Daimlerchrysler Ag v. Bloom

• Decision Date: 09 January 2003
• Docket Number: No. 01-3700.,01-3700.
• Citation: 315 F.3d 932
• Parties: DAIMLERCHRYSLER AG; Mercedes-Benz USA, Inc., Appellants, v. Donald H. BLOOM; MBZ Communications, Inc., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

315 F.3d 932

DAIMLERCHRYSLER AG; Mercedes-Benz USA, Inc., Appellants, v. Donald H. BLOOM; MBZ Communications, Inc., Appellees.

No. 01-3700.

United States Court of Appeals, Eighth Circuit.

Submitted: June 13, 2002.

Filed: January 9, 2003.

COPYRIGHT MATERIAL OMITTED

Allen W. Hinderaker, argued, Minneapolis, MN, for appellant.

Thomas C. Mahlum, argued, Minneapolis, MN, for appellee.

Before HANSEN, Chief Judge, FAGG and BOWMAN, Circuit Judges.

HANSEN, Circuit Judge.

DaimlerChrysler and Mercedes-Benz USA appeal an adverse grant of summary judgment in this trademark action. For the reasons stated below, we affirm the judgment of the district court.¹

DaimlerChrysler is the registered owner of the trademarks and service marks MERCEDES and MERCEDES-BENZ (collectively, hereinafter "Marks"). Mercedes-Benz USA is the exclusive licensee of the Marks in the United States. We refer to both of them collectively as "Mercedes."

In 1984, Donald Bloom (hereinafter "Bloom") became part owner of a Mercedes-Benz dealership in Owatonna, Minnesota. In the mid-1980s, Bloom acquired the toll-free telephone number 1-800-637-2333, one possible alphanumeric translation of which is 1-800-MERCEDES. Bloom advertised the vanity phone number in conjunction with his dealership, and he believes that the use of the phone number was a key component in reviving what had otherwise been a moribund dealership. In 1989, Mercedes granted Bloom a second dealership in St. Paul.

Between 1988 and 1992, Mercedes made several attempts to acquire the 1-800-637-2333 phone number from Bloom. The parties entered into negotiations, but the negotiations never came to fruition, and Bloom retained the rights to the phone number. On October 22, 1992, Mercedes sent Bloom a cease and desist letter stating that he could no longer use the 1-800 phone number because such use violated his Dealer Agreement.² In the same letter, Mercedes informed Bloom that his continued possession and use of the 1-800 phone number interfered with Mercedes' plan to use that number for its Client Assistance Center (hereinafter "CAC"). The CAC provides Mercedes customers with 24-hour, 365-days per year customer service. Because Bloom refused to relinquish his right to use the toll free number, Mercedes was forced to acquire and use a different telephone number, 1-800-367-6372 (1-800-FOR-MERCEDES), for the CAC.

In 1994, Bloom formed MBZ Communications (hereinafter "MBZ"). MBZ is located in Owatonna and is an independent telecommunications company that specializes in the use of vanity phone numbers. Bloom formed MBZ to manage the shared use of the 1-800-MERCEDES phone number with other Mercedes dealers throughout the country. MBZ licensed the number to six Mercedes dealers throughout the country. MBZ granted the dealers "[e]xclusive use ... of the telephone number 1-800-637-2333 and/or its mnemonic translation within an area" defined geographically by area code and provided call pattern analysis and other marketing services to the licensee dealers in exchange for payment of an initial set up fee and additional monthly fees. (J.A. at 155.) The licensees then marketed the phone number in the agreed to areas. Through the use of call routing technology, any call made to 1-800-MERCEDES originating in a contracted for area code is automatically rerouted to the appropriate dealership. Any call originating from an area code not covered by a licensing agreement terminates at the MBZ office and is processed by MBZ personnel.

The following description is a concrete example of how MBZ's licensing system works. The House of Imports, Inc. (hereinafter "House"), a Los Angeles based Mercedes dealer, entered into a licensing agreement with MBZ for the exclusive use of the number 1-800-637-2333 in the territory falling within area codes 213, 310, 619, 714, 805, 818, and 909, which encompasses the Los Angeles and San Diego metropolitan areas. House paid MBZ an initial fee of $39,200 and agreed to make additional monthly payments of $3150 for the continued right to use the number within the agreed to area codes. House used various marketing devices to promote the vanity phone number 1-800-MERCEDES. Per the licensing agreement, any call made to 1-800-MERCEDES from the aforementioned area codes is automatically routed to House. House then services the call.

As mentioned above, a call originating from an area code not covered by a licensing agreement terminates at the MBZ office and is processed by MBZ personnel. MBZ receives approximately 100 calls per day from Mercedes customers who intend to reach the CAC but reach MBZ instead. Mercedes contends that the mere fact that people reach MBZ instead of the CAC is detrimental to Mercedes because the CAC is open 24 hours per day whereas MBZ is open only weekdays from 8 a.m. to 6 p.m. Therefore, Mercedes argues, its customers become frustrated when no one answers the phone after hours and on weekends and holidays.

In 1997, Mercedes terminated its Dealer Agreements with Bloom. In February 2000, Mercedes filed this action against Bloom and MBZ, asserting that the MBZ licensing plan violated the Lanham Act, the Federal Trademark Dilution Act, and state trademark and unfair competition laws.³ The parties filed cross motions for summary judgment. The district court denied Mercedes' motion and granted MBZ's motion on the ground that MBZ did not "use" the Marks within the meaning of the acts. Mercedes appeals.

Mercedes asserted three federal claims against MBZ. Mercedes claimed that MBZ infringed its trademarks and service marks in violation of 15 U.S.C. § 1114. Section 1114 creates civil liability for persons who, without consent, "use in commerce any ... colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114 (2000). Mercedes asserted a claim for false designation of origin in violation of 15 U.S.C. § 1125(a). Section 1125(a) creates civil liability for any person who "uses in commerce any ... symbol, or device ... or any false designation of origin, false or misleading description of fact or ... representation of fact, which ... is likely to cause confusion, ... mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person." 15 U.S.C. § 1125(a)(1)(A). Mercedes also asserted a claim for dilution of trademark and service mark in violation of 15 U.S.C. § 1125(c). The statute provides that "[t]he owner of a famous mark shall be entitled ... to an injunction against another person's commercial use in commerce of a mark or trade name, if such use ... causes dilution of the distinctive quality of the mark." 15 U.S.C. § 1125(c)(1).

Each provision requires, as a prerequisite to finding liability, that the defendant "use in commerce" the protected mark or a colorable imitation thereof. See Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619, 626 (6th Cir.1996) ("[T]he defendants' use of a protected mark or their use of a misleading representation is a prerequisite to the finding of a Lanham Act violation."), cert. denied, 519 U.S. 1093, 117 S.Ct. 770, 136 L.Ed.2d 715 (1997); Miss Dig Sys., Inc. v. Power Plus Eng'g, Inc., 944 F.Supp. 600, 602 (E.D.Mich.1996) ("[A]s the language of these statutory provisions shows ... the court ... must first find that the defendant... has made an actual `use' of the plaintiff's trademark. In the absence of this preliminary finding, there can be no liability for trademark infringement or unfair competition under the Lanham Act."). The Act provides that "`use in commerce' means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark." 15 U.S.C. § 1127. The statute also provides that a "mark shall be deemed to be in use in commerce ... on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce." Id. The district court concluded that the mere licensing of a telephone number, without the active promotion or advertising of the Marks, did not constitute a "use" of Mercedes' marks. We review the district court's grant of summary judgment de novo. Luigino's Inc. v. Stouffer Corp., 170 F.3d 827, 830 (8th Cir.1999).

There is no dispute that MBZ only licensed the phone number but did not advertise or promote Mercedes' protected marks. Mercedes argues that MBZ can be liable even though MBZ did not promote the Marks because MBZ "passed off" its services for those of Mercedes. Mercedes also argues that the advertising and promotion performed by MBZ's licensees is a "use" that can be imputed to MBZ and, independently, that the "use" requirement can be met here because MBZ intended to exploit the marks. We reject these arguments seriatim.

We note at the outset that Mercedes did not plead an independent passing off claim and only discussed passing off in its summary judgment brief as it related to the issue of confusion. Independently, the passing off claim has no merit. Passing off occurs where a company sells its goods or services under the pretense that they are the goods or services of another. See Heaton Distrib. Co. v. Union Tank Car Co., 387 F.2d 477, 484 (8th Cir.1967). In Coca-Cola v. Overland, Inc., 692 F.2d 1250 (9th Cir.1982), the case on which Mercedes relies, restaurant customers ordered Coke or Coca-Cola but were served Pepsi instead. Id. at 1252. Coke obtained injunctive relief against the restaurant, preventing it from serving Pepsi to a customer who had requested Coke without first informing the customer of the switch. Coca-Cola thus represents a situation where a consumer requested a specific product and was sold a competitor's product...