Morgan Miller Blair

Two recent cases handed down by the Ninth Circuit Court of Appeals offer important guidance on how well known trademarks can be used by other businesses.  In the first case, Chief Judge Alex Kozinski held that use by a small web-based education and information business of the name “eVisa” in a domain name was not allowed because it could dilute the value of the trademark owned by the credit card company Visa International.  But less than two weeks later, the same judge held that an auto broker’s use of “Lexus” in its domain name was a permissible fair use of Toyota’s mark.  A comparison of the two cases offers important guidance on the limits that apply to one’s use of a famous brand name in business.  Read on …

Visa International Service Association v. JSL Corp.

The court held that the website www.evisa.com (operated by JSL, a non-competing internet-based “multilingual education and information” company) diluted Visa International’s “Visa” trademark. 

Dilution, unlike infringement, requires proof that the mark is “famous and distinctive,” that the defendant started using the mark in commerce after the mark became famous and distinctive, and that the defendant’s use of the mark is likely to “dilute” the value of plaintiff’s mark.  JSL could not dispute that Visa’s mark was famous, and that the website www.evisa.com did not launch until well after Visa was famous.  JSL’s sole argument was that Visa’s established mark was so well known and recognized that it was not likely to be diluted by the eVisa name.

The court disagreed.  The court explained that “dilution by blurring” occurs “when a mark previously associated with one product also becomes associated with a second. … For example, Tylenol snowboards, Netscape sex shops and Harry Potter dry cleaners would all weaken the ‘commercial magnetism’ of these marks and diminish their ability to evoke their original association.”  The court noted that the marks here were “effectively identical” – the only difference between JSL’s domain name and Visa’s mark was the prefix “e,” which failed to distinguish the companies and could easily create a new and different association that would undermine the distinctiveness of the Visa brand. 

The court also rejected JSL’s argument that there could be no dilution since “visa” is a commonly used word.  The Court acknowledged that if JSL were using the work “visa” for its literal dictionary meaning, such as JSL Visa Services, the result would be different.  The court held that even though “visa” was a common word freely used in the English language, the term was not “free to use” in commerce due to Visa’s trademark rights.  The court described its reasoning: “There are, for instance, many camels, but just one Camel; many tides, but just one Tide.  Camel cupcakes and Tide calculators would dilute the value of those marks.”

This was not a typical infringement case; normally infringement is based on a likelihood of confusion of the user with the mark’s owner.  Dilution, on the other hand, does not require a showing of confusion.  It involves the use of a mark that is different from the owner’s use; the injury addressed by anti-dilution law occurs when the same mark is placed in new and different contexts, thereby weakening the mark’s ability to bring to mind the owner’s goods or services.

Toyota Motor Sales, U.S.A., Inc. v. Tabari

This case also involved the use of a major brand name in a domain name of a third party.  Farzan and Lisa Tabari were auto brokers (according the Court, “the personal shoppers of the automotive world”) who sold Lexus cars online at websites they called www.buy-a-lexus.com and www.buyorleaselexus.com.  Toyota claimed that this use of the lexus mark infringed its trademark rights, and the lower court had agreed.  The Court of Appeals, in an opinion by the same Judge Kozinski who wrote the Visa opinion, held that this use of the mark constituted nominal fair use and did not infringe Toyota’s trademark rights.

In most cases, infringement involves a defendant who used the plaintiff’s mark in connection with the defendant’s different (often competing) product, in a manner “likely to confuse” the public.  But in this case, the Tabaris used the Lexus mark only to describe the actual Lexus product, not their own competing product.  (As the court noted, “when they say Lexus, they mean Lexus.”)  The main issue, therefore, was whether the Tabaris’ use of the Lexus mark would “inspire a mistaken belief” by consumers that the Tabaris were “sponsored or endorsed” by the trademark holder, Toyota.

The court held that the appearance of the term “lexus” within the Tabaris’ domain name was not, alone, sufficient to prove infringement.  The court reasoned that a “reasonably prudent” online shopper would not be fooled into thinking that the Tabaris were officially linked with Toyota.  Other website domain names make fair use of trademarked terms in a non-confusing manner, including “mercedesforum.com” and “starbucksgossip.com.”  The Tabaris’ domain names similarly made fair use of the term lexus (“buy-a-lexus” and “buyorleaselexus”), and did not convey false impressions of affiliation.  In fact, by the time of trial the Tabaris had inserted a prominent disclaimer in the body of their website, stating: “We are not an authorized Lexus dealer or affiliated in any way with Lexus.  We are an Independent Auto Broker.” 

The court’s First Amendment concerns also drove the decision.  The court observed, “One way or the other, the Tabaris need to let consumers know that they are brokers of Lexus cars, and that’s nearly impossible to do without mentioning Lexus, … be it via domain name, metatag, radio jingle, telephone solicitation or blimp. … Trademarks are part of our common language, and we all have some right to use them to communicate in truthful, non-misleading ways.”

Trademarks are about branding and goodwill, and the strategic use of the famous mark of another can be advantageous to a small company in many cases.  But companies that have spent the resources and money to build a famous mark will also go to great lengths to assert their rights.  Use of a famous mark by a non-owner to promote its business is permissible in some cases, but it is important that owners and non-owners alike are mindful of their respective rights before launching an expensive campaign that might backfire.