Fair Use of Trademark in Domain Name – Ninth Circuit

Chief Judge Kozinski

Chief Judge Kozinski

The Ninth Circuit held that the domain names buy-a-lexus.com and buyorleaselexus.com could be fair use of the Lexus trademark. Toyota Motor Sales, U.S.A., Inc. v. Tabari, opinion by Judge Kozinski dated July 8, 2010. Excerpts are below.

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. … 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.”

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.

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.

The injunction here is plainly overbroad … 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.

[Under the injunction by the Trial Court, t]he Tabaris may not do business at lexus- broker.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.

The inclusion of such words [e.g. “independent”] will usually negate any hint of sponsorship or endorsement, which is why we mentioned them in concluding that there was no infringement in Volkswagenwerk. …But that doesn’t mean such words are required … Our subsequent cases make clear they’re not.

[in footnote 3:]
Where these or other factors suggest that nominative use is likely to cause confusion, a disclaimer may well be necessary. But a disclaimer is not required every time a URL contains a mark.

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.

Toyota asserts that, even if the district court’s injunction is overbroad, it can be upheld if limited to the Tabaris’ actual domain names: buyorleaselexus.com and buy- a-lexus.com. We therefore apply the three-part New Kids test to the domain names, and we start by asking whether the Tabaris’ use of the mark was “necessary” to describe their business. Toyota claims it was not, because the Tabaris could have used a domain name that did not contain the Lexus mark. It’s true they could have used some other domain name like autobroker.com or fastimports.com, or have used the text of their website to explain their business. But it’s enough to satisfy our test for necessity that the Tabaris needed to communicate that they specialize in Lexus vehicles, and using the Lexus mark in their domain names accomplished this goal.

[in footnote 9:]
The Seventh Circuit has similarly upheld the right of a seller of Beanie Babies to operate at “bargainbeanies.com” on the grounds that “[y]ou can’t sell a branded product without using its brand name.”

The disclaimer stated, prominently and in large font, “We are not an authorized Lexus dealer or affiliated in any way with Lexus. We are an Independent Auto Broker.” While not required, such a disclaimer is relevant to the nominative fair use analysis. … Because there was no risk of confusion as to sponsorship or endorsement, the Tabaris’ use of the Lexus mark was fair.

On remand, Toyota must bear the burden of establishing that the Tabaris’ use of the Lexus mark was not nominative fair use. A finding of nominative fair use is a finding that the plaintiff has failed to show a likelihood of confusion as to sponsorship or endorsement. … A defendant seeking to assert nominative fair use as a defense need only show that it used the mark to refer to the trademarked good, as the Tabaris undoubtedly have here. The burden then reverts to the plaintiff to show a likelihood of confusion.

We vacate and remand for proceedings consistent with this opinion. At the very least, the injunction must be modified to allow some use of the Lexus mark in domain names by the Tabaris. Trademarks are part of our common language, and we all have some right to use them to communicate in truthful, non-misleading ways.

The opinion did not mention the Anticybersquatting Consumer Protection Act. The ACPA prohibits cybersquatting on a domain name that is confusingly similar to another person’s trademark, with a bad faith intent to profit from the registration typically by selling the domain name to the trademark owner.

The Tabaris ran an actual automobile brokerage business using their websites, and nothing was said about any attempt to sell the domain names to Toyota. In the absence of intent to profit by selling the domain names, there was no bad faith under the ACPA, and the ACPA was not applicable.

For additional commentary on the trademark infringement issues raised in the opinion, see blog post by Prof. Barbara Tushnet, and a blog post by Prof. Eric Goldman that compares this opinion to an earlier domain name opinion, also by Judge Kozinski.