Toyota Motor Sales v. Tabari
610 F.3d 1171 (2010)
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Rule of Law:
The use of a trademark in an internet domain name is a permissible nominative fair use if the use is necessary to describe the product or service, no more of the mark is used than is necessary, and the use does not suggest sponsorship or endorsement by the trademark holder.
Facts:
- Farzad and Lisa Tabari worked as auto brokers, specializing in finding and arranging the purchase of Lexus vehicles for customers.
- The Tabaris operated their business through websites with the domain names buy-a-lexus.com and buyorleaselexus.com.
- Toyota Motor Sales U.S.A. ('Toyota') is the exclusive U.S. distributor of Lexus vehicles and owns the 'Lexus' trademark.
- Toyota objected to the Tabaris' use of the 'lexus' string in their domain names and their use of copyrighted Lexus photography and the official 'L Symbol' logo on their website.
- In response, the Tabaris removed the copyrighted photos and the logo from their website.
- The Tabaris also added a prominent disclaimer at the top of their website stating: 'We are not an authorized Lexus dealer or affiliated in any way with Lexus. We are an Independent Auto Broker.'
- Despite making these changes, the Tabaris refused Toyota's demand to relinquish their domain names.
Procedural Posture:
- Toyota Motor Sales U.S.A. sued Farzad and Lisa Tabari in the U.S. District Court, alleging trademark infringement.
- The Tabaris, representing themselves pro se, asserted a nominative fair use defense.
- After a bench trial, the district court applied the eight-factor Sleekcraft test and found in favor of Toyota.
- The district court entered a permanent injunction against the Tabaris, ordering them to cease using their domain names and prohibiting them from using the 'Lexus' mark in any future domain names.
- The Tabaris (appellants) appealed the district court's judgment to the U.S. Court of Appeals for the Ninth Circuit, where Toyota was the appellee.
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Issue:
Does the use of a registered trademark in an internet domain name by a business that brokers the trademarked goods constitute trademark infringement, or is it protected as nominative fair use?
Opinions:
Majority - Chief Judge Kozinski
No. The use of the Lexus mark in the Tabaris' domain names is a permissible nominative fair use because it does not create a likelihood of confusion as to sponsorship or endorsement. The proper analysis for such cases is the three-part nominative fair use test, not the standard eight-factor Sleekcraft test for likelihood of confusion. This test asks: (1) whether the product was readily identifiable without using the mark, (2) whether more of the mark than necessary was used, and (3) whether the user falsely suggested sponsorship. Here, it was necessary for the Tabaris to use the word 'Lexus' to describe their Lexus-brokering business. After they removed the official logos and added a disclaimer, they were not using more of the mark than necessary and did not suggest sponsorship. While a 'trademark.com' domain typically implies sponsorship, adding descriptive terms like 'buy-a' or 'buyorlease' makes sponsorship far less likely, especially to a reasonably prudent online consumer. The court clarified that the burden of proof is on the plaintiff (Toyota) to show that the use is not a fair use, effectively overturning prior circuit precedent on this point.
Concurring - Judge Fernandez
Judge Fernandez concurred in the judgment but wrote separately to express disagreement with certain aspects of the majority opinion. He agreed that the district court erred in its analysis of the nominative fair use defense. However, he disassociated himself from what he considered unsupported factual assertions by the majority regarding the sophistication of internet consumers. He also criticized the majority's gratuitous comments about Toyota's counsel and the suggestion that the district court find pro bono counsel for the Tabaris.
Analysis:
This case significantly clarifies the application of the nominative fair use doctrine to the internet, particularly regarding domain names. It establishes that legitimate resellers, critics, and commentators can use trademarks in domain names so long as the use is truthful and does not suggest affiliation. By shifting the burden of proof to the plaintiff to disprove fair use, the court aligned the Ninth Circuit with the Supreme Court's ruling in KP Permanent Make-Up and made it more difficult for trademark holders to use infringement claims to stifle legitimate competition and commentary online. This decision protects truthful commercial speech and prevents trademark law from being used to grant brand owners excessive control over secondary markets for their goods.
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