Applying Nominative Fair Use to Domain Names: Toyota v. Tabari

My thanks to GGU IP alum Jennifer Lam for alerting me to this decision. Farzad and Lisa Tabari are car brokers, focusing primarily on Lexus automobiles. They operate two websites, buy-a-lexus.com and buyorleaselexus.com, where customers would see photos of Lexus vehicles and the L symbol design mark used by Lexus. They are not authorized Lexus dealers – what they do is help customers get the best price from Lexus dealers, and they shop for their customers to get the best deals in terms of price, location, and model style and accessories.

Toyota, owner of the Lexus trademark, objected to the Tabaris’ usage of their logo, photos and related items. The Tabaris’ removed the photos and logo from their site, and posted a large disclaimer, making it clear they were not affiliated with Toyota. They declined, however, to abandon or change their URLs. Toyota sued, and the trial court found trademark infringement and issued an injunction ordering the Tabaris to cease using lexus in the existing or any future website. The Tabaris, acting pro se, appealed to the Ninth Circuit.

The Court, in another opinion by Judge Kozinski, reversed the District Court. Noting that this is a case involving nominative fair use, Judge Kozinski points out that the Tabaris were not involved in the sale of vehicles that weren’t in fact Lexus vehicles. So there is no passing off, no confusion in the marketplace – their customers wanted to buy a Lexus, and that is what the Tabaris found for them.

Because this is a nominative fair use case, the first error the Court finds in the District Court decision is that the use of the AMF v. Sleekcraft (599 F.2d 341, 348-49 (9th Cir. 1979) eight-factor test for likelihood of confusion, was incorrect, because that test only applies to actual infringement cases, not nominative use cases.

Judge Kozinski notes that because the URLs used by the Tabaris do not
claim affiliation with Lexus or Toyota, there is no basis to assume customers form a firm expectation, before going to the site, that it is a sponsored or endorsed site. This, he notes, “is sensible agnosticism, not consumer confusion”.

Citing the test established in the seminal nominative fair use case of New Kids on the Block v. News Am. Publ’g, Inc., 971 F.2d 302,308 (9th Cir. 1992), the Court finds that the revised Tabari website, which eschews use of the logo or official photos, used just what was necessary of the Lexus mark to let customers know the nature of their business. Consequently, their use was fair.

Judge Kozinski found support for this decision from another Judge known for his trenchant humor and concisely written decisions: Judge Posner in the Seventh Circuit. In an odd coincidence, Judge Posner, in upholding the right of a seller of Beanie Babies to operate at “bargainbeanies.com”, noted that prohibiting the use of such a domain name “would amount to saying that if a used car dealer truthfully advertised that it sold Toyotas, or if a muffler manufacturer truthfully advertised that it specialized in making mufflers for installation in Toyotas, Toyota would have a claim of trademark infringement”.

I derive two takeaways from this case: 1. The nominative fair use defense in trademark infringement cases is alive and well; and 2) When Judges Posner and Kozinski line up against you – its’ time to throw in the towel.