the ability to share photos. And that's important: In our visual-centric world, content with images presents a stickier, more cohesive user experience. That is something Twitter aims for.

Twitpic filled that void by its picture sharing app. Within no time, its popularity exploded. The symbiotic relationship was good for both Twitpic and Twitter.

How did we get here, then?
Alas, it seems all good things must come to an end. The relationship changed in 2011 when Twitter decided to integrate a native photo-sharing application into the platform. Everett did the relationship no favors by starting Heello, a tongue-in-cheek "social media" copycat site, as a form of mild protest. Funny, perhaps, but not the most professional way to treat a business partner. One that was now becoming a competitor of sorts.

More recently, Twitter has been pushing back against developers in an effort to ensure, as Twitter puts it, "a consistent experience." Twitter's new "Developer Rules of The Road" tells developers not to focus on apps concerning traditional Twitter clients and syndication.

Fact: Twitter did not force Twitpic to shut down
A Twitter representative responded to Everett's assertions:

We're sad to see Twitpic is shutting down. ... We encourage developers to build on top of the Twitter service, as Twitpic has done for years, and we made it clear that they could operate using the Twitpic name. Of course, we also have to protect our brand, and that includes trademarks tied to the brand.

And Twitter is right about that.

Fact: Without the trademark, monetization would be more difficult
Social media companies and apps generally operate on an ad-based model. As such, it's key to create a forum and grow users and content, and then effectively monetize them. Obviously, not being able to effectively trademark and brand your name would make that process harder.

Everett responded by saying:

Basically Twitter gave us an ultimatum, give up your mark or risk losing your API access which is Twitpic's life blood. ... We could not in good conscious just give up our rightful ownership to the Twitpic mark when forced to do so even though we don't have the funds to fight it.

Final thoughts
In the strict sense, Twitter did not force Twitpic to shut down. However, it put a huge dent in Twitpic's business model that essentially forced the founders to close the business -- and that's after dealing a huge blow to Twitpic's business model by adding native photo-sharing capabilities. For Twitter, this isn't a risk to the investment and shows the company is intent on protecting its brand --it will shock no one that Twitpic named itself that for a specific reason.

As far as Twitpic is concerned, its founder is already busy working on his next possible big project: Pingly.

Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.