Mead Data Cent., Inc. v. Toyota Motor Sales, U.S.A., Inc.

• Decision Date: 18 May 1989
• Docket Number: No. 862,D,862
• Citation: 875 F.2d 1026
• Parties: , 10 U.S.P.Q.2d 1961 MEAD DATA CENTRAL, INC., Plaintiff-Appellee, v. TOYOTA MOTOR SALES, U.S.A., INC. and Toyota Motor Corp., Defendants-Appellants. ocket 89-7001.
• Court: U.S. Court of Appeals — Second Circuit

Page 1026

875 F.2d 1026

57 USLW 2733, 10 U.S.P.Q.2d 1961

MEAD DATA CENTRAL, INC., Plaintiff-Appellee, v. TOYOTA MOTOR SALES, U.S.A., INC. and Toyota Motor Corp. Defendants-Appellants.

No. 862, Docket 89-7001.

United States Court of Appeals Second Circuit.

Argued Jan. 30, 1989.

Decided May 18, 1989.

Arthur D. Gray, New York City (Albert J. Breneisen, Kenyon & Kenyon, Edward W. Greason, William T. Boland, Howard J. Shire and Mary E. Mahon, New York City, of counsel), for defendants-appellants.

Charles J. Faruki, Dayton, Ohio (Smith & Schnacke, Sue K. McDonnell and Mary L. Readey, Dayton, Ohio, and Dean Ringel, Cahill Gordon & Reindel, New York City, of counsel), for plaintiff-appellee.

Before VAN GRAAFEILAND, CARDAMONE, Circuit Judges, and SWEET, District Judge. ^*

VAN GRAAFEILAND, Circuit Judge:

Toyota Motor Sales, U.S.A., Inc. and its parent, Toyota Motor Corporation, appeal from a judgment of the United States District Court for the Southern District of New York (Edelstein, J.) enjoining them from using LEXUS as the name of their new luxury automobile and the division that manufactures it. The district court held that, under New York's antidilution statute, N.Y.Gen.Bus.Law Sec. 368-d, Toyota's use of LEXUS is likely to dilute the distinctive quality of LEXIS, the mark used by Mead Data Central, Inc. for its computerized legal research service, 702 F.Supp. 1031 (1988). On March 8, 1989, we entered an order of reversal, stating that an opinion would follow. This is the opinion. ¹

THE STATUTE

Section 368-d of New York's General Business Law, which has counterparts in at least twenty other states, reads as follows:

Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name shall be a ground for injunctive relief in cases of infringement of a mark registered or not registered or in cases of unfair competition, notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.

THE PARTIES AND THEIR MARKS

Mead and Lexis

Mead is a corporation organized under the laws of Delaware with its principal place of business in Miamisburg, Ohio. Since 1972, Mead has provided a computerized legal research service under the trademark LEXIS. Mead introduced evidence that its president in 1972 "came up with the name LEXIS based on Lex which was Latin for law and I S for information systems." In fact, however, the word "lexis" is centuries old. It is found in the language of ancient Greece, where it had the meaning of "phrase", "word", "speaking" or "diction". Pinkerton, Word for Word, 179 (1982). "Lexis" subsequently appeared in the Latin where it had a substantially similar meaning, i.e., "word", "speech", or "language". Oxford Latin Dictionary (1983); Lewis and Short, A Latin Dictionary (1980); Lewis, An Elementary Latin Dictionary (1979).

Like many other Latin words, "lexis" has been incorporated bodily into the English. It can be found today in at least sixty general dictionaries or other English word books, including Webster's Ninth New Collegiate Dictionary and Webster's New World Dictionary. Moreover, its meaning has not changed significantly from that of its Latin and Greek predecessors; e.g., "Vocabulary, the total set of words in a language" (American Heritage Illustrated Encyclopedic Dictionary); "A vocabulary of a language, a particular subject, occupation, or activity" (Funk & Wagnalls Standard Dictionary). The district court's finding that "to establish that LEXIS is an English word required expert testimony at trial" is clearly erroneous. Anyone with a rudimentary knowledge of English can go to a library or bookstore and find the word in one of the above-mentioned standard dictionaries.

Moreover, the record discloses that numerous other companies had adopted "Lexis" in identifying their business or its product, e.g., Lexis Ltd., Lexis Computer Systems Ltd., Lexis Language and Export Information Service, Lexis Corp., Maxwell Labs Lexis 3. In sum, we reject Mead's argument that LEXIS is a coined mark which originated in the mind of its former president and, as such, is entitled per se to the greater protection that a unique mark such as "Kodak" would receive. See Nevertheless, through its extensive sales and advertising in the field of computerized legal research, Mead has made LEXIS a strong mark in that field, and the district court so found. In particular, the district court accepted studies proffered by both parties which revealed that 76 percent of attorneys associated LEXIS with specific attributes of the service provided by Mead. However, among the general adult population, LEXIS is recognized by only one percent of those surveyed, half of this one percent being attorneys or accountants. The district court therefore concluded that LEXIS is strong only within its own market.

Esquire, Inc. v. Esquire Slipper Mfg. Co., 243 F.2d 540, 543 (1st Cir.1957); Intercontinental Mfg. Co. v. Continental Motors Corp., 230 F.2d 621, 623 (C.C.P.A.1956).

As appears in the Addendum to this opinion, the LEXIS mark is printed in block letters with no accompanying logo.

Toyota and Lexus

Toyota Motor Corp. has for many years manufactured automobiles, which it markets in the United States through its subsidiary Toyota Motor Sales, U.S.A. On August 24, 1987 Toyota announced a new line of luxury automobiles to be called LEXUS. The cars will be manufactured by a separate LEXUS division of Toyota, and their marketing pitch will be directed to well-educated professional consumers with annual incomes in excess of $50,000. Toyota had planned to spend $18 million to $20 million for this purpose during the first nine months of 1989.

Before adopting the completely artificial name LEXUS for its new automobile, Toyota secured expert legal advice to the effect that "there is absolutely no conflict between 'LEXIS' and 'LEXUS.' " Accordingly, when Mead subsequently objected to Toyota's use of LEXUS, Toyota rejected Mead's complaints. The district court held correctly that Toyota acted without predatory intent in adopting the LEXUS mark.

[T]he absence of predatory intent by the junior user is a relevant factor in assessing a claim under the antidilution statute, ... since relief under the statute is of equitable origin,....

Sally Gee, Inc. v. Myra Hogan, Inc., 699 F.2d 621, 626 (2d Cir.1983) (citations omitted).

However, the district court erred in concluding that Toyota's refusal to acknowledge that its use of LEXUS might harm the LEXIS mark, deprived it of the argument that it acted in good faith. If, as we now hold, Toyota's mark did not dilute Mead's, it would be anomalous indeed to hold Toyota guilty of bad faith in proceeding in reliance on its attorney's correct advice to that effect. See Sweats Fashions, Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1565 (Fed.Cir.1987); E.S. Originals Inc. v. Stride Rite Corp., 656 F.Supp. 484, 490 (S.D.N.Y.1987); Inc. Publishing Corp. v. Manhattan Magazine, Inc., 616 F.Supp. 370, 394-96 (S.D.N.Y.1985), affd, 788 F.2d 3 (2d Cir.1986); Procter & Gamble Co. v. Johnson & Johnson, Inc., 485 F.Supp. 1185, 1201-02 (S.D.N.Y.1979), aff'd, 636 F.2d 1203 (2d Cir.1980). Indeed, even if the attorney's professional advice had been wrong, it does not follow that Toyota's reliance on that advice would have constituted bad faith. Information Clearing House, Inc. v. Find Magazine, 492 F.Supp. 147, 161-62 (S.D.N.Y.1980).

The LEXUS mark is in stylized, almost script-like lettering and is accompanied by a rakish L logo. See Addendum.

THE LAW

The brief legislative history accompanying section 368-d describes the purpose of the statute as preventing "the whittling away of an established trade-mark's selling power and value through its unauthorized use by others upon dissimilar products." 1954 N.Y.Legis.Ann. 49 (emphasis supplied). If we were to interpret literally the italicized word "its", we would limit statutory violations to the unauthorized use of the identical established mark. This is what Frank Schechter, the father of the dilution theory, intended when he wrote The Rational Basis of Trademark Protection, 40 Harv.L.Rev. 813 (1927). See id. at Indeed, some courts have gone so far as to hold that, although violation of an antidilution statute does not require confusion of product or source, the marks in question must be sufficiently similar that confusion may be created as between the marks themselves. See Holiday Inns, Inc. v. Holiday Out in America, 481 F.2d 445, 450 (5th Cir.1973); King Research, Inc. v. Shulton, Inc., 324 F.Supp. 631, 638 (S.D.N.Y.1971), aff'd, 454 F.2d 66 (2d Cir.1972). We need not go that far. We hold only that the marks must be "very" or "substantially" similar and that, absent such similarity, there can be no viable claim of dilution.

830-33; see also Shire, Dilution Versus Deception--Are State Antidilution Laws an Appropriate Alternative to the Law of Infringement?, 77 Trademark Rep. 273-76 (1987). However, since the use of obvious simulations or markedly similar marks might have the same diluting effect as would an appropriation of the original mark, the concept of exact identity has been broadened to that of substantial similarity. Community Federal Savings and Loan Ass'n v. Orondorff, 678 F.2d 1034 (11th Cir.1982) (quoting Pro-phy-lac-tic Brush Co. v. Jordan Marsh Co., 165 F.2d 549, 553 (1st Cir.1948)); Dreyfus Fund, Inc. v. Royal Bank of Canada, 525 F.Supp. 1108, 1124 (S.D.N.Y.1981); 2 J. McCarthy, Trademarks and Unfair Competition Sec. 24:13 at 215 (2d ed. 1984). Nevertheless, in keeping with the original intent of the statute, the similarity must be substantial before the doctrine of dilution may be applied. See Alberto-Culver Co. v. Andrea Dumon, Inc., 466 F.2d 705, 709 (7th Cir.1972); Consolidated Cosmetics v. Neilson Chemical Co., 109 F.Supp. 300, 310 (E.D.Mich.1952); Ehrlich, Anti-Dilution Laws Give Plaintiffs Powerful Weapon Against Copiers, Nat'l...