While URDP are decided daily its pretty rare to find a Federal Court decision involving domain names and ever rarer to find a court that rules in favor of the domain name holder, but that’s exactly what happened in the case of TOYOTA MOTOR SALES U.S.A., INC. v. TABARI a decision just released on Thursday by the Ninth Circuit for the United States Court of Appeals.
In that case a couple who are auto brokers, beat Toyota on appeal winning the right to a new trial on whether they can regain their domain names; buy-a-lexus.com and buyorleaselexus.com and the most amazing thing about the case, is they did it without an attorney.
Yes they represented themselves against a global heavyweight and won!!!!
Being a federal Appellate court decision, its pretty long, but I think its well worth 15 minutes it may take you to get thorough it. Of course I tried to shorten it up as much as possible.
But the discussion by the chief judge is very interesting for anyone in the domain space, and much of the language goes against a lot of what we read daily in UDRP decisions.
Here are the fact of this case as described by the chef judge of the court:
“Farzad and Lisa Tabari are auto brokers. They contact authorized dealers, solicit bids and arrange for customers to buy from the dealer offering the best combination of location, availability and price.”
“Until recently, the Tabaris offered this service at buy-a-lexus.com and buyorleaselexus.com.”
“Toyota Motor Sales U.S.A. (“Toyota”) is the exclusive distributor of Lexus vehicles in the United States, and jealous guardian of the Lexus mark.”
“A Toyota marketing executive testified at trial that Toyota spends over $250 million every year promoting the Lexus brand. In the executive’s estimation, “Lexus is a very prestigious luxury brand and it is an indication of an exclusive luxury experience.” No doubt true.”
“Toyota objected to the Tabaris’ use on their website of copyrighted photography of Lexus vehicles and the circular “L Symbol Design mark.” Toyota also took umbrage at the Tabaris’ use of the string “lexus” in their domain names, which it believed was “likely to cause confusion as to the source of [the Tabaris’] web site.”
“The Tabaris removed Toyota’s photography and logo from their site and added a disclaimer in large font at the top. But they refused to give up their domain names.”
“Toyota sued, and the district court found infringement after a bench trial. It ordered the Tabaris to cease using their domain names and enjoined them from using the Lexus mark in any other domain name. Pro se as they were at trial, the Tabaris appealed.”
In finding in favor of the domain holders the court said:
“When customers purchase a Lexus through the Tabaris, they receive a genuine Lexus car sold by an authorized Lexus dealer, and a portion of the proceeds ends up in Toyota’s bank account. Toyota doesn’t claim the business of brokering Lexus cars is illegal or that it has contracted with its dealers to prohibit selling through a broker. Instead, Toyota is using this trademark lawsuit to make it more difficult for consumers to use the Tabaris to buy a Lexus.””
“”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. The Tabaris did in fact present a nominative fair use defense to the district court.”
“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. “
“This test “evaluates the likelihood of confusion in nominative use cases. see New Kids on the Block v. News Am. Publ’g, Inc., 971 F.2d 302, 308 (9th Cir. 1992)
This test is “designed to address the risk that nominative use of the mark will inspire a mistaken belief on the part of consumers that the speaker is 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 district court enjoined the Tabaris from using “any . . . domain name, service mark, trademark, trade name, meta tag or other commercial indication of origin that includes the mark LEXUS.” A trademark injunction, particularly one involving nominative fair use, can raise serious First Amendment concerns because it can interfere with truthful communication between buyers and sellers in the marketplace”
“To uphold the broad injunction entered in this case, we would have to be convinced that consumers are likely to believe a site is sponsored or endorsed by a trademark holder whenever the domain name contains the string of letters that make up the trademark.””
“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 independentlexus-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.”
“Even if we were to modify the injunction to exclude domain names that expressly disclaim sponsorship or endorsement (like the examples above), the injunction would still be too broad.”
“”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.
“If customers type in trademark.com and find the site occupied by someone other than the trademark holder, they may well believe it is the trademark holder, despite contrary evidence on the website itself. Alternatively, they may become discouraged and give up looking for the trademark holder’s official site, believing perhaps that such a website doesn’t exist.
” But the case where the URL consists of nothing but a trademark followed by a suffix like .com or .org is a special one indeed.
“Because the official Lexus site is almost certain to be found at lexus.com (as, in fact, it is), it’s far less likely to be found at other sites containing the word Lexus.”
“On the other hand, a number of sites make nominative use of trademarks in their domains but are not sponsored or endorsed by the trademark holder: You can preen about your Mercedes at mercedesforum.com and mercedestalk.net, read the latest about your double-skim-no-whip latte at starbucksgossip.com and find out what goodies the world’s greatest electronics store has on sale this week at fryselectronics-ads.com.”
“Consumers who use the internet for shopping are generally quite sophisticated about such matters and won’t be fooled into thinking that the prestigious German car manufacturer sells boots at mercedesboots.com, or homes at mercedeshomes.com, or that comcastsucks.org is sponsored or endorsed by the TV cable company just because the string of letters making up its trademark appears in the domain.”
“When people go shopping 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.”
“”If word of mouth, confusion is unlikely because the consumer will usually be aware of who runs the site before typing in the URL. And, if the site is located through a search engine, the consumer will click on the link for a likely-relevant site without paying much attention to the URL. ”
“Use of a trademark in the site’s domain name isn’t materially different from use in its text or metatags in this context; a search engine can find a trademark in a site regardless of where exactly it appears.”
” Of course a domain name containing a mark cannot be nominative fair use if it suggests sponsorship or endorsement by the trademark holder. ::
“When a domain name making nominative use of a mark does not actively suggest sponsorship or endorsement, the worst that can happen is that some consumers may arrive at the site uncertain as to what they will find. But in the age of FIOS, cable modems, DSL and T1 lines, reasonable, prudent and experienced internet consumers are accustomed to such 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 trademark.com, or 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.”
“So long as the site as a whole does not suggest sponsorship or endorsement by the trademark holder, such momentary uncertainty does not preclude a finding of nominative fair use.”
“Toyota argues it is entitled to exclusive use of the string “lexus” in domain names because it spends hundreds of millions of dollars every year making sure everyone recognizes and understands the word “Lexus.” But “[a] large expenditure of money does not in itself create legally protectable rights.”
“Indeed, it is precisely because of Toyota’s investment in the Lexus mark that “[m]uch useful social and commercial discourse would be all but impossible if speakers were under threat of an infringement lawsuit every time they made reference to [Lexus] by using its trademark.”
“”It is the wholesale prohibition of nominative use in domain names that would be unfair.””
“”It would be unfair to merchants seeking to communicate the nature of the service or product offered at their sites. And it would be unfair to consumers, who would be deprived of an increasingly important means of receiving such information. As noted, this would have serious First Amendment implications. The only winners would be companies like Toyota, which would acquire greater control over the markets for goods and services related to their trademarked brands, to the detriment of competition and consumers. The nominative fair use doctrine is designed to prevent this type of abuse of the rights granted by the Lanham Act.””
“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. While using Lexus in their domain names wasn’t the only way to communicate the nature of their business, the same could be said of virtually any choice the Tabaris made about how to convey their message”
“Rather than using the internet, they could publish advertisements in print; or, instead of taking out print ads, they could rely on word of mouth. We’ve never adopted such a draconian definition of necessity, and we decline to do so here.
“The fact that the Tabaris also broker other types of cars does not render their use of the Lexus mark unnecessary.
“Nor are we convinced by Toyota’s argument that the Tabaris unnecessarily used domain names containing the Lexus trademark as their trade name.
“The Tabaris’ business name is not buyorleaselexus.com or buy-a-lexus.com; it’s Fast Imports.
“Toyota points out that the Tabaris’ domain names featured prominently in their advertising, but that by no means proves the domain names were synonymous with the Tabaris’ business. The Tabaris may have featured their domain names in their advertisements in order to tell consumers where to find their website, as well as to communicate the fact that they can help buy or lease a Lexus. Toyota would have to show significantly more than “prominent” advertisement to establish the contrary. We therefore conclude that the Tabaris easily satisfy the first New Kids factor.”
“”The district court is in a better position to assess in the first instance the timing and extent of any infringing conduct, as well as the scope of the remedy, if any remedy should prove to be required. We therefore vacate the injunction and remand for reconsideration. The important principle to bear in mind on remand is that a trademark injunction should be tailored to prevent ongoing violations, not punish past conduct. Speakers do not lose the right to engage in permissible speech simply because they may have infringed a trademark in the past.””
“On remand, (new trial) Toyota must bear the burden of establishing that the Tabaris’ use of the Lexus mark was not nominative fair use.”
The court then ruled as follows:
“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.”
“”Many of the district court’s errors seem to be the result of unevenly-matched lawyering, as Toyota appears to have taken advantage of the fact that the Tabaris appeared pro se. “”
“Costs on appeal are awarded to the Tabaris.”
So its obviously a great win for the Tabaris.
It’s not easy to beat a company like Toyota with the best and most expensive attorneys in the world, but to do so, per se, without any counsel is quite impressive.
Now lets be clear, this is not a case where the use of the domain was parking.
However the couple was engaged in the auto broker business using the trademark of Lexus in their domain name without permission or license from Lexus.
So for those who engage in a business or have a blog, or fan site, using a domain containing a trademark this is an important case.
It is also a great case to support the argument that its not the domain, but the use of the domain that determines infringement in most cases.
I don’t think this court would uphold the line of reasoning we see in many UDRP or WIPO panels that non-use of a domain where it goes to a non-resolving page is an indication of bad faith.
Moreover unlike UDRP and WIPO were we see panels bringing up past decisions all the time, even as few as 2 negative decisions, to decide against the domain holder, as recently as the Domain Capital we discussed on Friday, this court said:
Speakers do not lose the right to engage in permissible speech simply because they may have infringed a trademark in the past.”
Unfortunately UDRP and WIPO panels have a different standard then federal courts and do not seem to have to follow any precedents of courts or even their own decisions and pretty much make it up on the fly as they go.
With decisions like this, there is some hope on the horizon for a better day.