An automobile brokerage operating online under the web domains “buy-a-lexus.com” and “buyorleaselexus.com” got sued by Toyota Motor Sales for trademark infringement, first losing in trial court on a trademark “fair use” argument, then winning on appeal. The case opinion can be found here.
The domain name question in trademark is whether and how one can use established trademarks in domain names, in other words using the “LEXUS” trademark in your website URL when the use is anything but incidental but rather intentionally drawing on the value of the valuable brand.
Toyota, owner of the Lexus car brand, had sued to stop the auto brokerage from using the “LEXUS” trademark in the brokerage’s websites listed under “buy-a-lexus.com” and “buyorleaselexus.com”. The brokerage defended its actions by arguing that the use of “LEXUS” was permitted (that is, non-infringing) as a fair use of the trademark. Or as Judge Alex Kozinski explained in his appeals court opinion, the trademark was used to “refer to the trademarked good itself”.
This is the “nominative fair use” doctrine of trademark law. In (hopefully) plain English, the defendant makes no argument to counter a trademark owner’s typical claims of trademark infringement such as likelihood of confusion or dilution of trademark and so forth. Instead, the use of the trademark is permitted as a fair use since the use simply (and only) identifies the trademark. Toyota did not dispute the legality of the brokerage’s business nor its authority to broker and sell Lexus vehicles. The Lexus auto brokerage could therefore successfully argue that use of the “Lexus” was necessary to identify the product being sold.
Further to its case, though, the brokerage could argue that the use of the trademark implied no sponsorship or endorsement by the trademark owner, Toyota. Among other things to this point:
[They] did not run their business at lexus.com, and their domain names did not contain words like “authorized” or “official.” … Reasonable consumers would arrive at the [brokerage] site agnostic as to what they would find. Once there, they would immediately see [a] disclaimer and would promptly be disabused of any notion that the [brokerage] website is sponsored by Toyota.
When Use of Trademark in Domain Names is Not Fair Use
It is not correct to conclude that this creates open season for use of trademarks in domain names. Quite the contrary. As Judge Kozinski noted in the Toyota case, “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.” (emphasis in original)
And that – the suggestion of sponsorship or endorsement – is the crux of the test for nominative fair use in trademark: “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.” It is in fact quite common to find permitted use of established trademarks in domain names, where typically the absence of sponsorship or endorsement is clear. Judge Kozinski offers these examples:
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.
Creating More Confusion than it Resolves?
That is, at least, the opinion of one thoughtful commentator, Rebecca Tushnet. Tushnet notes that typically, demonstrating nominative fair use is the responsibility of the defendant. However, she argues that in the Toyota case, Judge Kozinski shifted much of this burden to the plaintiff, requiring the defendant only to show that the use was nominative, that is: simply referring to the trademark. It is the plaintiff who must DIS-prove the necessity of the use for the fair use purpose, and must show a “likehood of confusion” (a standard trademark infringement claim) by proving that the use of the trademark suggests sponsorship or endorsement:
So what exactly happens when a defendant shows that its use is referential? Apparently a plaintiff then has to show that the use is likely to confuse by showing that the use, while nominative, is not necessary (with necessary being defined broadly), uses more of the mark than necessary and/or suggests source or sponsorship. Even aside from the factor-three problem, this raises various questions. For example, what if the plaintiff shows that the use is not necessary even under a broad definition of necessary. Because the nominative fair use test is a substitute for the regular confusion test, does the defendant automatically lose, or do we then hold a confusion inquiry?
Tushnet makes a good point, particularly because there is a good deal of FACTUAL discussion (and rejection) by the court of Toyota’s claims of likelihood of confusion. As Tushnet comments about Judge Kozinski’s views on use of “a domain name consist[ing] only of the trademark followed by .com” as clearly infringing,
[The court’s] rule only works if courts are very confident of their ability to assess context and also very confident that consumer understandings of domain names remain static – as Judge Kozinski evidently is.
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