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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

Nissan Motor Co., et al. v. Nissan Computer Corp., et al.

378 F.3d 1002 (9th Cir., 2004), cert. denied (2005)

Applying the "initial interest confusion" doctrine, the Ninth Circuit holds that defendant Nissan Computer's display of advertisements promoting the sale of automobiles on its website infringes the trademark held by plaintiff Nissan Motors in its federally registered "Nissan" trademark, and accordingly affirms the District Court's decision enjoining defendants from continuing such activity. 

The Court further holds, however, that Nissan Computer's display of links on its site to a web site operated by a company owned by Uzi Nissan, the owner of Nissan Computer, which web site purports to describe the instant litigation and contains disparaging remarks about Nissan Motors, is non-commercial speech that neither infringes plaintiffs' mark nor runs afoul of the Federal Trademark Dilution Act despite its potentially negative impact on plaintiffs' commercial activities.  The Ninth Circuit holds such speech protected by operation of the First Amendment, and accordingly reverses so much of the District Court's decision that enjoined defendant Nissan Computer from placing such links on its site. 

Finally the Court held that issues of fact prevented a determination at this time as to whether defendants' use of plaintiffs' Nissan mark violated the FTDA.  To establish such a dilution claim, held the Court, the plaintiff must establish that its mark was famous when defendant first commenced a potentially diluting use thereof.  Disagreeing with the court below, the Ninth Circuit held that such use commenced when defendant began to call its business 'Nissan Computer,' and not when it subsequently registered the domain name for use in that business.  As there was an issue of fact as to whether the Nissan mark was famous as of 1991, when Nissan Computer commenced its operations, the court denied plaintiffs' motion for summary judgment, and remanded the question of defendants' violation of the Federal Trademark Dilution Act to the District Court.

Plaintiff Nissan Motors and its subsidiary Nissan North America Inc. have, since 1983, marketed automobiles under the federally registered trademark "Nissan."   Prior to 1983, plaintiffs marketed their cars under the tradename "Datsun." 

Uzi Nissan established defendant Nissan Computer Corp. in 1991 to engage in the sale of computer-related goods and services.  In 1994, Nissan Computer registered the domain name for use in connection with its computer business.  In 1996, it registered, at which it offered services as an Internet Service Provider.

In 1999, Nissan Computer began displaying third party advertisements on its website, including ads promoting the sale of automobiles.  Nissan Computer received revenue each time a user "clicked through" one of these ads. 

After their efforts to purchase the Nissan domains failed, plaintiffs commenced this suit, charging defendants, inter alia, with trademark infringement and violation of the Federal Trademark Dilution Act.  On plaintiffs' motion, the District Court issued a preliminary injunction, enjoining defendants from displaying automobile ads on their sites.  The District Court further directed Nissan Computer to post a disclaimer on its site, disclaiming any affiliation with Nissan Motors.

Nissan Computer thereafter posted a link on its site titled "Nissan Motor's lawsuit against Nissan Computer."  This link took the user to a web site operated by another entity owned by Uzi Nissan, which site, in turn, contained unflattering comments about plaintiffs in the course of a description of the instant litigation, links to other sites, and advertisements.

On plaintiffs' motion, the District Court issued additional injunctive relief.  This time, defendants were enjoined from posting any commercial content at all on the Nissan sites.  The District Court grounded its decision on its finding that defendants had violated the FTDA by tarnishing a famous mark.  This appeal followed.

On this appeal, the Ninth Circuit affirmed so much of the District Court's decision that held that defendant Nissan Computer had infringed plaintiffs' Nissan mark by placing automobile ads on defendant's website.  The Ninth Circuit reached this result by application of the "initial interest confusion" doctrine.  According to the Ninth Circuit "initial interest confusion occurs when the defendant uses the plaintiff's trademark in a manner calculated to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion."  To determine if such confusion is actionable, the Court looks to the traditional factors utilized to determine whether defendant's allegedly infringing use of a mark is likely to confuse consumers.  In the context of a claim of initial interest confusion arising out of internet activities, however, the Ninth Circuit noted that "the three most important factors are the similarity of the marks, the relatedness of the goods or services, and the parties' simultaneous use of the internet in marketing."

Analyzing these factors, including defendants' use of a mark identical to plaintiffs, the close relationship of automobile ads on defendants' site to the services offered by the plaintiffs, and the parties' simultaneous use of the internet for marketing, the Ninth Circuit concluded that defendants' placement of automobile ads on the website impermissibly took advantage of the consumers' initial interest in as a way of locating plaintiffs, and thus constituted trademark infringement.  Said the Ninth Circuit:

Nissan Computer traded on the goodwill of Nissan Motor by offering links to automobile-related websites. … it was offering information about automobiles and this capitalized on consumers' initial interest.

The Court also held that the display by Nissan Computer of non-automobile related advertisements on its website did not infringe plaintiffs' trademark.  In such circumstances, held the Court, consumers would not be confused because "when the item on that website was computers, the auto-seeking consumer 'would realize in one hot second that she was in the wrong place and either guess again or resort to a search engine to locate' Nissan Motor's site."

The Ninth Circuit reversed so much of the District Court's decision that permanently enjoined defendants from displaying a link on their site to the website of a related company that in turn contained comments critical of the plaintiffs in the course of a description of the instant lawsuit.  Such injunctive relief could not be grounded on a violation of the Federal Trademark Dilution Act because the speech in question was non-commercial, and thus exempted from the reach of the FTDA.  See 15 U.S.C. Section 1125(c)(4)(b).  In reaching this result, the court declined to follow the lead of the New Jersey District Court in Jews for Jesus v. Brodsky, 993 F.Supp. 282 (D.N.J. 1998), where the court held that defendant had made a commercial use of plaintiff's marks by placing disparaging statements on his site designed to harm plaintiff commercially.  Said the Ninth Circuit "we have never adopted an 'effect on commerce' test to determine whether speech is commercial and decline to do so here."  The Court found support for its decision in the 4th Circuit's decision in CPC Int'l v. Skippy Inc., 214 F.3d 456 (4th Cir., 2000).

The Ninth Circuit held that the District Court's injunction ran afoul of the First Amendment because it was a content-based restriction on speech - to wit the speech placed by defendant Nissan Computer on its website.  As such, it was presumptively invalid, and could only be upheld if it constituted the least restrictive means to achieve a compelling state interest, a test the injunction at issue failed to meet.  In reaching this result, the Court rejected plaintiffs' argument that no protectible speech was involved, because the injunction simply addressed the use of defendants' domain name, and hence only involved the use of a mark as a source identifier, and not as speech.  The Court rejected this contention because the injunction did not bar defendants from making any use of the domain name.  Rather, it only enjoined the placement of disparaging content on defendants' site, and thus implicated First Amendment concerns.

Finally, the Ninth Circuit held that issues of fact as to when Nissan Motor's "Nissan" mark became famous precluded an award of summary judgment to plaintiffs on their dilution claims.  To establish a claim under the FTDA, a plaintiff must show "that (1) its mark is famous; (2) the defendant is making commercial use of the mark in commerce; (3) the defendant's use began after the plaintiff's mark became famous."  Importantly, however, the statute further provides that plaintiff's mark must become famous before defendant's commercial and potentially diluting use of the mark began.  Thus, Section 1125 (c)(1) provides:

The owner of a famous mark shall be entitled … to an injunction against another person's commercial use in commerce of a mark or trade name if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark …

The Ninth Circuit held the appropriate date for measuring the famous nature of plaintiff's mark was the date defendant first commenced use of that mark in commerce.  In this case, that was the date Nissan Computer first commenced its business operations under the Nissan Computer name - which occurred in 1991 - and not when defendant first commenced use of the domain name.  Said the Court:

We believe 'such use' for purposes of Section 1125(c ) is a use that, assuming it occurs after another's mark has become famous, would arguably dilute the mark.  This follows from the text of the statute as well as its purpose. … for purposes of settling the date by which fame must be measured, Nissan Computer's use of the Nissan mark is arguably diluting even though the word 'Nissan' is used in combination with another identifier [i.e. computer].  … If it were otherwise, and first use for purposes of Section 1125(c) turned on whatever use the mark's owner finds particularly objectionable, 'owners of famous marks would have the authority to decide when an allegedly diluting use was objectionable, regardless of when the party accused of diluting first began to use the mark. …. For purposes of the FTDA … the commercial use of "Nissan" for computers in Nissan computer was a use of the Nissan mark in commerce that was arguably diluting.  Such use occurred in 1991.  Therefore fame of the Nissan mark must be measured as of 1991.

Because issues of fact existed as to whether Nissan Motor's mark was in fact famous in 1991, the Ninth Circuit denied plaintiffs' motion for summary judgment on the dilution claim. In this regard, the Court noted, among other things, that the word Nissan was used as a trade mark or trade name for 190 businesses unaffiliated with plaintiffs, is a common Israeli name, is the name of a month in the Jewish calendar, as well as the name of the month of April in Arabic.

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