Toyota Motor Sales: Internet Shoppers Rarely Confused by Trademark Use in Domain Names

Toyota Motor Sales: Internet Shoppers Rarely Confused by Trademark Use in Domain Names

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In a lively opinion displaying unusual judicial sophistication regarding the Internet, the Ninth Circuit rules that domain names buy-a-lexus.com and buyorleaselexus.com are non-infringing uses of the LEXUS mark.  Toyota Motor Sales, U.S.A., Inc. v. Tabari, 2010 U.S. App. LEXIS 13930 (9th Cir. 2010).  The opinion, by Judge Alex Kozinski, champions those seeking to use others' trademarks in their domain names, so long as the use is not blatantly misleading or deceptive.  It also sets a high standard for trademark owners seeking to show initial interest confusion from domain names containing their marks.

Facts

Plaintiff Toyota Motor Sales, U.S.A. is the exclusive domestic distributor of LEXUS luxury automobiles.  Defendants Farzad and Lisa Tabari operate an independent automobile brokerage business, specializing in LEXUS vehicles.  When contacted by a customer, the Tabaris seek bids from authorized automobile dealers and help broker a purchase. 

Defendants use the domain names buyorleaselexus.com and buy-a-lexus.com in connection with their business, while Toyota's official LEXUS site is at lexus.com.  When defendants started their website, the site displayed the LEXUS mark in the stylized form used by Toyota as well as the official LEXUS L symbol design, but before this litigation began, defendants removed these LEXUS indicia from their site.

Toyota sued to stop defendants from using the domain names, claiming trademark infringement.  After a bench trial, the United States District Court for the Central District of California ruled in favor of Toyota, finding that "[c]onsumers who encounter Defendants' domain names . . .  are likely to assume, at least initially, that Defendants' business is sponsored, approved by, or somehow affiliated with Plaintiff."  Findings of Fact and Conclusions of Law After Court Trial, CV03-8506 (C.D. Cal. 2006), p. 22 ¶ 37.  It permanently enjoined defendants from using the buyorleaselexus.com and buy-a-lexus.com domain names, as well as any other domain name that includes LEXUS.

Defendants appealed and the Ninth Circuit vacated the district court opinion.

Assumptions About Internet Users

This case is a true high water mark in terms of judicial sophistication about the Internet.  Judge Kozinski details the expectations and assumptions of the typical Internet shopper to support his skepticism about claims that consumers are easily duped by an ambiguous domain name.  His pronouncements are bold and perhaps even unsuitable for judicial notice.  Nevertheless, his candid description of Internet use may change the way courts see the likelihood of consumer confusion in this context.

The opinion takes as its starting point the assumption that the relevant consumer in the case is "a reasonably prudent consumer accustomed to shopping online."  It goes on to state that, when people shop online, "they don't start out by typing random URLs containing trademarked words hoping to get a lucky hit.  They may start out by typing trademark.com, but then they'll rely on a search engine or word of mouth."  The opinion is surely correct that an Internet user looking for the official LEXUS site is not going to type into the browser buy-a-lexus.com or buyorleaselexus.com.

According to Toyota Motor Sales, after the typical Internet consumer starts out on an online search, he does not expect each domain name that contains a trademark to lead to an official web site for the mark owner.  Judge Kozinski goes on to opine:

[R]easonable, prudent and experienced internet consumers are accustomed to . . . exploration by trial and error.  They skip from site to site, ready to hit the back button whenever they're not satisfied with a site's contents. They fully expect to find some sites that aren't what they imagine based on a glance at the domain name or search engine summary. Outside the special case of . . . domains that actively claim affiliation with the trademark holder, consumers don't form any firm expectations about the sponsorship of a website until they've seen the landing page -- if then. This is sensible agnosticism, not consumer confusion.

This pragmatism about the Internet and its users makes this case notable, and is a departure from cases holding that the parties' simultaneous use of the Internet to sell their goods would exacerbate the likelihood of confusion.  See, e.g., Perfumebay.com, Inc. v. eBay, Inc., 506 F.3d 1165, 1173 (9th Cir. 2007); Brookfield Comm., Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1057 (9th Cir. 1999) ("Web surfers are more likely to be confused as to the ownership of a web site than traditional patrons of a brick-and-mortar store would be of a store's ownership.").

Nominative Fair Use

It is plainly true that trademark rights are not rights in gross, allowing a mark owner to prevent all uses of its mark by others.  A defendant may use a plaintiff's mark to refer to the plaintiff's goods or services without liability for trademark infringement, as long as its use is not misleading or likely to confuse consumers.  See, e.g., Tiffany, Inc. v. eBay, Inc., 600 F.3d 93, 102-03 (2d Cir. 2010) (holding that "a defendant may lawfully use a plaintiff's trademark where doing so is necessary to describe the plaintiff's product and does not imply a false affiliation or endorsement by the plaintiff of the defendant").  For example, if true, a software maker can advertise that its software is compatible with a certain brand of computer or a pharmaceutical company can advertise that its headache remedy takes effect more quickly than that of its named competitor.  Courts draw the sometimes fine line in such cases between an informational use of another party's mark and an infringing use of that mark.  For more on defendants referring to plaintiffs' marks, see Gilson on Trademarks § 11.08[4][k].

The Ninth Circuit has developed its own likelihood of confusion test especially for cases in which a defendant uses plaintiff's mark to refer to plaintiff's goods and services.  The test, known as the nominative fair use test, was enunciated by Judge Kozinski himself in 1992.  First, the defendant's product or service "must be one not readily identifiable without use of the trademark."  Second, the defendant may use "only so much of the mark . . . as is reasonably necessary to identify the product or service."  Third, the defendant must "do nothing that would . . . suggest sponsorship or endorsement by the trademark holder."  New Kids on the Block v. News Am. Pub., Inc., 971 F.2d 302, 308 (9th Cir. 1992).  (The nominative fair use test is unrelated to the statutory fair use defense, which refers to a non-trademark­ use of another party's use in its descriptive sense to describe the defendant's own product.  See 15 U.S.C. § 1115(b)(4); Gilson on Trademarks § 11.08[3][d].)

The district court in this case held that the "mere use of 'lexus' . . . in a domain name generally implies sponsorship or endorsement and is not nominative fair use."  Findings of Fact and Conclusions of Law, p. 30 ¶ 28 (footnote omitted).  The Ninth Circuit, however, found otherwise, focusing on the defendants' web site itself as well as their domain names.  First, it ruled that the defendants needed to tell their potential customers that they specialize in LEXUS vehicles, so they needed to use the LEXUS mark in their domain names.  Second, it found that the site itself used only as much of the mark as was necessary.  And third, it found that the existence of a disclaimer and the lack of official LEXUS trademarks on the site itself eliminated the possibility of confusion.  As the opinion puts it, "[r]easonable consumers would arrive at the [defendants'] site agnostic as to what they would find.  Once there, they would immediately see the disclaimer and would promptly be disabused of any notion that the [defendants'] website is sponsored by [plaintiff]."

The appellate court found that the defendants were not required to use a domain name such as lexus-broker.com, which the court acknowledged would have been "the most straightforward, obvious and truthful way to describe [defendants'] business."  Nor did they have to use domain names that clearly disclaimed affiliation, such as independent-lexus-broker.com and we-are-definitely-not-lexus.com.

Note that the Toyota Motor Sales opinion explicitly overturns prior case law that had held that the burden of proof of showing nominative fair use is on the defendant.  It held that nominative fair use is not an affirmative defense to be analyzed only after a plaintiff shows a likelihood of confusion under the traditional confusion factors.  Instead, where the defendant simply shows that it has used the plaintiff's mark to refer to plaintiff's goods or services, the burden shifts to the plaintiff to show likelihood of confusion.  This pronouncement overrules the Ninth Circuit's statement in an earlier case that "the nominative fair use defense shifts to the defendant the burden of proving no likelihood of confusion."  See Brother Records, Inc. v. Jardine, 318 F.3d 900, 909 n.5 (9th Cir. 2003).

Initial Interest Confusion

Courts can find actionable likelihood of confusion even if the confusion dissipates before the consumer makes a purchase from the defendant.  Known as initial interest confusion, this doctrine is intended to prevent a bait and switch where a company uses another party's trademark to get consumers' attention and lead customers to consider purchasing its own goods or services.  Even if the consumer realizes that the product before it is not made by the mark owner, the initial confusion may be actionable infringement.  For more on initial interest confusion, see Gilson on Trademarks § 5.14[1].

In Toyota Motor Sales, the possibility of initial interest confusion on the Internet is essentially eliminated except for the most obvious cases of domain name infringement.  The opinion declared that when a domain name is not plainly indicative of sponsorship or endorsement, "the worst that can happen is that some consumers may arrive at the site uncertain as to what they will find."  The district court had found that, even if consumers' initial confusion were dispelled upon seeing defendants' site, "it nonetheless is actionable because it drives business to Defendants' website by trading on the exceptionally strong public recognition of the LEXUS brand."  Findings of Fact and Conclusions of Law, p. 22 ¶ 37.  However, according to the appellate court, nothing about the defendants' domain names themselves would give rise to confusion because the domain names did not include words like authorized or official, nor were they lexus.com.

Other courts have similarly found little chance for proving trademark infringement through a domain name alone where the domain name is not noticeably confusing and where the web site itself does not contribute to a likelihood of confusion.  The Fourth Circuit has ruled that there is generally no actionable confusion where the web site itself is clearly not sponsored by or affiliated with the plaintiff mark owner.  Lamparello v. Falwell, 420 F.3d 309, 316 (4th Cir. 2005) ("[A] court must evaluate an allegedly infringing domain name in conjunction with the content of the website identified by the domain name.").  The Second Circuit has ruled that there must have been intentional deception by a defendant in a domain-name-infringement case "[b]ecause consumers diverted on the Internet can more readily get back on track than those in actual space, thus minimizing the harm to the owner of the searched-for site from consumers becoming trapped in a competing site."  Savin Corp. v. Savin Group, 391 F.3d 439, 462 n.13 (2d Cir. 2004).

The Ninth Circuit opinion in Toyota Motor Sales does conflict with a Sixth Circuit case finding defendant's use of domain names like peterbilttrucks.com and kenworthnewtrucks.com to infringe plaintiff's trademark rights in the marks PETERBILT and KENWORTH.  PACCAR, Inc. v. Telescan Techs., L.L.C., 319 F.3d 243, 252 (6th Cir. 2003), overruled in part on other grounds, KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111 (2004).  There, the court found initial interest confusion, stating:  "An infringing domain name has the potential to misdirect consumers as they search for web sites associated with the owner of a trademark. A disclaimer disavowing affiliation with the trademark owner read by a consumer after reaching the web site comes too late."  Id. at 253.

The Bottom Line in the Ninth Circuit

The Toyota Motor Sales opinion sharply limits findings of infringement from domain names alone, as opposed to infringement resulting from the appearance of a web site.  It identifies specific situations in which use of another's mark in a domain name will typically be infringing:

  • trademark.com (for example, lexus.com), especially where the site is "used to sell goods or services related to the trademarked brand"
  • trademarkUSA.com and trademark-of-glendale.com, because "a location modifier following a trademark indicates that consumers can expect to find the brand's local subsidiary, franchise or affiliate"
  • e-trademark.com, because the "e" "merely indicates the electronic version of a brand"
  • official-trademark-site.com and we-are-trademark.com, because they  "affirmatively suggest sponsorship or endorsement by the trademark holder"

Apart from these obvious cases, the Ninth Circuit opinion strongly suggests that all other domain names that mention another party's trademark are protected by nominative fair use.  The court concluded that consumers who locate web sites through search engines or on the basis of recommendations will simply not pay attention to the web address.  Even if they do notice the web address, their confusion should be measured by their reaction to the content of the web site they find when they get there.  Thus, for domain names that contain another party's trademark, if they are ambiguous about their association with the  mark owner, they are not infringing, according to the Ninth Circuit.  The content of the web site is what ultimately matters.

Conclusion

This opinion may well dismay trademark owners.  However, all is not lost for mark owners attempting to challenge domain names that use their marks.

The Toyota Motor Sales opinion forecloses Internet-based infringement claims where (1) the domain names do not blatantly suggest affiliation with the mark owners and (2) the content of the web site is not confusing or misleading.  Nevertheless, if a mark owner cannot file in the more favorable Sixth Circuit, it could still bring a claim in federal court under the Anticybersquatting Consumer Protection Act (ACPA) where a domain name is confusingly similar to its mark.  See Gilson on Trademarks § 7A.06[1] for more on actions under the ACPA.  It could also bring an administrative proceeding under the Uniform Domain Name Dispute Policy (UDRP) to obtain cancellation or transfer of such a domain name.  See Gilson on Trademarks § 7A.06[2] for more on UDRP proceedings.  To prevail in each of these, the mark owner must show that the defendant had a bad faith intent to profit from the use of the plaintiff's mark.  A mark owner that believes another party is unfairly benefiting from the good will of its mark can pursue these claims instead of relying on the doubtful success of an infringement claim.

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