Nissan Motor Co. v. Nissan Computer Corp.,
United States Court of Appeals for the Ninth Circuit
No. 02-57148
August 6, 2004
Appeals from the United States District Court for the Central District
of California
COUNSEL
OPINION
RYMER,
Circuit Judge:
This
appeal raises a number of trademark issues arising out of the use by Uzi
Nissan of his last name for several business enterprises since 1980, his
use beginning in 1991 of “Nissan” as part of the name of a North
Carolina computer store he owned — Nissan Computer Corp. — and his
registration in 1994 of “nissan.com” as a domain name and website for
advertising various products including for a period in 1999,
automobile-related products and services. Nissan Motor Co., Ltd., a
Japanese automobile manufacturer that registered the mark “NISSAN” in
1959, and its subsidiary, Nissan North America, Inc., began using that
name, rather than “DATSUN,” to identify and market their vehicles in the
United States in 1983. They filed this action in 1999 complaining that
“nissan.com” diluted the NISSAN mark under the Federal Trademark
Dilution Act (FTDA), 15 U.S.C. § 1125(c), as well as the California
analogue, Cal. Bus. & Prof. Code § 14330, and infringed it under the
Lanham Act, 15 U.S.C. § 1114.
In a
series of summary judgment rulings, the district court held that Nissan
Computer’s automobile-related advertising constituted trademark
infringement on the basis of initial interest confusion, but that
non-automobile-related advertising did not. The court determined that
Nissan Motor’s dilution suit was not barred by laches, that Nissan
Computer’s first commercial use of “nissan” was in 1994 when it
registered the website “nissan.com” because that was the only use
identical to the NISSAN mark, that by then Nissan Motor’s NISSAN mark
had become famous, and that Nissan Computer’s use of “nissan.com”
dilutes the quality of Nissan Motor’s mark. Accordingly, the court
enjoined Nissan Computer (and its alter ego, The Internet Center Inc.)
from posting any commercial content at nissan.com and from placing links
to other websites that contain disparaging remarks or negative
commentary about Nissan Motor.
Neither
side is entirely happy and both appeal. On the main issues, we hold:
Initial
interest confusion exists as a matter of law as to Nissan Computer’s
automobile-related use of “nissan.com” because use of the mark for
automobiles captures the attention of consumers interested in Nissan
vehicles. To this extent “nissan.com” trades on Nissan Motor’s goodwill
in the NISSAN mark and infringes it, but other uses do not because there
is no possibility of confusion as to them.
Even
though the NISSAN mark was distinctive and incontestable within five
years of registration, it must also have become “famous” before Nissan
Computer’s first commercial use in order to be entitled to protection
against dilution. The first use for purposes of the FTDA is that use
which is arguably offending, here, “Nissan Computer,” because
any commercial use of a
famous mark is diluting
regardless of whether it is confusing or combined with other
identifiers. As such a use occurred in 1991, and because the district
court believed that triable issues of fact exist about fame of the
NISSAN mark before 1994, summary judgment on the dilution claim cannot
be sustained.
Finally,
to enjoin Nissan Computer from providing visitors to nissan.com a link
to sites with disparaging or negative commentary about Nissan Motor is a
content-based restriction on non-commercial speech that is inconsistent
with the First Amendment.
As a
result of our conclusion on these and other issues, we affirm in part
(on the infringement claim), reverse in part (on the dilution claim),
and remand.
I
It is
uncontroverted that Nissan Motor Co. and its subsidiary Nissan North
America, Inc. (collectively, Nissan Motor) have marketed and distributed
automobiles in the United States since 1960. Nissan Motor registered the
NISSAN mark for ships and vehicles on the Principal Register in 1959.
Vehicles were sold in the United States under the name “Datsun” until
1983, when Nissan Motor began marketing its vehicles under the name
“Nissan.” For a while the two names were
used
together, but since 1985 only the “Nissan” name has been used.
Uzi
Nissan used his last name for various businesses, including “Nissan
Foreign Car Mobile Repair Service” (1980), an import/export business
“Nissan International, Ltd.” (1987), and “Nissan Computer Corp.”
established in 1991 to engage in the business of computer sales and
services. On June 4, 1994, Nissan Computer registered the domain name
nissan.com and established a website at that address to advertise its
computer-related goods and services. In July 1995 Nissan Motor sent
Nissan Computer a letter expressing “great concern” about use of the
word “Nissan” in Nissan Computer’s domain name; Nissan Computer made no
response and nothing further happened until Nissan Motor contacted Uzi
Nissan in October 1999.
Meanwhile, Nissan Computer registered “nissan.net” to offer services as
an Internet Service Provider in 1996. In August 1999, it altered the
nissan.com website by adding a new logo with the name “nissan.com,” sold
space for advertising, and registered with a website for banner
advertising. Nissan Computer received a payment for each time a user
clicked through to an advertiser’s website. The first links (in August
and September) were for goto.com, Barnes & Noble, CNet.com, and
Netradio.com. Automobile-related ads appeared in late September. Within
several weeks Nissan Computer signed up cartrackers.com, priceline.com,
tunes.com, askjeeves.com, directhit.com, safari.com, lycos.com,
asimba.com, ameritech.com, and about.com; by December, 1stopauto.com,
hotlinks.com, shabang.com, fastweb.com, remarq.com, carprices.com and
stoneage.com had been added.
In
October 1999, Nissan Motor told Uzi Nissan that it wished to purchase
nissan.com, but negotiations came to naught. This action was filed
against Nissan Computer on December 10, 1999. The complaint asserts
claims for trademark dilution in violation of federal and state law;
trademark infringement; domain name piracy; false designation of origin;
and unfair competition. Nissan Motor moved for a preliminary injunction,
which the district court granted in a published opinion,
Nissan Motor Co., Ltd. v. Nissan
Computer Corp.,
89 F.Supp.2d 1154 (C.D. Cal. 2000), and which we affirmed. The
injunction ordered Nissan Computer to post prominent captions on the
first web page of the nissan.com and nissan.net websites identifying
them as affiliated with Nissan Computer Corporation and disclaiming
affiliation with Nissan Motor, and to refrain from displaying
automobilerelated information, advertisements, and links.
In March
2000, Nissan Computer posted a link on nissan.com and nissan.net that
stated “Nissan Motor’s Lawsuit Against Nissan Computer.” Clicking this
link transferred the user to ncchelp.org. A banner at ncchelp.org stated
“We Are Being Sued!!!”; and included links entitled (1) “story,” which
contained Uzi Nissan’s description of this litigation, (2) “FAQ,” (3)
“news,” which contained links to media reports, (4) “people’s opinions,”
which contained emails received by Uzi Nissan, and (5) “how you can
help,” which contained links via banner advertising, including a link to
a site operated by The Internet Center (TIC), which had auto-related
advertising. TIC was owned and operated by Uzi Nissan, and was added as
a defendant in Nissan Motor’s First Amended Complaint.
The
district court resolved the action on cross-motions for summary
judgment. In summary, the court held that TIC was an alter ego of Nissan
Computer and that both TIC and Nissan Computer are liable for trademark
infringement on account of their use of the NISSAN mark for
automobile-related links and for dilution. The court inferred from
Nissan Computer’s altering the website in August 1999 to display
auto-related advertising that it intended to confuse consumers. The
court granted Nissan Computer’s motion for summary judgment on
non-automobile-related use of the website.
On the
dilution claim, the court declined to bar Nissan Motor’s suit on account
of laches because the internet was an emerging technology and Nissan
Computer was not prejudiced by delay. The court initially found that the
fame of the NISSAN mark was to be measured as of 1991, when Nissan
Computer was incorporated, and that there was a question of material
fact whether the NISSAN mark was famous as of that date. However, in a
later ruling that granted judgment to Nissan Motor, the court determined
fame as of 1994 when Nissan Computer first used the NISSAN mark alone
because that is the use that Nissan Motor disputes, and as of 1999 when
TIC did. Applying the fame factors set out in the FTDA, 15 U.S.C. §
1125(c), the court concluded that the NISSAN mark was famous at the time
that Nissan Computer registered the “nissan.com” domain name in 1994. It
held that Nissan Computer’s use of the NISSAN mark diluted the quality
of that mark by blurring its ability to distinguish Nissan Motor’s goods
from other companies’ products and by tarnishing it because the look and
design of the nissan.com website falls short of the high standards that
Nissan Motor sets for itself, and because the site posts disparaging
remarks about Nissan Motor and this lawsuit. Accordingly, the court
concluded that Nissan Motor is entitled to an injunction that prohibits
commercial content at the nissan.com and nissan.net sites. Although it
declined to preclude Uzi Nissan from using the site for personal
purposes, the court decided that disparaging remarks and negative
commentary posted on the sites or through links are sufficiently
commercial to bring use of the domain names within the scope of the FTDA
because critical commentary at those sites, where the domain name is the
mark, exploits the goodwill of Nissan Motor in the NISSAN mark.
Therefore, the court permanently enjoined Nissan Computer and TIC from
posting commercial content, advertising, and disparaging remarks or
negative commentary regarding Nissan Motor on nissan.com or nissan.net;
and placing links to other websites containing commercial content or
disparaging remarks and negative commentary about Nissan Motor. 231
F.Supp.2d 977, 981 (C.D. Cal. 2002). The district court subsequently
denied Nissan Computer’s request for a stay, explaining that it is the
coupling of disparaging remarks with visitors’ expectations of finding
Nissan Motor that makes the enjoined conduct commercial and that the
First Amendment is not implicated because the domain names are source
identifiers and not part of the communicative message. We denied a
request for a stay as well.
These
cross-appeals followed. Nissan Computer and TIC appeal the judgment in
Nissan Motor’s favor on laches, dilution, retroactivity of the FTDA,
alter ego, and infringement as to automobile-related use of nissan.com.
Nissan Computer appeals the permanent injunction; Nissan Motor
crossappeals, asking that the injunction be broadened to include
transfer of the domain names nissan.com and nissan.net to itself in
exchange for the fair value of Nissan Computer’s investment.1
II
We start
with the dilution claim because this is where the parties focus most of
their attention.
[1]
Four
preliminary issues can be summarily resolved. First, the parties
disagree about the relevant statute of limitations and whether Nissan
Motor’s delay in bringing this action presumptively constituted laches.
We need not address their arguments, however, because regardless, the
district court did not abuse its discretion in finding that Nissan
Computer was not prejudiced. See
Jarrow Formulas, Inc. v. Nutrition
Now, Inc., 304 F.3d 829, 839
(9th Cir. 2002) (stating that laches will not apply unless the defendant
will suffer prejudice from delay if the suit were to proceed).
[2]
Second,
Nissan Computer argues that the FTDA should not be applied retroactively
because by the time it was passed in 1996, Uzi Nissan had been using
“Nissan” for 16 years, Nissan Computer had been using it for nearly five
years, and nissan.com had been up and running for 18 months. However,
application of the FTDA is not retroactive because it only authorizes
prospective relief. Landgraf v. USI
Film Products, 511 U.S. 244, 273 (1994). Three circuits have
so held, and we join them. See
Westchester Media v. PRL USA Holdings, Inc., 214 F.3d 658,
669-70 n.11 (5th Cir. 2000);
Sporty’s Farm L.L.C. v.
Sportsman’s Market, Inc., 202 F.3d 489, 502 (2d Cir. 2000);
Viacom Inc. v. Ingram Enters., Inc.,
141 F.3d 886, 889-90 (8th Cir. 1998).
[3]
Third,
Nissan Computer argues that the district court violated due process by
changing the date for determining fame of the NISSAN mark from 1991 —
which it had used in denying partial summary judgment in 2001 — to 1994,
which it used in its final order granting summary judgment. However, the
issue had been fully briefed and final judgment had not been entered.
The court had discretion to see things differently without affronting
due process.
[4]
Finally,
TIC contends that it is not an alter ego of Nissan Computer just because
they are related companies, share resources, and exchange interest-free
loans. The district court considered the appropriate factors,
see UA Local 343 v. NorCal Plumbing,
Inc., 48 F.3d 1465, 1475-76 (9th Cir. 1995), and correctly
concluded that the separate identity of each was not respected, and that
sufficient injustice could occur to Nissan Motor from TIC’s misuse of
the corporate form to permit Nissan Computer to capitalize on the NISSAN
mark while rendering itself judgment proof.
A
[5]
“[I]njunctive relief is available under the Federal Trademark Dilution
Act if a plaintiff can establish 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;”
Avery Dennison Corp. v.
Sumpton, 189 F.3d 868,
873-74 (9th Cir. 1999), and there is actual harm to the trademark
holder, Moseley v. V Secret
Catalogue, Inc., 537 U.S.
418, 433-34 (2003). Noncommercial use of a mark is excepted.
See 15 U.S.C. §
1125(c)(4)(B).
[6]
The
FTDA’s “grandfathering” clause lies at the heart of
this
dispute. It provides:
The owner
of a famous mark shall be entitled, subject to the principles of equity
and upon such terms as the court deems reasonable, 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, and to obtain such
other relief as is provided in this subsection.
15 U.S.C.
§ 1125(c)(1).
In Nissan
Computer’s view, the “first use” principle requires that fame be
measured as of the defendant’s actual first use of the mark, not the use
that the plaintiff finds objectionable. This would be no later than
1991, when Nissan Computer was incorporated and used the name to sell
computers.2
Not
surprisingly, Nissan Motor has a different view, that the date to
determine famousness of its NISSAN mark is the first time that Nissan
Computer used “nissan” by itself as a trade or company name instead of
as a composite trade or company name. This would be 1994, when Nissan
Computer registered nissan.com as a domain name and opened a website for
advertising. Nissan Motor points out that the text of the statute refers
to “such use,” which
Nissan Motor interprets to mean not just any use — but the “commercial
use in commerce of a mark.”3
Drawing
on the anti-dissection rule from trademark infringement law, Nissan
Motor also posits that use of “Nissan” by itself is a different
“commercial use in commerce” of the NISSAN mark than is “Nissan Computer
Corp.”
[7]
We
believe “such use” for purposes of § 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.
The FTDA protects the holder of a trademark from dilution, which is
different from, and broader than, infringement in that neither confusion
nor competition is required and the protection is nationwide in scope.
See Avery, 189 F.3d at
873. Dilution is “the lessening of the capacity of a famous mark to
identify and distinguish goods or services, regardless of the presence
or absence of—(1) competition between the owner of the famous mark and
other parties, or (2) likelihood of confusion, mistake, or deception.”
15 U.S.C. § 1127. As the Supreme Court explained, the purpose of the
FTDA “is to protect famous trademarks from subsequent uses that blur the
distinctiveness of the mark or tarnish or disparage it, even in the
absence of a likelihood of confusion.”
Moseley, 537 U.S. at 431
(quoting H.R.Rep. No. 104-374, p.2 (1995), U.S.Code Cong. & Admin.News
1995, pp 1029, 1030). “Dilution refers to the whittling away of the
value of a trademark when it’s used to identify different products.”
Mattel, Inc. v. MCA
Records, Inc., 296 F.3d 894,
903 (9th Cir. 2002) (citation and quotation marks omitted). Because
protection from dilution comes close to being a “right[ ] in gross,” it
is a cause of action “reserved for a select class of marks—those marks
with such powerful consumer associations that even noncompeting uses can
impinge on their value.” Avery
Dennison, 189 F.3d at 875. For this reason, the FTDA extends
dilution protection only to those whose mark is a “household name.”
Thane Int’l., Inc. v. Trek Bicycle
Corp., 305 F.3d 894, 911 (9th Cir. 2002).
“[T]he
mark used by the alleged diluter must be identical, or nearly identical,
to the protected mark” for a dilution claim to succeed.
Id.
at 905.
This means that the mark itself must be identical, or nearly identical,
not that it cannot be used in combination with some other identifier.
For example, as the Report of the Subcommittee on Courts and
Intellectual Property of the House Judiciary Committee observes of the
FTDA, “the use of DUPONT shoes, BUICK aspirin, and KODAK pianos would be
actionable under this legislation.”
See Moseley, 537 U.S. at 431 (citing H.R.Rep. No 104-374, p.3
(1995), U.S.Code Cong. & Admin. News 1995, pp 1029, 1030);
Thane, 305 F.3d at 906,
910-11 (citing the same examples in the Senate Report, S.Rep. No.
100-515, at 7 (1988), reprinted
in 1988 U.S.C.C.A.N.
5577, 5583). We conjured others in
Mattel, “[f]or example, Tylenol snowboards, Netscape sex
shops and Harry Potter dry cleaners would all weaken the commercial
magnetism of these marks and diminish their ability to evoke their
original associations. These uses dilute the selling power of these
trademarks by blurring their uniqueness and singularity, and/or by
tarnishing them with negative associations.” 296 F.3d at 903 (internal
quotations and citations omitted).
The point
of dilution law is to protect the owner’s investment in his mark.
See, e.g.,
Thane, 305 F.3d at 904. This
is why it is actionable for a store to call itself KODAK Pianos, as well
as KODAK. As the use of KODAK pianos would dilute KODAK, then NISSAN
pianos would dilute NISSAN if the NISSAN mark were as famous as KODAK.
It follows that NISSAN Computers is a use that arguably dilutes the
NISSAN mark. Whether it does in fact, of course, depends upon whether
the capacity of the NISSAN mark to identify and distinguish goods or
services sold by Nissan Motor has been lessened; however, 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.
See
Mattel, 296 F.3d at 903-04
(holding that “Barbie Girl” diluted Mattel’s “Barbie” mark);
see also Moseley, 537 U.S.
at 433- 34 (suggesting that the evidence required to prove dilution may
differ depending upon whether the junior and senior marks are
identical). In sum, just as the TYLENOL mark, the BARBIE mark, and the
KODAK mark are used in commerce when “snowboards,” “Girl,” and “pianos”
are added, the NISSAN mark is used in commerce when other words are
added to it such that if NISSAN were a famous mark, then “NISSAN
Computer” could be a dilutive commercial use.
The
Federal Circuit recently considered, and rejected, a statutory argument
similar to Nissan Motor’s, and to the view taken by the district court,
that the use that matters for purposes of § 1125(c) is the first use
that the trademark holder finds objectionable. In
Enterprise
Rent-A-Car Co. v. Advantage
Rent-A-Car, Inc., 330
F.3d 1333, 1336 (Fed. Cir. 2003), Enterprise challenged Advantage’s use
of the phrase “We’ll Even Pick You Up” in television commercials
broadcast in San Antonio, Texas between 1992 and 1995 as diluting its
own phrases “Pick the Company that Picks You Up” and “Pick Enterprise,
We’ll Pick You Up,” which Enterprise began using in 1994. Enterprise
contended that prior use by Advantage in a limited geographic area did
not bar its claim of dilution. The court recognized that the term “such
use” in § 1125(c) “could refer to any use by the defendant in commerce,”
or “could refer to the particular use being challenged in the
litigation.”
Id.
at 1341.
It held that the latter was “not a tenable reading of the statute,” and
that “the statute’s reference to ‘such use’ must refer to any use in
commerce.”
Id.
At
1341-42. We agree that this is a more sensible construction. As the
Federal Circuit explained, “it is significant that there is no
qualification in the statute requiring that the defendant’s prior use be
substantial or cover a wide geographic area to defeat an injunction
under the statute.”
Id.
at 1342.
If it were otherwise, and first use for purposes of § 1125(c) turned on
whatever use the mark’s owner finds particularly objectionable,
“[o]wners 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.”
The Network Network v. CBS Inc.,
54 U.S.P.Q.2d 1150, 1153 (C.D. Cal. 2000). Nissan Motor’s reliance on
the anti-dissection rule is also unhelpful. That doctrine prescribes
that “a composite mark is tested for its validity and distinctiveness by
looking at it as a whole, rather than dissecting it into its component
parts.” 2 J. Thomas McCarthy,
McCarthy on Trademarks and Unfair
Competition § 11:27 (4th ed.
2003); GoTo.com, Inc. v. Walt
Disney Co., 202 F.3d
1199, 1207 (9th Cir. 2000) (“[I]t is the
mark in
its entirety that must be considered—not simply individual
elements
of that mark.”) (citation omitted). However,
our task
here is not to test distinctiveness but to determine
famousness.
[8]
Accordingly, we hold that any commercial use of a famous mark in
commerce is arguably a diluting use that fixes the time by which
famousness is to be measured. In this respect as in others, a dilution
claim differs from a claim for infringement, because not all uses of a
mark are actionable. See
Interstellar Starship Servs., Ltd. v. EPIX, Inc., 304 F.3d
936, 943-44 (9th Cir. 2002) (explaining why companies using the same
mark for different products with different consumer expectations may not
cause initial interest confusion). For purposes of the FTDA, however,
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.
B
Nissan
Motor argues that even if the fame of its mark must be measured as of
1991 rather than 1994, reversal is not required because the NISSAN mark
was also famous as of 1991. However, the district court found that there
were triable issues of fact when it was of the view that fame should be
determined as of 1991. The record is not so clear that we can affirm
notwithstanding the district court’s conclusion.
The FTDA
lists eight non-exclusive factors for a court to consider in determining
whether a mark is distinctive and famous. They are:
(A) the
degree of inherent or acquired distinctiveness of the mark;
(B) the
duration and extent of use of the mark in connection with the goods or
services with which the mark is used;
(C) the
duration and extent of advertising and publicity of the mark;
(D) the
geographical extent of the trading area in which the mark is used;
(E) the
channels of trade for the goods or services with which the mark is used;
(F) the
degree of recognition of the mark in the trading areas and channels of
trade used by the mark’s owner and the person against whom the
injunction is sought;
(G) the
nature and extent of use of the same or similar marks by third parties;
and
(H)
whether the mark was registered . . . or on the principal register.
15 U.S.C.
§ 1125(c)(1).
Without
going into detail because we must remand in any event, there is no
question that the NISSAN mark is distinctive because it became
incontestible five years after being registered, yet “to be capable of
being diluted, a mark must have a
degree of distinctiveness and ‘strength’ beyond that needed
to serve as a trademark.” Avery
Dennison, 189 F.3d at 876 (citations and quotations omitted)
(emphasis added). “[F]amousness requires more than mere
distinctiveness.”
Id.
at 879.
Nissan
Motor introduced evidence through surveys, studies, and expert opinion
that the NISSAN mark had considerable public recognition, however Nissan
Computer questioned their methodology and import, and we have no ruling
on these issues from the district court. For example, an Allison-Fisher
survey found that NISSAN enjoyed 55% awareness among consumers in 1985,
60% in 1986, and 65% in 1991, but Nissan Computer’s experts counter that
the survey measured only the attitude of people who intended to buy a
new car, thereby skewing the results in favor of Nissan Motor, and claim
that there are methodological errors in the survey’s analysis. The same
applies to the Landor Research Survey, which concluded that Nissan Motor
was one of the 200 most powerful brands in America in 1988; Nissan
Computer’s experts point out that the survey was a newspaper account
without a description of methodology, universe of respondents, or
statistical reliability of results. Another public opinion survey that
reported consumer familiarity with “Nissan” was conducted between 1999
and January 2000 and spoke as of that time frame, which sheds no light
on public perception in 1991. Although Nissan Motor’s promotional
expenditures for vehicles bearing the NISSAN mark — more than $898
million during the period 1985-1991 — weigh in its favor, we cannot say
as a matter of law, on this record, that the survey, expert, and
advertising evidence permit only the conclusion that the NISSAN mark was
famous as of 1991.
The
record is further clouded by what it shows about the word “Nissan” and
its third-party use. “Nissan” is a common Jewish/Israeli last name, a
Biblical term originally identifying the first month in the calendar,
the contemporary name of the seventh month in the Jewish calendar, the
Arabic word for April, and is part of the trademark or trade name of
more than 190 unaffiliated businesses in the United States including
“Nissan Thermos,” “Nissan Chemical,” and “Nissan Fire and Marine
Insurance Company.” The word “Nissan” is an acronym in Japanese for
“Japanese Industries KK.” Nissan Motor itself is a party to a Trademark
Basic Agreement with “Nissan
Chemical,” “Nissan Agriculture and Forestry,” “Nippon Oxygen Co.,”
“Nippon Fisheries Co.,” and “Nippon Oil and Fat Co.,” in which each
agrees to cooperate to ensure the proper use and protection of the
“Nissan” related trademark. And there are thousands of domain names that
use the word “Nissan.” All of this is relevant, because “when ‘a mark is
in widespread use, it may not be famous for the goods or services of one
business.’ ” Avery Dennison,
189 F.3d at 878 (quoting Trademark Review Commission,
Report & Recommendation, 77
Trademark Rep. 375, 461 (Sept.-Oct.1987)). That other unaffiliated
companies use “Nissan” in their names at a minimum raises a question
whether the mark can be considered a famous mark eligible for dilution
protection. See id.
(stating that widespread use of the mark in the name of other companies
makes fame unlikely).
[9]
In sum,
we cannot say on this record that genuine issues of material fact do not
exist as to the degree of distinctiveness of the NISSAN mark, the weight
to be given and the conclusions to be drawn from the experts’ reports
and surveys, the impact of third party uses of NISSAN, and the overall
fame of the NISSAN mark in 1991.
C
[10]
After the
district court’s final decision in this case, the Supreme Court held in
Moseley v. V Secret Catalogue,
537 U.S. 418 (2003), that actual dilution must be shown for a dilution
claim to succeed. Based on Moseley,
Nissan Computer and TIC argue that summary judgment on the FTDA claim
must be reversed because Nissan Motor presented no evidence of actual
harm to the NISSAN mark. Nissan Motor argues otherwise, relying on
Moseley’s statement that
“direct evidence of dilution such as consumer surveys will not be
necessary if actual dilution can reliably be proved through
circumstantial evidence — the obvious case is one where the junior and
senior marks are identical.”
Id.
at 434. However, it is not entirely clear what the Court meant by this,
see Ty
Inc. v. Softbelly’s Inc.,
353 F.3d 528, 536 (7th Cir. 2003), and appellate review would be aided
by a record developed in light of
Moseley and the district court’s analysis of it. Therefore,
we follow the lead of Horphag
Research Ltd. v. Pellegrini, 337 F.3d 1036, 1041 (9th Cir.
2003), and remand to give the district court an opportunity to consider
in the first instance whether there has been actual dilution within the
meaning of Moseley.
Nissan
Motor also urges that remand is not necessary because the California
analogue of the FTDA, Cal. Bus. & Prof. Code § 14330,4
affords
another basis upon which to affirm. However, the district court granted
injunctive relief entirely under the FTDA. We prefer to hear from the
district court in the first instance on this as well. The California
analogue has generally been construed consistently with federal law, and
no argument has been made to us about whether, or how,
Moseley might affect what
the California Supreme Court would do. In addition, Nissan Computer has
claimed on appeal that a nationwide injunction for violation of state
law is inappropriate and unconstitutional.
See, e.g.,
Enterprise,
330 F.3d at 1342 (“A federal dilution statute is necessary because
famous marks ordinarily are used on a nationwide basis and dilution
protection is currently only available on a patch-quilt system of
protection . . . . Further, court decisions have been inconsistent and
some courts are reluctant to grant nationwide injunctions for violation
of state law . . . . This simply encourages forum-shopping and increases
the amount of litigation.”) (quoting H.R. Rep. No. 104-374, at 3-4).
While “California courts have repeatedly held that they have authority
to issue injunctions which have effect beyond the borders of
California,” Duncan v. Stuetzle,
76 F.3d 1480, 1488-89 (9th Cir. 1996), this remains an open question in
this circuit.
Id.
at 1489
n.13. As we have no ruling before us, we leave the constitutionality of
a nationwide injunction based on state law for another day and remand to
the district court to consider, if necessary, whether it would grant
injunctive relief, or alter its scope, if the dilution liability were
based solely on California law.
D
Nissan
Computer seeks relief from the provision of the permanent injunction
that restrains it from placing links on nissan.com and nissan.net to
other websites containing disparaging remarks or negative commentary
about Nissan Motor. It contends that such speech is non-commercial, thus
not diluting under the FTDA. Nissan Computer also maintains that the
disclaimer ordered in the preliminary injunction is sufficient to assure
there is no dilution. Finally, it submits that the injunction does not
control the uses of the domain names but instead, prohibits a particular
type of content posted at the website.
Nissan
Motor argues that we need not revisit Nissan Computer’s First Amendment
challenge to the permanent injunction because we already considered and
rejected it by denying Nissan Computer’s motion to stay. We disagree, as
the standards for a stay differ from the review on the merits that is
now before us.5
Beyond
this, Nissan Motor defends the injunction as narrowly tailored, arguing
that it restricts use of just two websites identical to the NISSAN mark.
These restrictions, in its view, constitute regulation of nothing more
than non-expressive trademark-equivalent domain names that do not
express or communicate any views at all. For this reason, Nissan Motor
asks us to hold that the First Amendment is not implicated because it is
only when a trademark is used as part of a communicative message and not
as a source identifier (which is what a domain name functions as in
cyberspace) that the First Amendment is implicated. We disagree with
this as well.
Prohibiting Nissan Computer from placing links to other sites with
disparaging commentary goes beyond control of the Nissan name as a
source identifier. The injunction does not enjoin use of nissan.com, but
enjoins certain content on the nissan.com website. Thus, it is not the
source identifier that is controlled, but the communicative message that
is constrained. Consequently, the First Amendment is implicated.
[11]
The
prohibited use of the mark is a content-based restriction because the
purpose behind it is to control the message and it is not “justified
without reference to the content of the regulated speech.”
See, e.g.,
Ward v. Rock Against Racism,
491 U.S. 781, 791 (1989) (citation and quotation omitted).
“Content-based regulations pass constitutional muster only if they are
the least restrictive means to further a compelling interest.”
S.O.C., Inc. v. County of Clark,
152 F.3d 1136, 1145 (9th Cir. 1998) (citing
Sable Communications of Cal. v.
F.C.C., 492 U.S. 115, 126
(1989)). As a content-based restriction, the injunction is presumptively
invalid, see R.A.V. v. City
of St. Paul, 505 U.S.
377, 382 (1992), and not subject to a “time, place, and manner”
analysis, see Reno v. ACLU,
521 U.S. 844, 879 (1997). Thus, it is immaterial whether there are
alternative places on the web that negative commentary about Nissan
Motor can be posted. The injunction is also viewpoint based because it
only prohibits disparaging
remarks and negative
commentary. See R.A.V.,
505 U.S. at 391.
The FTDA
anticipates the constitutional problem where the speech is not
commercial but is potentially dilutive by including an exception for
noncommercial use of a mark. See
15 U.S.C. § 1125(c)(4)(B);
Mattel, 296 F.3d at 905-06
(recognizing that the “noncommercial use” exemption in the FTDA was
designed to prevent courts from issuing injunctions that collide with
the First Amendment). So, the relevant question is whether linking to
sites that contain disparaging comments about Nissan Motor on the
nissan.com website is commercial.
[12]
“Although
the boundary between commercial and non-commercial speech has yet to be
clearly delineated, the core notion of commercial speech is that it does
no more than propose a commercial transaction.”
Mattel, 296 F.3d at 906
(quoting Hoffman v. Capital
Cities/ABC, Inc., 255 F.3d 1180, 1184 (9th Cir. 2001))
(quotation marks omitted). “If speech is not ‘purely commercial’—that
is, if it does more than propose a commercial transaction—then it is
entitled to full First Amendment protection.”
Id.
Negative
commentary about Nissan Motor does more than propose a commercial
transaction and is, therefore, non-commercial. Nissan Motor argues that
disparaging remarks or links to websites with disparaging remarks at
nissan.com is commercial because the comments have an effect on its own
commerce. See Jews for Jesus v.
Brodsky, 993 F.Supp. 282, 308 (D.N.J. 1998) (“The conduct of
the Defendant also constitutes a commercial use of the Mark and the Name
of the Plaintiff Organization because it is designed to harm the
Plaintiff Organization commercially by disparaging it and preventing the
Plaintiff Organization from exploiting the Mark and the Name of the
Plaintiff Organization.”). However, we have never adopted an “effect on
commerce” test to determine whether speech is commercial and decline to
do so here.
We are
persuaded by the Fourth Circuit’s reasoning in a similar case involving
negative material about Skippy Peanut Butter posted on skippy.com, a
website hosted by the owner of the trademark SKIPPY for a cartoon comic
strip. CPC, which makes Skippy Peanut Butter, successfully sought an
injunction that ordered removal of the material. The court of appeals
reversed. CPC Int’l, Inc. v. Skippy
Inc., 214 F.3d 456, 461-63 (4th Cir. 2000). Recognizing that
criticism was vexing to CPC, the court emphasized how important it is
that “trademarks not be ‘transformed from rights against unfair
competition to rights to control language.’ ”
Id.
at 462
(quoting Mark
A.
Lemley, The Modern Lanham Act and
the Death of Common Sense, 108 Yale L.J. 1687, 1710-11
(1999)). It held that
speech critical of CPC was informational, not commercial
speech. Likewise here, links to negative commentary about
Nissan Motor, and about this litigation, reflect a point of
view that we believe is
protected.
Nissan
Motor relies on San Francisco Arts &
Athletics, Inc. v. USOC, 483 U.S. 522 (1987), to argue that
it has obtained a limited
property right in the NISSAN mark which Nissan
Computer does not have a First Amendment right to appropriate
to itself. In that case, the Court held that the Amateur
Sports Act of 1978 did not unconstitutionally prohibit
certain commercial and
promotional uses of the word “Olympic”
because Congress has a broader public interest than in
traditional trademark law
— promoting the “physical and moral
qualities which are the basis of sport” and “the
participation of amateur
athletes from the United States in ‘the great four-
yearly sport festival, the Olympic Games.’ ”
Id.
at 537
(quoting Olympic Charter,
Rule 1 (1985)). For this reason the
application of the Act to commercial speech was not broader
than necessary to protect the legitimate congressional
interest and therefore
did not violate the First Amendment. But the
Olympics
are different, and there is no similar legislative interest at stake in
this case.
[13]
Therefore, we conclude that the permanent injunction violates the First
Amendment to the extent that it enjoins the placing of links on
nissan.com to sites with disparaging comments about Nissan Motor.
III
Nissan
Computer argues that it did not infringe the NISSAN mark because it did
nothing to draw potential Nissan Motor customers to its website or to
divert customers who were looking for Nissan vehicles, and that there is
at least a factual dispute whether Nissan Computer “captured” the
initial interest of internet users looking for Nissan Motor products.
Nissan Computer reasons that it did not offer automobiles or
automobile-related services, rather it posted advertisements on its
website much as a newspaper does. Nissan Motor responds that we already
concluded that Nissan Computer altered its website to capitalize on the
initial interest confusion of consumers who were looking for Nissan
Motor’s products when we affirmed the preliminary injunction entered in
this case. We agree with Nissan Motor’s position, but not for this
reason. A determination that the district court did not abuse its
discretion in granting preliminary relief is not binding on appeal from
a final judgment. See, e.g.,
Rodde v. Bonta, 357 F.3d
988, 995 (9th Cir. 2004). Nissan Motor also submits that the district
court should have found trademark infringement based on Nissan
Computer’s nonautomobile-related advertising given consumer
expectations, identicalness of the internet domain names and its MARK,
and the simultaneous use of the Web as a marketing channel by Nissan
Computer and Nissan Motor. We disagree that reversal is indicated.
[14]
“The core
element of trademark infringement is whether the similarity of the marks
is likely to confuse customers about the source of the products . . . .
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.’ ”
Interstellar, 304 F.3d at 941 (quoting
Brookfield Communications, Inc. v. West
Coast Entm’t Corp.,
174 F.3d 1036, 1062 (9th Cir. 1999) (quoting
Dr. Seuss Enters., L.P. v. Penguin
Books USA, Inc., 109 F.3d 1394, 1405 (9th Cir. 1997)
(internal quotation marks omitted))). As we hypothesized initial
interest confusion in
Brookfield,
it would occur if Blockbuster Video put up a billboard that advertised
West Coast Video at Exit 7, when in actuality West Coast was located at
Exit 8, but Blockbuster was at Exit 7. Customers looking for West Coast
would leave the freeway at Exit 7, but after not finding it, rent from
Blockbuster rather than reentering the freeway in search of West Coast.
Customers are not confused that they are renting from Blockbuster
instead of West Coast, but Blockbuster misappropriates West Coast’s
acquired goodwill through the initial consumer confusion.
See
Brookfield,
174 F.3d at 1064.
“To
evaluate the likelihood of confusion, including initial interest
confusion, the so-called Sleekcraft
factors provide non-exhaustive guidance.”
Interstellar, 304 F.3d at
942 (citing AMF Inc. v. Sleekcraft
Boats, 599 F.2d 341, 346 (9th Cir. 1979)). They are well
known, and are: “(1) the similarity of the marks; (2) the relatedness or
proximity of the two companies’ products or services; (3) the strength
of the registered mark; (4) the marketing channels used; (5) the degree
of care likely to be exercised by the purchaser in selecting goods; (6)
the accused infringers’ intent in selecting its mark; (7) evidence of
actual confusion; and (8) the likelihood of expansion in product lines.
Sleekcraft, 599 F.2d at
346.” Interstellar, 304
F.3d at 942. In the context of the internet, 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. See id.
(citing GoTo.com, 202
F.3d at 1205).
[15]
Nissan
Computer’s use of nissan.com to sell nonautomobile-related goods does
not infringe because Nissan is a last name, a month in the Hebrew and
Arabic calendars, a name used by many companies, and “the goods offered
by these two companies differ significantly.”
Id.
at 944.
However, Nissan Computer traded on the goodwill of Nissan Motor by
offering links to automobile-related websites. Although Nissan Computer
was not directly selling automobiles, it was offering information about
automobiles and this capitalized on consumers’ initial interest. An
internet user interested in purchasing, or gaining information about
Nissan automobiles would be likely to enter nissan.com. 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.
Id.
at 946. A
consumer might initially be incorrect about the website, but Nissan
Computer would not capitalize on the misdirected consumer. However, once
nissan.com offered links to auto-related websites, then the auto-seeking
consumer might logically be expected to follow those links to obtain
information about automobiles. Nissan Computer financially benefitted
because it received money for every click. Although nissan.com itself
did not provide the information about automobiles, it provided direct
links to such information. Due to the ease of clicking on a link, the
required extra click does not rebut the conclusion that Nissan Computer
traded on the goodwill of Nissan Motor’s mark.
The marks
are legally identical; the goods or services are related as to
auto-related advertising, but not related as to anything else; and the
parties simultaneously use the internet in marketing. The NISSAN mark is
an incontestible mark, but it is also used in many channels of commerce,
is a last name, and is a month. The degree of care exercised by a
purchaser is disputable. Whereas a consumer purchasing an automobile
will exercise great care, a consumer searching for information about
automobiles on the internet may exercise little care and will click on
all information about automobiles. The intent of Nissan Computer in
selecting the mark weighs to some extent in favor of Nissan Computer
because Uzi Nissan chose a domain name to correspond with his own name,
but its intent in posting automobile-related links cuts the other way.
There is evidence of actual confusion in that consumers have clicked on
nissan.com to find out information about Nissan Motor. The likelihood of
expansion in product lines can again cut both ways. Nissan Computer is
unlikely to enter the automobile sales business, however, it is likely
to advertise more
auto-related products.
[16]
On
balance we agree with the district court that Nissan Motor is entitled
to summary judgment on trademark infringement as to automobile-related
advertisements, and that Nissan Computer is entitled to summary judgment
as to non-autorelated advertisements.
IV
What we
have already held largely disposes of Nissan Motor’s cross-appeal asking
that the injunction be broadened
to require transfer of nissan.com and nissan.net. The district court
declined to enter such an order and did not abuse its discretion in
doing so. See Interstellar,
304 F.3d at 948 (emphasizing discretion to fashion relief, and noting
that only upon proving the rigorous elements of cybersquatting under the
Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d), have
plaintiffs successfully forced the transfer of an infringing domain
name). To the extent that Nissan Motor requests broader relief on
account of infringement through initial interest confusion, it is a
request better directed to the district court because the injunction was
granted on the basis of dilution under the FTDA, not on the basis of
infringement.
V
Conclusion
Having
held that the first use of a mark for purposes of the Federal Trademark
Dilution Act is that use which is arguably offending, and such use in
this case occurred when NISSAN was used in “Nissan Computer” in
commerce, we must reverse and remand the partial summary judgment on
dilution for the district court to consider the fame of the NISSAN mark
as of 1991. On remand, it must also consider whether Nissan Computer
“actually diluted” the NISSAN mark as required by
Moseley. Injunctive relief
may not restrain Nissan Computer from placing links on nissan.com and
nissan.net to other sites that post negative commentary about Nissan
Motor; to this extent, the relief granted is overbroad, reaches
non-commercial speech, and runs afoul of the FTDA and the First
Amendment. On all other issues, we affirm.
Each
party shall bear its own costs.
AFFIRMED
IN PART; REVERSED IN PART; AND
REMANDED.
1Public
Citizen filed an amicus brief in support of Nissan Computer’s appeal.
2Nissan
Computer argues for the earlier date of 1980, when Uzi Nissan began
using his last name for various business enterprises. The district court
did not explain why it rejected this possibility, and we do not
foreclose considering it afresh on remand. However, based on the
arguments made to us we see no basis for holding as a matter of law that
Nissan Computer’s use amounted to the same, continuous use of the mark
since 1980 or that triable issues of fact exist as to it.
3The
term “use in commerce” means the bona fide use of a mark in the ordinary
course of trade, and not made merely to reserve a right in a mark. For
purposes of this chapter, a mark shall be deemed to be in use in
commerce—
(1) on
goods when—
(A) it is
placed in any manner on the goods or their containers or the displays
associated therewith or on the tags or
labels
affixed thereto, or if the nature of the goods makes such placement
impracticable, then on documents associated with the goods or their
sale, and
(B) the
goods are sold or transported in commerce, and
(2) on
services when it is used or displayed in the sale or advertising of
services and the services are rendered in commerce, or the services are
rendered in more than one State or in the United States and a foreign
country and the person rendering the services is engaged in commerce in
connection with the services.
15 U.S.C.
§ 1127.
4Cal.
Bus. & Prof. Code § 14330 provides:
Likelihood of injury to business reputation or of dilution of the
distinctive quality of a mark registered under this chapter, or a mark
valid at common law, or a trade name valid at common law, shall be a
ground for injunctive relief notwithstanding the absence of competition
between the parties or the absence of confusion as to the source of
goods or services.
5See,
e.g.,
Artukovic v. Rison, 784
F.2d 1354, 1355 (9th Cir. 1986) (explaining that a stay is warranted if
applicant shows probability of success on the merits and likelihood of
irreparable injury or serious questions on merits and balance of
hardships tipping in its favor). We review the scope of injunctive
relief for abuse of discretion. See
Idaho Watersheds
Project v. Hahn, 307 F.3d
815, 823 (9th Cir. 2002). “A district court by definition abuses its
discretion when it makes an error of law.”
Koon v.
United
States,
518 U.S. 81, 100 (1996). On First Amendment challenges,
we
conduct an independent, de novo review.
See Jacobsen v.
United States Postal Serv.,
993 F.2d 649, 653-54 (9th Cir. 1993).