On-line auto brokers triumphed over Toyota last week when the Ninth Circuit Court of Appeals approved of the use of the Lexus trademark in their domain names.
Toyota Motor Sales USA is the exclusive distributor of Lexus vehicles in the United States and guardian of the Lexus mark. Independent auto brokers used the Lexus mark in domain names "buy-a-lexus.com" and "buyorleaselexus.com." This and other conduct by the brokers prompted Toyota to sue for trademark infringement and to seek an injunction to prevent use of the Lexus mark. The brokers defended the action pro se. The district court, applying the eight-factor test for likelihood of confusion from AMF v. Sleekcraft Boats, concluded that the brokers had infringed Toyota's mark. The court then enjoined use of the Lexus mark in any domain name or metatag.
On appeal, the Ninth Circuit in Toyota Motor Sales, U.S.A. v. Tabari reversed, holding that the brokers' use of the Lexus mark in their domain names was a lawful nominative fair use. According to the court, consumers who use the Internet for shopping will not be confused as to the sites' sponsorhip or affiliation because they are sophisticated and accustomed to domain names that incorporate marks but are not affiliated with the trademark owner. Moreover, even if the use of the Lexus mark leads Internet consumers searching for the official Lexus website to the brokers' sites, these consumers expect trial and error in exploring websites and know at a glance that certain websites are not what they want. Without an affirmative suggestion of sponsorship or affiliation, the Ninth Circuit reasoned, mere use of the mark in the domain name does not cause Internet users to believe there is sponsorship by, or affiliation with, the trademark owner.
Last week the U.S. Supreme Court excised a relatively minor portion of the Sarbanes-Oxley Act, leaving intact much of that wide-ranging corporate reform law. In Free Enterprise Fund v. Public Company Accounting Oversight Bd., the Court declared the legal structure of the Act's enforcement body, the Public Company Accounting Oversight Board ("PCAOB"), unconstitutional as violating separation of powers.
Under the Sarbanes-Oxley Act, members of the PCAOB may be removed from office by members of the Securities and Exchange Commission ("SEC") only for good cause. Members of the SEC, in turn, may be removed by the President only for good cause. The Court found that Congress violated the Constitution by placing these "two layers" of protection from removal between the President and the members of the PCAOB. Chief Justice John Robers, writing for the Court, stated:
"[S]uch multilevel protection from removal is contrary to Article II’s vesting of the executive power in the President. The President cannot 'take Care that the Laws be faithfully executed' if he cannot oversee the faithfulness of the officers who execute them. Here the President cannot remove an officer who enjoys more than one level of good-cause protection, even if the President determines that the officer is neglecting his duties or discharging them improperly. That judgment is instead committed to another officer, who may or may not agree with the President’s determination, and whom the President cannot remove simply because that officer disagrees with him. This contravenes the President’s 'constitutional obligation to ensure the faithful execution of the laws.' ”
Despite the constitutional flaw in the PCAOB's make-up, the court did not do away with the board. Instead, it ordered that PCAOB members must now be subject to removal at will by the SEC.
"She sells sea shells by the sea shore. That's swell, but how about Shell espresso, Tide motor oil, Apple bicycles and Playboy computers? We consider the application of anti-dilution law to trademarks that are also common English words."
With this riff on a popular tongue-twister, Judge Alex Kozinski set the stage for the Ninth Circuit's latest opinion on trademark dilution. Last week in Visa International Service Assoc. v. JSL Corporation, Judge Kozinski, writing for the court, ruled that eVisa, the trademark for an internet English-language tutoring service, is likely to dilute the trademark of Visa, the world's largest credit card network.
While acknowledging that the word visa already has a common dictionary usage, the court stated "the prevalence of such non-trademark use does not undermine Visa as a trademark. . . . [T]he introduction of the eVisa mark to the marketplace means that there are now two products, and not just one, competing for association with that word. This is the quintessential harm addressed by anti-dilution law." And on that basis, the court affirmed summary judgment for Visa and enjoined use of the eVisa mark.