Lead Opinion
Opinion by Chief Judge KOZINSKI; Concurrence by Judge FERNANDEZ.
In this trademark infringement case, we consider the application of the nominative fair use doctrine to internet domain names.
Facts
Farzad and Lisa Tabari are auto brokers — the personal shoppers of the automotive world. They contact authorized dealers, solicit bids and arrange for customers to buy from the dealer offering the best combination of location, availability and price. Consumers like this service, as
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 appeal.
Nominative Fair Use
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,
In cases where a nominative fair use defense is raised, we ask whether (1) the product was “readily identifiable” with
A. 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. See Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc.,
In performing this analysis, our focus must be on the “ ‘reasonably prudent consumer’ in the marketplace.” Cf. Dreamwerks Prod. Grp., Inc. v. SKG Studio,
The injunction here is plainly over-broad — as even Toyota’s counsel grudgingly conceded at oral argument — 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 frus
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. The Tabaris may not do business at lexusbroker.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. See Welles,
Although our opinion in Volkswagenwerk Aktiengesellschaft v. Church remarked on that defendant’s “prominent use of the word ‘Independent’ whenever the terms ‘Volkswagen’ or ‘VW’ appeared in his advertising,”
The district court reasoned that the fact that an internet domain contains a trademark will “generally” suggest sponsorship or endorsement by the trademark holder. 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. Cf. Panavision Int'l, L.P. v. Toeppen,
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. See Brookfield,
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.
Of course a domain name containing a mark cannot be nominative fair use if it suggests sponsorship or endorsement by the trademark holder. We’ve already explained why trademark.com domains have that effect. See pp. 1177-78 supra. Sites like trademark-USA.com, trademark-ofglendale.com or e-trademark.com will also generally suggest sponsorship or endorsement by the trademark holder; the addition of “e” merely indicates the electronic version of a brand, and a location modifier following a trademark indicates that consumers can expect to find the brand’s local subsidiary, franchise or affiliate. See Visa Int’l Serv. Ass’n v. JSL Corp., No. 08-15206,
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. Cf. Interstellar Starship,
Toyota argues it is entitled to exclusive use of the string “lexus” in domain names because it spends hundreds of mil
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.
B. 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 auto-broker.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. In Volkswagenwerk, for instance, we affirmed the right of a mechanic to put up a sign advertising that he specialized in repairing Volkswagen cars, although he could have used a sandwich board, distributed leaflets or shouted through a megaphone.
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. See Volkswagenwerk,
As for the second and third steps of our nominative fair use analysis, Toyota suggests that use of the stylized Lexus mark and “Lexus L” logo was more use of the mark than necessary and suggested sponsorship or endorsement by Toyota. This is true: The Tabaris could adequately communicate their message without using the visual trappings of the Lexus brand. New Kids,
But the Tabaris submitted images of an entirely changed site at the time of trial: The stylized mark and “L” logo were gone, and a disclaimer appeared in their place. 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 Bro
This makeover of the Tabaris’ site is relevant because Toyota seeks only forward-looking relief. In Volkswagenwerk, we declined to order an injunction where the defendant had likewise stopped all infringing activities by the time of trial,
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.
C. When considering the scope and timing of any infringement on remand, the district court must eschew application of Sleekcraft and analyze the case solely under the rubric of nominative fair use. Cairns,
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. See Welles,
We have previously said the opposite: “[T]he nominative fair use defense shifts to the defendant the burden of proving no likelihood of confusion.” Brother Records, Inc.,
Laches
The Tabaris claim Toyota’s case is barred by laches. This would obviate any need to remand, as it would provide a complete defense to Toyota’s trademark claims. The district court rejected this defense, and we review for abuse of discretion. United States v. Marolf,
The district court found that Toyota waited six months before contacting the Tabaris after it became aware of them domain names. The Tabaris point to no evidence that would justify overturning that finding on appeal. Nor was it an abuse of discretion to conclude that short delay was reasonable. An additional delay of two years ensued before Toyota brought this suit, but during that period the parties were actively seeking to resolve this matter out of court. It was not unreasonable for Toyota to attempt to avoid the expense and inconvenience of a lawsuit. See, e.g., E. & J. Gallo Winery,
Nor did the relatively brief delay prejudice the Tabaris. See id. at 1294. The Tabaris note that one witness answered “I don’t remember” in her deposition, but they present no evidence that the witness’s loss of memory occurred during the period of delay. We must therefore affirm the district court’s rejection of the Tabaris’ laches defense.
Seventh Amendment
Finally, we consider the Tabaris’ claim that the district court deprived them of their right to a trial by jury when it failed to empanel a jury to decide Toyota’s trademark claims. Because Toyota only sought an injunction, the district court did not err by resolving its claims in a bench trial. See, e.g., Anti-Monopoly, Inc. v. Gen. Mills Fun Grp.,
The Tabaris also claim the district court erred by bifurcating the trademark claims from the Tabaris’ counterclaims for intentional and negligent interference with prospective economic advantage, as to which the Tabaris undoubtedly did have a right to trial by jury. After resolving the trademark claims in a bench trial, the district court granted summary judgment against the Tabaris on the interference counterclaims. This was proper only if there were no common factual issues among the bifurcated claims; otherwise, the interference counterclaims should have been addressed first in order to avoid the risk that findings made in the bench trial would become the law of the case and prevent a jury from determining the common issues. See Dollar Sys., Inc. v. Avcar Leasing Sys., Inc.,
There’s no need for an exhaustive inquiry to determine whether there was factual overlap between the claims; we can take Toyota’s word for it. After the bench trial, Toyota sought summary judgment on the Tabaris’ counterclaims on the ground that:
Much of the testimony and evidence offered at trial to support or refute Defendants’ affirmative defenses and ... counterclaims ... involve the same issues of proof necessary to Defendants’ pending tortious interference counterclaims. For example, the factual allegations underlying Defendants’ affirmative defense of inequitable conduct, unclean hands and trademark misuse are also central to Defendants’ tortious interference counterclaims.
Toyota claimed there was no longer any need for a jury trial because the district court’s bench trial findings constituted the “law of the case.”
Nevertheless, it was harmless, and there’s no need to revisit the issue on remand. See Kulas v. Flores,
Because the district court could have granted summary judgment on this basis before the bench trial, it was harmless error for it to do so after the trial was concluded. See Kulas,
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. See, e.g., p. 1184 n.12 supra. To avoid similar problems on remand, the district court might consider contacting members of the bar to determine if any would be willing to represent the Tabaris at a reduced rate or on a volunteer basis.
VACATED AND REMANDED.
Costs on appeal are awarded to the Tabaris.
Notes
. This is no less true where, as here, "the defendant's ultimate goal is to describe his own product.” Cairns v. Franklin Mint Co., 292 F.3d 1139, 1151 (9th Cir.2002) (emphasis omitted). In Welles, for instance, we applied our nominative fair use analysis to a former playmate’s use of the Playboy mark to describe herself and her website.
. If defendants are unable or unwilling to modify their use of the mark to comply with New Kids, then the district court’s order to modify may effectively enjoin defendants from using the mark at all.
. The Sixth Circuit enjoined a domain name in part because it did "not include words like 'independent' or 'unaffiliated,' ” but in that case there were additional factors indicating sponsorship or endorsement, including the use of stylized versions of the plaintiff's marks on the site. PACCAR Inc. v. TeleScan Techs., L.L.C.,
. Of course, not eveiy trademark.com domain name is likely to cause consumer confusion. See Interstellar Starship,
When a website deals in goods or services related to a trademarked brand, as in this case, it is much closer to the second example, where apple.com competes with Apple Computers. If a company that repaired iPods, iPads and iPhones were to set up at apple.com, for instance, consumers would naturally assume that the company was sponsored or endorsed by Apple (or, more likely, that it was Apple). Where a site is used to sell goods or services related to the trademarked brand, a trademark.com domain will therefore suggest sponsorship or endorsement and will not generally be nominative fair use.
. Citing our refusal to distinguish between “Golden Door/’ a spa, and a competing “Golden Door for Hair,” the district court treated buyorleaselexus.com as legally indistinguishable from lexus.com. Golden Door, Inc. v. Odisho,
. By "word of mouth” we, of course, refer not merely to spoken recommendations from friends and acquaintances, but to the whole range of information available to online shoppers, including chat rooms, discussion forums, feedback and evaluation websites, and the like.
. Domain names containing trademarks may also be prohibited because they dilute the value of those marks — for instance, by creating negative associations with the brand. Cf. Playboy Enters., Inc. v. Netscape Commc'ns Corp.,
. "Words ... do not worm their way into our discourse by accident.” Alex Kozinski, Trademarks Unplugged, 68 N.Y.U. L.Rev. 960, 975 (1993). Trademark holders engage in "well-orchestrated campaigns intended to burn them into our collective consciousness.” Id. Although trademark holders gain something by pushing their trademark into the lexicon, they also inevitably lose a measure of control over their mark.
. 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.” Ty Inc.,
. Toyota doesn't suggest that the Tabaris used the Lexus mark to refer to those other cars, or that the Tabaris used the Lexus mark in order to redirect customers to those cars. See, e.g., Nissan Motor Co. v. Nissan Computer Corp.,
. This is necessarily so because, unlike classic fair use, nominative fair use is not specifically provided for by statute. A court may find classic fair use despite "proof of infringement” because the Lanham Act authorizes that result. See 15 U.S.C. § 1115(b)(4). Nominative fair use, on the other hand, represents a finding of no liability under that statute's basic prohibition of infringing use. See id. § 1114.
. Toyota artfully maneuvered to obscure this factual overlap before trial and again on appeal. Toyota argued in favor of bifurcation on the grounds that even "a cursory review” would show "that there are no common issues of fact between any of these original claims and the counterclaims.” This was technically correct: The overlap was between the Tabaris' defenses and counterclaims, not Toyota’s "original claims” and the Tabaris’ counterclaims. Toyota evidently hoped that the district court would not notice the careful parsing of its language, and that the Tabaris (who are defending this case pro se) would not call it to the court's attention.
Toyota is playing the same game on appeal: It states that bifurcation was proper because "[t]here was no factual overlap between Toyota's trademark claims and Fast Imports’ interference claims.” But Toyota is only telling half the story by talking about only half of the relevant claims; Toyota admitted as much in its motion for summary judgment. Such selective memory exceeds the bounds of zealous advocacy.
. The Tabaris do challenge the district court’s holding that they failed to present evidence that they were damaged by Toyota’s alleged tortious conduct. But the district court also found that no reasonable jury could find Toyota liable. The Tabaris' argument that they were damaged is irrelevant in light of this unchallenged holding regarding liability-
Concurrence Opinion
concurring:
I concur in the majority’s conclusion that the district court erred in its handling of the nominative fair use defense. I write separately, however, because I cannot concur in all that is said by the majority.
First, and principally, I feel compelled to disassociate myself from statements by the majority which are not supported by the evidence or by the district court’s findings. I simply cannot concur in essentially factual statements whose provenance is our musings rather than the record and determinations by trier of fact. For example, on this record I do not see the basis for the majority’s assertion that the “relevant consumer is ... accustomed to shopping online”;
Second, I am unable to join the gratuitous slap at counsel for Toyota in the majority opinion,
Finally, I do not join the final textual paragraph, which nudges the district court to find pro bono counsel for the Tabaris, who have neither chosen to retain their own counsel nor demonstrated that they cannot do so. To the extent that the majority sees their activities as especially socially worthy and above reproach, I do not agree.
Thus, I respectfully concur in the result.
. Majority opinion, page 1176.
. Mat 1178.
. Mat 1179.
. Mat 1179.
. Id. at 1181-82.
. Id. at 1184 n. 12.