IP: Developments in Evaluation of Nominative Fair Use in Domain Names

David LevittA retailer or broker sells a trademarked product. The seller obtains a domain name that includes the trademark. Does the trademark owner have a valid claim for trademark infringement? The recent decision in Toyota Motor Sales, U.S.A., Inc. v. Tabari, sheds some further light on this issue. But the court's analysis adds to the growing body of case law that seems to assume consumer behavior without evidence.

The Tabaris are auto brokers. They contact authorized dealers, solicit bids and arrange for customers to buy from the dealer offering the best combination of location, availability and price. The Tabaris offered this service on the Internet at buy-a-lexus.com and buyorleaselexus.com. Because "Lexus" appeared in the domain name, Toyota sued for trademark infringement. The district court entered a permanent injunction barring the Tabaris from using any domain name which included the Lexus mark, but the 9th Circuit reversed and remanded.

The reversal was based on "nominative fair use," a doctrine that applies where the alleged infringer is using the trademark to describe the trademark owner's product, not its own. The court noted that the usual multifactor likelihood of confusion test (different federal circuits have articulated slightly different factors) does not apply in nominative fair use cases; rather, the court asks whether: (1) the product was "readily identifiable" without the use of the mark; (2) the defendant used more of the mark than was necessary; and (3) the defendant falsely suggested that it was sponsored or endorsed by the trademark holder.

Of particular import was the court's clarification that nominative fair use is not an affirmative defense on which the defendant has the burden of proof. Rather, a defendant asserting nominative fair use need only show that it used the mark to refer to the trademarked good. The burden then shifts to the trademark owner/plaintiff to show that the nominative fair use nonetheless created a likelihood of confusion. Further, the court noted that even where all three factors are found, it is usually best for the district court to order the defendant to modify its use of the mark so that all three factors are satisfied. The 9th Circuit stated that the district court may not enjoin nominative use of the mark altogether. These rulings alone make the decision noteworthy.

However, the 9th Circuit's discussion of the different kinds of uses of a trademark in domain names also merits further review. The court stated several times that a domain name of "trademark.com" usually is likely to cause confusion, and may be enjoined, but where the domain name (such as that used by the Tabaris) provides more information, consumers are less likely to believe that the website is sponsored or authorized by the trademark holder. In reaching these conclusions, the court made numerous statements about consumer behavior. Examples of the court's commentary (emphasis in original):

"When a domain name consists only of the trademark followed by .com . . ., it will typically suggest sponsorship or endorsement by the trademark holder. [Citation omitted]. This is because "[a] customer who is unsure about a company's domain name will often guess that the domain name is also the company's name." [Citation omitted]. If customers type in trademark.com and find the site occupied by someone other than the trademark holder, they may well believe it is the trademark holder, despite contrary evidence on the website itself. Alternatively, they may become discouraged and give p looking for the trademark holder's official site, believing perhaps that such a website doesn't exist. [Citation omitted]."

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"Outside the special case of trademark.com or domains that actively claim affiliation with the trademark holder, consumers don't form any expectations about the sponsorship of a website until they've seen the landing page - if then. This is sensible agnosticism, not consumer confusion."

As Judge Ferdinand Francis Fernandez points out in his concurring opinion, these comments about consumer behavior and expectations while surfing the Internet are "musings rather than the record and determinations by the trier of fact." Regardless of which way those musings go - such as towards stating that confusion "generally" exists by use of trademark.com or that consumers are generally not misled where additional words are included in the domain name in addition to the trademark, such statements ought to be evidence-based rather than assumptions by the court. Indeed, the U.S. Court of Appeals for the Sixth Circuit in Paccar Inc. v. Telescan Technologies, L.L.C., stated:

"Even in the absence of proof regarding Internet marketing's effect on consumer confusion, the district court's finding that using the Internet as a marketing channel increases the likelihood of confusion is not clearly erroneous." (Emphasis added.)

Parties should be wary of courts that are willing to make dispositive rulings in the absence of evidence, or which make assumptions about consumer behavior without a record. But despite that shortcoming in its opinion, the Tabari court made important clarifications about the nature of domain name infringement claims and nominative fair use. It further confirmed that sellers of trademarked products have the right to use the mark to tell the public that they have the product available for purchase, and that doing so in the body of a domain name may well be protected activity. Sellers must take care, however, because the court left open the possibility of infringement if the use crosses the line from "fair use" into likelihood of confusion.

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David Levitt

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