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Use of Trademark in Domain Names Found to Be Nominative Fair Use
By Harry Zhou – Edited by Anthony Kammer

Toyota Motor Sales v. Tabari, No. 07-55344 (9th Cir. Jul. 8, 2010)
Slip Opinion

On July 8, 2010, the Ninth Circuit Court of Appeals vacated and remanded an injunction against Farzad and Lisa Tabari by the United States District Court for the Central District of California in a trademark infringement claim brought by Toyota Motor Sales U.S.A. (“Toyota”).  The Ninth Circuit stated that on remand the injuction must be modified to permit some use of Toyota’s “Lexus” trademark in Internet domain names.

Led by Chief Judge Alex Kozinski, the majority concluded that Tabari’s use of the string “lexus” in domain names “buy-a-lexus.com” and “buyorleaselexus.com,” under which Tabari operated an automobile brokerage, was nominative fair use, a defense that shielded Tabari from Toyota’s claim of trademark infringement.  The nominative fair use doctrine is a defense that gives individuals to right to use another’s trademark to refer to the trademarked good itself. The majority reasoned that Tabari’s truthful communications regarding the nature of the Lexus product fell into the protective scope of the nominative fair use doctrine.

Seattle Trademark Lawyer features excerpts from the opinion. The E-Commerce and Tech Law Blog summarizes potential impacts of the decision. An in-depth analysis of the opinion is available at Eric Goldman’s Technology and Marketing Law BlogRebecca Tushnet’s 43(B)log offers comments on the opinion.

Farzard and Lisa Tabari (“Tabari”) operated an automobile brokerage that matched customers interested in purchasing Lexus vehicles to dealers that provided the best combination of price and convenience. Tabari solicited business online under “buy-a-lexus.com” and “buyorleaselexus.com.” Toyota brought a trademark infringement claim against Tabari, objecting mainly to Tabari’s use of the trademarked string “lexus” in their domain names.  Toyota additionally claimed that Tabari’s use of copyrighted photography of Lexus vehicles and the circular “L Symbol Design mark” on their web sites was infringing.  Tabari subsequently removed all such materials.

Tabari appeared in proceedings before the district court pro se. After a bench trial, the district court issued an injunction against Tabari, enjoining them from using “any . . . domain name, service mark, trademark, trade name, meta tag . . . that includes the mark LEXUS.”  Tabari appealed, again pro se.

The Ninth Circuit considered whether Tabari’s use of “lexus” in their domain names was nominative fair use.  Citing Playboy Enters., Inc. v. Welles, 279 F.3d 796, 801 (9th Cir. 2002), the court looked at “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.”  On the first and second factors, the court found Tabari had demonstrated sufficient necessity because it was nearly impossible to convey specialty in brokering Lexus vehicles without mentioning “Lexus.”  As for the third factor, namely the risk of confusion as to sponsorship or endorsement, the court examined as a threshold matter how “a reasonably prudent consumer accustomed to shopping online” would search for a business entity on the Internet.

The court identified a two-step process that a reasonably prudent consumer would go through when shopping online.  Specifically, a customer with ordinary prudence would start a search by typing an URL consisting of the business’ main trademark, followed by “.com.”  If the URL didn’t link to the desired web site, the shopper would resort to search engines.  The shopper would likely encounter many third-party sites that made nominative use of the trademark before eventually arriving at the trademark owner’s site.  The court therefore concluded that a reasonable customer accustomed to “such exploration by trial and error” would remain agnostic regarding the ownership of a web site before viewing its contents.  Applying such a standard to Tabari’s web sites, the court concluded that a reasonably prudent customer on the Internet would not mistakenly think that Toyota was sponsoring or endorsing Tabari.  Any momentary uncertainty of customers due to Tabari’s domain names, the court explained, should not preclude a finding of nominative fair use “so long as the site[s] as a whole [did] not suggest sponsorship or endorsement by [Toyota].”    Judge Ferdinand F. Fernandez filed a concurring opinion, in which he “disassociated [himself] from statements by the majority” regarding how a reasonably prudent customer on the Internet would act.

Ruling that Tabari’s use of the string “lexus” was nominative fair use, the court remanded the case for reconsideration of the injunction’s scope.  In remanding the case, the Ninth Circuit stated, “At the very least, the injunction must be modified to allow some use of the Lexus mark in domain names by the Tabaris.”  The court also noted that on remand Toyota would bear the burden of showing that Tabari’s use of “lexus” was not nominative fair use, overruling precedent that held that the party accused of infringement would be the one who carried the burden of proving nominative fair use.

The opinion points to a more liberal application of the nominative fair use doctrine on the Internet by describing in detail how a reasonably prudent customer makes use of domain names and locates businesses online.

Harry Zhou is a 2L at the Harvard Law School.

Posted On Jul - 22 - 2010 Comments Off

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