Friday, July 9, 2010
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Court Tosses Order Barring Lexus Brokers From Using Trademark
By STEVEN M. ELLIS, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday threw out a district court’s order barring a Southern California couple from using the term “Lexus” in any Internet domain name to describe their business of brokering the automobiles.
Ruling that the injunction was overbroad, a three-judge panel rejected an argument by Toyota Motor Sales U.S.A.—the exclusive distributor of Lexus in the United States—that it was entitled to exclusive use of the string “lexus” in domain names.
Chief Judge Alex Kozinski wrote that a special, three-part test replaced the normal standard for determining likelihood of confusion when Farzad and Lisa Tabari, representing themselves in a trademark infringement suit by Toyota, claimed to have used the Lexus mark in their websites “buy-a-lexus.com” and “buyorleaselexus.com” to refer to the trademarked good itself.
‘Nominative Fair Use’
Reasoning that the pair raised a “nominative fair use defense,” he said that Toyota bore the burden of showing that the Tabaris’ product was “readily identifiable” without use of the mark, that the couple used more of the mark than necessary, or that they falsely suggested they were sponsored or endorsed by Lexus or Toyota.
The Tabaris, doing business as Fast Imports, offered through their websites to contact authorized Lexus dealers on customers’ behalf, solicit bids and arrange for customers to buy from the dealer offering the best combination of location, availability and price.
Toyota, which says it spends over $250 million every year promoting the Lexus brand, objected that the Tabaris’ use on the websites of copyrighted photographs of Lexus vehicles and the brand’s logo, as well as the domain names, was likely to cause confusion whether the websites were affiliated with Lexus.
The Tabaris removed the photos and the logo and added a disclaimer, but Toyota sued when the pair declined to give up their domain names.
Bench Trial
After a bench trial, U.S. District Court Judge Dale S. Fischer of the Central District of California, applying the eight-factor test for likelihood of confusion set forth by the Ninth Circuit in AMF Inc. v. Sleekcraft Boats (1979) 599 F.2d 341, found infringement. He ordered the Tabaris to cease using their domain names and enjoined them from using the Lexus mark in any other domain name.
But Kozinski wrote that the Tabaris’ use of “Lexus” to refer to actual Lexus automobiles was nominative fair use and he said that Fischer should have used the three-part test set forth in New Kids on the Block v. News Am. Publ’g, Inc. (1992) 971 F.2d 302 to evaluate infringement.
The chief judge said Fischer’s injunction was overbroad because it prohibited domain names such as “independent-lexus-broker.com” and “we-are-definitely-not- lexus.com” that on their face would dispel any confusion as to sponsorship or endorsement, and undermined the Lanham Act’s purpose of protecting consumers and preventing unfair competition. He commented that consumers on the Internet were savvy enough to know that domain names containing a trademark in combination with other words are unlikely to be an official website, although he noted that the domain name cannot suggest sponsorship or endorsement by the trademark holder.
Kozinski also wrote that the injunction could not be upheld if limited to the Tabaris’ existing domain names under the three-part test, and said that Toyota bore the burden on remand to establish that the Tabaris’ use of the Lexus mark presented a likelihood of confusion.
Concurring Opinion
Judge N. Randy Smith joined Kozinski in his opinion. Senior Judge Ferdinand F. Fernandez concurred in the result, but wrote that Kozinski’s assessment of the sophistication of online shoppers was not supported by the record.
The dissenting jurist also declined to join in what he called the majority’s “gratuitous slap at counsel for Toyota” over the company’s contention that bifurcation of the trademark claims from the Tabaris’ counterclaims for intentional and negligent interference with prospective economic advantage was proper.
Fernandez further took exception to what he characterized as Kozinski “nudg[ing] the district court to find pro bono counsel for the Tabaris, who have neither chosen to retain their own counsel nor demonstrated that they cannot do so.”
He added: “To the extent that the majority sees their activities as especially socially worthy and above reproach, I do not agree.”
Jens B. Koepke and Robin Meadow of Greines, Martin, Stein & Richland LLP in Los Angeles, and Alan S. Cooper of Howrey LLP in Washington, D.C., represented Toyota.
The case is Toyota Motor Sales, U.S.A., Inc. v. Tabari, 07-55344.
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