Mead Data Cent. v. Toyota Motor Sales, USA

• Decision Date: 30 December 1988
• Docket Number: No. 88 Civ. 2854 (DNE).,88 Civ. 2854 (DNE).
• Citation: 702 F. Supp. 1031
• Parties: MEAD DATA CENTRAL, INC., Plaintiff, v. TOYOTA MOTOR SALES, U.S.A., INC., and Toyota Motor Corp., Defendants.
• Court: U.S. District Court — Southern District of New York

702 F. Supp. 1031

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

No. 88 Civ. 2854 (DNE).

United States District Court, S.D. New York.

December 30, 1988.

COPYRIGHT MATERIAL OMITTED

Smith & Schnacke, Charles J. Faruki, Sue K. McDonnell, Mary Lynn Readey, Dayton, Ohio, of counsel, Cahill, Gordon & Reindel, Dean Ringel, New York City, of counsel, and Arnold, White & Durkee, Bill Durkee, Houston, Tex., J. Paul Williamson, Arlington, Va., of counsel, for plaintiff Mead Data Cent., Inc.

Kenyon & Kenyon, Arthur D. Gray, Albert J. Breneisen, Edward W. Greason, William T. Boland, Jr., Howard J. Shire, Mark D. Engelmann, New York City, of counsel, for defendants, Toyota Motor Sales, U.S.A., Inc. and Toyota Motor Corp.

OPINION & ORDER

EDELSTEIN, District Judge:

INTRODUCTION

Plaintiff, Mead Data Central, Inc. ("Mead"), has filed the instant action seeking injunctive relief against defendants, Toyota Motor Corp. ("TMC") and Toyota Motor Sales U.S.A., Inc. ("TMS") (TMC and TMS collectively, "Toyota"). The complaint alleges one claim for false designation of origin pursuant to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) and one claim of dilution of a tradename pursuant to New York's antidilution statute, New York General Business Law § 368-d. The parties, pursuant to Fed.R.Civ.P. 65(a)(2), have agreed to a consolidation of a hearing for a preliminary injunction and a trial on the merits. A bench trial was held on November 8 and 11 and December 13-15, 1988. The following constitutes the court's findings of fact and conclusions of law.

I. FINDINGS OF FACT

Plaintiff, Mead, is a Delaware corporation with its principal place of business in Miamisburg, Ohio. Joint Pretrial Order ("PTO"), Agreed Fact No. 1. Mead provides various computer assisted research services, primarily under the rubric LEXIS, which is a registered trademark. PTO, Agreed Facts Nos. 1, 4, 10, and 11. Mead, through its LEXIS service, has played a pivotal role in building the computer assisted legal research ("CALR") industry to its current state of widespread acceptance by the legal community. PTO, Agreed Fact No. 4. Mead's principal competitor in the CALR field is the West Publishing Company, through its WESTLAW service.

Defendant, TMC, is a Japanese corporation with its principal place of business in Japan. Defendant, TMS, is a California corporation with its principal place of business in Torrance, California, and is a wholly-owned subsidiary of TMC. PTO, Agreed Facts Nos. 2 and 3. TMC is a manufacturer of automobiles under the Toyota name-plate, and TMS markets Toyota automobiles in the United States. PTO, Agreed Facts Nos. 18-19.

On August 24, 1987 Toyota announced a new line of luxury automobiles to be offered for sale in the fall of 1989. PTO Agreed Facts Nos. 20, 23; Plaintiff's Exhibit ("Px") 99. Toyota will market this new line of cars to upscale consumers, primarily well-educated, status-conscious individuals with household incomes over $50,000. Testimony of John French, Project Manager for LEXUS Division, T. 343, 1. 25 — 344, 1. 8; Testimony of Jimmie C. Perkins, Senior Vice-President, TMS, LEXUS Division, T. 459, 1. 19—460, 1. 1. The new luxury cars will be marketed through a new division of TMS called LEXUS. PTO, Agreed Fact No. 23. The automobiles will be sold under the LEXUS name followed by an alphanumeric designation. Perkins Testimony, Tr. 442.

Toyota followed a lengthy process in choosing the LEXUS name. In the Spring of 1986, John French, Project Manager for LEXUS, was charged with the search for a name for Toyota's new car division. French Testimony, Tr. 367; Perkins Testimony, Tr. 445. Mr. French retained the firm of Lippincott & Margulies ("L & M") to assist TMS in the development of a new name. French Testimony, Tr. 369-70; Px 11). L & M presented TMS with a list of 219 names during a meeting at TMS on July 29, 1986. French Testimony, Tr. 377; Perkins Testimony, Tr. 473; Px 15 at T0634-638; Px 43. The TMS employees at that meeting did not like any of the names suggested by L & M. French Testimony, Tr. 378-79, 388.

One of the names on the list was ALEXIS. Px 15 at T0634; Px 43 at T2541. At some point during the July 29, 1986 meeting, Mr. French wrote, on his copy of the L & M list, the word "LEXIS," he derived by dropping the "A" from ALEXIS. Px 43 at T2541. Mr. French claims not to have known, at that time, of the Mead LEXIS service. French Testimony, Tr. 407-09. During that meeting, Mr. French claims to have changed the "I" to a "U" and then suggested LEXUS as a possible name. Testimony of William Plourde, An Attorney for TMS, Tr. 473; Deposition of Patricia Britton, An Attorney for TMS, at 16-17. Mr. French contends he changed the LEXIS to LEXUS because the "u" connoted luxury to him.

Mr. French mentioned the name LEXIS to Mr. Plourde and Ms. Britton, who were at the meeting. Both of the attorneys were aware of the LEXIS service but made no mention of it at that time. The court is not persuaded by Mr. French's contention regarding the change from LEXIS to LEXUS and concludes that the change was probably prompted by Mr. Plourde or Ms. Britton either directly or as a result of their mentioning Mead's LEXIS service to Mr. French.

After additional names were developed by L & M and TMS employees, TMS narrowed the list of names to 24. French Testimony, Tr. 399. TMS then retained the firm of Dunteman & Zollweg to conduct focus group interviews to evaluate consumer reaction to each name. Id.; Px 16 at T0749 et seq. The focus group test yielded six preferred names: CAMBRIDGE, LEXUS, VECTRE, VERONE, CALIBRE, and CHAPARAL. Px 16 at T0757. Dunteman & Zollweg recommended that Cambridge be dropped from the list as too stuffy. Perkins Testimony, Tr. 569.

The five remaining names were then sent to Mr. Plourde for a preliminary in-house trademark search. Plourde Testimony, Tr. 475-477. Although he was aware of the LEXIS service and he discovered Mead's mark in his search, Mr. Plourde concluded that the LEXIS mark was not strong and was unrelated to the automotive industry and, therefore, not an impediment to LEXUS. Id. In reaching his conclusion, Mr. Plourde did not specifically consider the dilution issue. Id., Tr. at 481.

In October 1986, TMS approved the LEXUS name and submitted it, along with the four other finalists, to TMC for approval. Perkins Testimony, Tr. 576; Px 16 at T0734. In January 1987, TMC conducted, through its outside trademark counsel, David Kera, its own trademark search of the five names on the final list. Kera Testimony, Tr. 513; Defendants' Exhibit ("Dx") G2. After Mr. Kera concluded that CHAPARAL and VECTRE were not available, Kera Testimony, Tr. 516-18; Dx H2, TMC requested Mr. Kera to conduct a broader search of LEXUS. Kera Testimony, Tr. 519-20; Dx M2. By telex dated April 3, 1987, Dx N2, and letter dated June 18, 1987, Dx 02, Mr. Kera communicated to TMC that LEXUS was available for use and registration in the United States for cars. Kera Testimony, Tr. 520-21. TMC approved the LEXUS name in June 1987 and a public announcement of the new LEXUS line was made in August 1987. Perkins Testimony 581-82.

The choice of the LEXUS name for Toyota's new division and line of cars sparked the controversy that gives rise to this lawsuit. On October 8, 1987, Mead, through its counsel, Bill Durkee of Arnold, White & Durkee, sent a letter of protest to Shoichiro Toyoda, President of TMC and J. Davis Illingworth, Manager of the LEXUS Division of TMS. The letter informed Toyota that Mead considered the use of LEXUS an infringement on its LEXIS trademark, and it specifically referred to the twenty-three currently enacted state antidilution statutes. After a number of meetings between Mead and Toyota personnel failed to resolve the controversy, Mead filed the instant lawsuit on April 22, 1988.

The complaint alleges that Toyota's use of the LEXUS mark will likely dilute the LEXIS mark, under the meaning of New York's antidilution statute, N.Y.Gen. Bus.Law § 368-d. The complaint also alleges that the planned use of the LEXUS mark will cause a likelihood of confusion among consumers creating a false impression of the origin of the goods, in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). To remedy these alleged harms to its trademark, Mead seeks to enjoin Toyota from using the name LEXUS. Toyota filed counterclaims seeking a declaratory judgment that its planned use of the LEXUS mark will not violate either the antidilution statute or § 43 of the Lanham Act. Toyota also asserted the affirmative defense that the Lanham Act preempts the New York antidilution statute.

II. CONCLUSIONS OF LAW

A. LANHAM ACT CLAIM

Mead claims that the proposed use of the LEXUS name by Toyota will mislead and confuse purchasers and consumers and convey a false impression as to the source of the products, in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)¹, and New York common law. Section 43(a) proscribes "false designation of origin" as to goods and services and it is the only section of the Lanham Act that protects unregistered marks. See Centaur Communications, Limited v. A/S/M Communications, Inc., 830 F.2d 1217, 1220 (2d Cir. 1987).

A § 43(a) claim requires a plaintiff to establish (1) that its mark is entitled to protection; and (2) a likelihood of confusion among "an appreciable number of ordinary prudent purchasers." Lever Brothers Co. v. American Bakeries Co., 693 F.2d 251, 253 (2d Cir.1982). In this case, there is no dispute that Mead has registered the LEXIS trademark with the Patent and Trademark Office, and that the mark has become incontestable under 15 U.S.C. § 1065. See Joint Pretrial Order, Statement of Agreed Facts Nos. 10, 11. Such a mark is entitled to the utmost trademark protection. See Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 871 (2d Cir.1986). Moreover, defendants do not seriously dispute that the...