Sales v. Tabari

• Citation: 610 F.3d 1171
• Decision Date: 08 July 2010
• Docket Number: No. 07-55344.,07-55344.
• Parties: TOYOTA MOTOR SALES, U.S.A., INC., a California corporation, Plaintiff-counter-defendant-Appellee,v.Farzad TABARI; Lisa Tabari, California residents, d/b/a Fast Imports, Defendants-counter-claimants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

610 F.3d 1171

TOYOTA MOTOR SALES, U.S.A., INC., a California corporation, Plaintiff-counter-defendant-Appellee,v.Farzad TABARI; Lisa Tabari, California residents, d/b/a Fast Imports, Defendants-counter-claimants-Appellants.

No. 07-55344.

United States Court of Appeals Ninth Circuit.

Argued and Submitted July 8, 2009.

Filed July 8, 2010.

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Jens B. Koepke (argued), Robin Meadow, Greines, Martin, Stein & Richland LLP, Los Angeles, CA; Alan S. Cooper, Howrey, LLP, Washington, DC, for the plaintiff, counter-defendant, appellee.

Lisa Tabari (argued), Farzad Tabari, pro se, Mission Viejo, CA, for the defendants, counter-claimants, appellants.

Appeal from the United States District Court for the Central District of California, Dale S. Fischer, District Judge, Presiding. D.C. No. CV-03-08506-DSF.

Before: ALEX KOZINSKI, Chief Judge, FERDINAND F. FERNANDEZ and N. RANDY SMITH, Circuit Judges.

Opinion by Chief Judge KOZINSKI; Concurrence by Judge FERNANDEZ.

KOZINSKI, Chief Judge:

In this trademark infringement case, we consider the application of the nominative fair use doctrine to internet domain names.

Facts

Farzad and Lisa Tabari are auto brokers-the personal shoppers of the automotive world. They contact authorized dealers, solicit bids and arrange for customers to buy from the dealer offering the best combination of location, availability and price. Consumers like this service, as it increases competition among dealers, resulting in greater selection at lower prices. For many of the same reasons, auto manufacturers and dealers aren't so keen on it, as it undermines dealers' territorial exclusivity and lowers profit margins. Until recently, the Tabaris offered this service at buy-a-lexus.com and buyorleaselexus.com.

Toyota Motor Sales U.S.A. (“Toyota”) is the exclusive distributor of Lexus vehicles in the United States, and jealous guardian of the Lexus mark. A Toyota marketing executive testified at trial that Toyota spends over $250 million every year promoting the Lexus brand. In the executive's estimation, “Lexus is a very prestigious luxury brand and it is an indication of an exclusive luxury experience.” No doubt true.

Toyota objected to the Tabaris' use on their website of copyrighted photography of Lexus vehicles and the circular “L Symbol Design mark.” Toyota also took umbrage at the Tabaris' use of the string “lexus” in their domain names, which it believed was “likely to cause confusion as to the source of [the Tabaris'] web site.” The Tabaris removed Toyota's photography and logo from their site and added a disclaimer in large font at the top. But they refused to give up their domain names. Toyota sued, and the district court found infringement after a bench trial. It ordered the Tabaris to cease using their domain names and enjoined them from using the Lexus mark in any other domain name. Pro se as they were at trial, the Tabaris appeal.

Nominative Fair Use

When customers purchase a Lexus through the Tabaris, they receive a genuine Lexus car sold by an authorized Lexus dealer, and a portion of the proceeds ends up in Toyota's bank account. Toyota doesn't claim the business of brokering Lexus cars is illegal or that it has contracted with its dealers to prohibit selling through a broker. Instead, Toyota is using this trademark lawsuit to make it more difficult for consumers to use the Tabaris to buy a Lexus.

The district court applied the eight-factor test for likelihood of confusion articulated in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir.1979), and found that the Tabaris' domain names-buy-a-lexus.com and buyorleaselexus.com-infringed the Lexus trademark. But we've held that the Sleekcraft analysis doesn't apply where a defendant uses the mark to refer to the trademarked good itself. See Playboy Enters., Inc. v. Welles, 279 F.3d 796, 801 (9th Cir.2002); New Kids on the Block v. News Am. Publ'g, Inc., 971 F.2d 302, 308 (9th Cir.1992).¹ The Tabaris are using the term Lexus to describe their business of brokering Lexus automobiles; when they say Lexus, they mean Lexus. We've long held that such use of the trademark is a fair use, namely nominative fair use. And fair use is, by definition, not infringement. The Tabaris did in fact present a nominative fair use defense to the district court.

In cases where a nominative fair use defense is raised, we ask whether (1) the product was “readily identifiable” without use of the mark; (2) defendant used more of the mark than necessary; or (3) defendant falsely suggested he was sponsored or endorsed by the trademark holder. Welles, 279 F.3d at 801 (quoting New Kids, 971 F.2d at 308-09). This test “evaluates the likelihood of confusion in nominative use cases.” Id. It's designed to address the risk that nominative use of the mark will inspire a mistaken belief on the part of consumers that the speaker is sponsored or endorsed by the trademark holder. The third factor speaks directly to the risk of such confusion, and the others do so indirectly: Consumers may reasonably infer sponsorship or endorsement if a company uses an unnecessary trademark or “more” of a mark than necessary. But if the nominative use satisfies the three-factor New Kids test, it doesn't infringe. If the nominative use does not satisfy all the New Kids factors, the district court may order defendants to modify their use of the mark so that all three factors are satisfied; it may not enjoin nominative use of the mark altogether.²

A. The district court enjoined the Tabaris from using “any ... domain name, service mark, trademark, trade name, meta tag or other commercial indication of origin that includes the mark LEXUS.” A trademark injunction, particularly one involving nominative fair use, can raise serious First Amendment concerns because it can interfere with truthful communication between buyers and sellers in the marketplace. See Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 763-64, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976). Accordingly, “we must [e]nsure that [the injunction] is tailored to eliminate only the specific harm alleged.” E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1297 (9th Cir.1992). To uphold the broad injunction entered in this case, we would have to be convinced that consumers are likely to believe a site is sponsored or endorsed by a trademark holder whenever the domain name contains the string of letters that make up the trademark.

In performing this analysis, our focus must be on the “ ‘reasonably prudent consumer’ in the marketplace.” Cf. Dreamwerks Prod. Grp., Inc. v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir.1998) (describing the test for likelihood of confusion in analogous Sleekcraft context). The relevant marketplace is the online marketplace, and the relevant consumer is a reasonably prudent consumer accustomed to shopping online; the kind of consumer who is likely to visit the Tabaris' website when shopping for an expensive product like a luxury car. See, e.g., Interstellar Starship Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 946 (9th Cir.2002). Unreasonable, imprudent and inexperienced web-shoppers are not relevant.

The injunction here is plainly overbroad-as even Toyota's counsel grudgingly conceded at oral argument-because it prohibits domain names that on their face dispel any confusion as to sponsorship or endorsement. The Tabaris are prohibited from doing business at sites like independent-lexus-broker.com and we-are-definitely-not-lexus.com, although a reasonable consumer wouldn't believe Toyota sponsors the websites using those domains. Prohibition of such truthful and non-misleading speech does not advance the Lanham Act's purpose of protecting consumers and preventing unfair competition; in fact, it undermines that rationale by frustrating honest communication between the Tabaris and their customers.

Even if we were to modify the injunction to exclude domain names that expressly disclaim sponsorship or endorsement (like the examples above), the injunction would still be too broad. The Tabaris may not do business at lexusbroker.com, even though that's the most straightforward, obvious and truthful way to describe their business. The nominative fair use doctrine allows such truthful use of a mark, even if the speaker fails to expressly disavow association with the trademark holder, so long as it's unlikely to cause confusion as to sponsorship or endorsement. See Welles, 279 F.3d at 803 n.26. In New Kids, for instance, we found that use of the “New Kids on the Block” mark in a newspaper survey did not infringe, even absent a disclaimer, because the survey said “nothing that expressly or by fair implication connotes endorsement or joint sponsorship.” 971 F.2d at 309. Speakers are under no obligation to provide a disclaimer as a condition for engaging in truthful, non-misleading speech.

Although our opinion in Volkswagenwerk Aktiengesellschaft v. Church remarked on that defendant's “prominent use of the word ‘Independent’ whenever the terms ‘Volkswagen’ or ‘VW’ appeared in his advertising,” 411 F.2d 350, 352 (9th Cir.1969), it isn't to the contrary. The inclusion of such words will usually negate any hint of sponsorship or endorsement, which is why we mentioned them in concluding that there was no infringement in Volkswagenwerk. Id. But that doesn't mean such words are required, and Volkswagenwerk doesn't say they are. Our subsequent cases make clear they're not. See Welles, 279 F.3d at 803 n.26; New Kids, 971 F.2d at 309.³

The district court reasoned that the fact that an internet domain contains a trademark will “generally” suggest sponsorship or endorsement by the trademark holder. When a domain name consists only of the trademark followed by .com, or some other suffix like .org or .net, it will typically suggest sponsorship or endorsement by the trademark holder. Cf. Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1327 (9th Cir.1998).⁴ This...