The lessons the trademark community should learn from Judge Kozinski's ruling on nominative use

In the midst of ICANN's public comment period debate concerning the Rights Protection Mechanisms afforded to trademark owners in the new gTLD era, Judge Alex Kozinski for the United States Court of Appeals for the Ninth Circuit, provided answers to many issues that currently are part of the debate within ICANN. By applying the "Nominative Use' doctrine in domain names and by insisting on the boundaries of protection trademarks should receive in the Domain Name Space, Judge Kozinski put to rest how a trademarked term may be used in the context of domain names and helped define the boundaries of protection trademark owners are entitled to in the online environment.

In Toyota Motor Sales, U.S.A., Inc. v. Farzad Tabari, et al. No. 07-55344 (9th Cir. July 8, 2010) a unanimous panel strictly applied the 'nominative use' test as was established by Judge Kozinski in New Kids on the Block. 

The case concerned a couple - the Tabaris - who operated their auto-broker business as Fast Imports. The defendants assisted consumers in buying Toyota LEXUS cars as well as cars of other brands at the lowest possible price. The Tabaris offered their business through two domain names - buy-a-lexus.com and buyorleaselexus.com - both of which were the subject of the dispute. Toyota asserted that the use of these domain names infringed their trademarks and the Tabaris argued that the use fell under the 'nominative use' doctrine. The district court agreed with Toyota, forbidding the defendants from using "any [...] domain name, service mark, trademark, trade name, meta tag or other commercial indication of origin that includes the mark LEXUS". The Ninth Circuit disagreed and reversed the decision in light of the ‘nominative fair us’e doctrine and First Amendment concerns.

Judge Kozinski applied the three-part ‘nominative use’ test he established in New Kids on the Block, asking whether "(1) the product is 'readily identifiable' without use of the mark; (2) defendant uses more of the mark than necessary; and, (3) defendant falsely suggests he is sponsored or endorsed by the trademark holder". The Ninth Circuit found that all three part of the nominative use test are applicable and confirmed that the use of the domain names by the defendants were actually protected by the First Amendment.

The Ninth Circuit seeking to examine consumer confusion correctly mentioned that in such cases we should not be looking at all consumers. Instead, Judge Kozinski said: "In performing this analysis, our focus must be on the "reasonably prudent consumer" in the marketplace. The relevant marketplace is the online marketplace, the relevant consumer is the reasonably prudent consumer accustomed to shopping online; the kind of consumer who is likely to visit the Tabaris' website when shopping for an expensive product like a luxury car. Unreasonable, imprudent and inexperienced web-shoppers are not relevant".

The Court continued: "The injunction here is plainly overbroad—as even Toyota’s counsel grudgingly conceded at oral argument —because it prohibits domain names that on their face dispel any confusion as to sponsorship or endorsement. The Tabaris are prohibited from doing business at sites like independentlexus-broker.com and we-are-definitely-not-lexus.com, although a reasonable consumer wouldn’t believe Toyota sponsors the websites using those domains. Prohibition of such truthful and non-misleading speech does not advance the Lanham Act’s purpose of protecting consumers and preventing unfair competition; in fact, it undermines that rationale by frustrating honest communication between the Tabaris and their customers.”

Further, the Ninth Circuit upheld the importance of the First Amendment in the context of trademark law stating that “Speakers are under no obligation to provide a disclaimer as a condition for engaging in truthful, non-misleading speech”. Judge Kozinski, even asserted that thousands of sites make ‘nominative use’ and, contrary to the way consumers are portrayed under ICANN’s trademark policies, in reality consumers are both sophisticated and not easily mislead. “On the other hand, a number of sites make nominative use of trademarks in their domains but are not sponsored or endorsed by the trademark holder: 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. Consumers who use the internet for shopping are generally quite sophisticated about such matters and won’t be fooled into thinking that the prestigious German car manufacturer sells boots at mercedesboots.com, or homes at mercedeshomes.com, or that comcastsucks.org is sponsored or endorsed by the TV cable company just because the string of letters making up its trademark appears in the domain”.

Judge Kozinski very aptly asserted that “a large expenditure of money [on behalf of big brand owners} does not in itself create legally protectable rights”. And, he continued “Indeed, it is precisely because of Toyota’s investment in the Lexus mark that ‘much useful social and commercial discourse would be all but impossible if speakers were under threat of an infringement lawsuit every time they made reference to [Lexus] by using its trademark”.

“It is the wholesale prohibition of nominative use in domain names that would be unfair. It would be unfair to merchants seeking to communicate the nature of the service or product offered at their sites. And it would be unfair to consumers, who would be deprived of an increasingly important means of receiving such information. As noted, this would have serious First Amendment implications. The only winners would be companies like Toyota, which would acquire greater control over the markets for goods and services related to their trademarked brands, to the detriment of competition and consumers. The nominative fair use doctrine is designed to prevent this type of abuse of the rights granted by the Lanham Act.”

Well, here we have it. Judge Kozinski really provided answers to many of the debatable issues concerning the use of domain names. Trademark infringement in domain name disputes is not as clear-cut as ICANN, WIPO or the trademark community wants to make it look like. Nominative use is a basic principle, which, if not appropriately addressed, can raise serious free speech concerns.

The ICANN community should really pay attention to this ruling and should learn from the excellent reasoning of Judge Kozinski. This decision is really a victory for many legitimate domain name holders who lose their domain names, despite the fact that their use is protected under the ‘nominative use’ doctrine.

Judge Kozinski did not seem impressed by the argument that brand owners spend a lot of money protecting their brands and therefore should be granted exclusive rights to all domain names that incorporate their trademarked term; and, nor should we!