Opinion ID: 3038368
Heading Depth: 2
Heading Rank: 2

Heading: volkswagen and audi’s infringement claim

Text: Although we conclude that Volkswagen and Audi’s registered trademarks are not “functional,” and thus are protectable, it remains to be determined whether Auto Gold is infringing those marks. Cf. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 117 (2004) (although mark was protected, “the [markholder]’s success is still subject to ‘proof of infringement’ ”). The district court concluded that “[w]hile [Volkswagen and Audi] have attempted to make a prima facie case of trademark infringement and dilution of their mark, this situation does not rise to that level.” Operating on the premise that the Volkswagen and Audi marks were unprotectable under the doctrine of aesthetic functionality, the district court erroneously concluded Volkswagen and Audi “offered insufficient evidence to show that there is a question of material fact that might lead a factfinder to conclude that infringement of their trademarks occurred.” In particular, the district court resolved that Volkswagen and Audi “failed to offer any evidence that would have a tendency to show that there is a likelihood of or any actual confusion in the minds of consumers.” The court then granted Auto Gold’s motion for partial summary judgment and denied Volkswagen and Audi’s motion for summary judgment which included a claim for infringement. The court declared that Auto Gold’s use of the marks on its products was neither trademark infringement nor trademark counterfeiting, and enjoined Volkswagen and Audi from asserting any trademark rights against Auto Gold. In doing so, the district court appeared to merge the aesthetic functionality analysis and the likelihood of confusion analysis as to infringement, but nonetheless based its judgment on both issues. These are distinct inquiries and thus we consider infringement on appeal. Volkswagen and Audi seek protection under § 1114(1)(a), which provides civil penalties against: AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9535 Any person who shall, without consent of the [registered owner] . . . use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive. It is undisputed that Volkswagen and Audi own the registered trademarks at issue, and that Auto Gold uses those trademarks in commerce, without their consent, and in connection with the sale of goods. Thus, as with many infringement claims, the central issue is whether Auto Gold’s use of the marks is “likely to cause confusion” within the meaning of the Lanham Act. Before us on appeal are the parties’ cross-motions for summary judgment on the issue of trademark infringement, and in particular, the district court’s determination that Volkswagen and Audi had not offered any evidence showing a likelihood of confusion. We review de novo the district court’s decision on summary judgment. Clicks Billiards, 251 F.3d at 1257. Because the likelihood of confusion is often a fact-intensive inquiry, courts are generally reluctant to decide this issue at the summary judgment stage. Thane Int’l, Inc. v. Trek Bicycle Corp., 305 F.3d 894, 901-02 (9th Cir. 2002). However, in cases where the evidence is clear and tilts heavily in favor of a likelihood of confusion, we have not hesitated to affirm summary judgment on this point. See, e.g., Nissan Motor Co. v. Nissan Computer Corp., 378 F.3d 1002, 1019 (9th Cir. 2004) (affirming summary judgment where the marks were “legally identical,” the goods at issue were related, and the marketing channels overlapped). As part of our de novo review, we conclude as a matter of law that likelihood of confusion is clear cut here and that Volkswagen and Audi have made out a prima facie case of infringement. We do not direct 9536 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA judgment on this issue, however, because the district court reserved judgment on Auto Gold’s defense of “first sale.” The case must be remanded for consideration of Auto Gold’s defenses. [9] A “[l]ikelihood of confusion ‘exists when customers viewing [a] mark would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark.’ ” Fuddruckers, Inc. v. Doc’s B.R. Others, Inc., 826 F.2d 837, 845 (9th Cir. 1987) (quoting Lindy Pen Co. v. Bic Pen Corp., 725 F.2d 1240, 1243 (9th Cir. 1984)). The Ninth Circuit employs an eight-factor test (the “Sleekcraft” factors) to determine the likelihood of confusion: (1) strength of the mark(s); (2) relatedness of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels; (6) degree of consumer care; (7) defendant’s intent; (8) likelihood of expansion. Surfvivor Media, Inc. v. Survivor Productions, 406 F.3d 625, 631 (9th Cir. 2005); see also AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979). These elements are not applied mechanically; courts may examine some or all of the factors, depending on their relevance and importance. See Surfvivor, 406 F.3d at 631; Thane Int’l, 305 F.3d at 901 (“The list of factors is not a score-card —whether a party wins a majority of the factors is not the point. Nor should the factors be rigidly weighed; we do not count beans.”) (internal punctuation and citations omitted). This case presents an easy analysis in terms of likelihood of confusion. The Volkswagen and Audi marks, which are registered and have been in use for more than fifty years, are strong, distinctive marks, the first factor in the Sleekcraft analysis. Auto Gold’s products, which incorporate exact copies of those marks, compete with accessories sold by Volkswagen and Audi through their licensed marketers, and are related10 to Volkswagen and Audi’s primary goods—cars. 10 “Related goods are ‘products which would be reasonably thought by the buying public to come from the same source if sold under the same mark.’ ” Sleekcraft, 599 F.2d at 348 n.10 (quoting Standard Brands, Inc. v. Smidler, 151 F.2d 34, 37 (2d Cir. 1945)). AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9537 Although Volkswagen and Audi license their marks to third parties, and Auto Gold sells its products to the wholesale market, the ultimate consumers are the same. In fact, according to Auto Gold, it is a very specific sub-group of consumers that wants either Auto Gold’s or Volkswagen and Audi’s accessories—Audi or Volkswagen car owners who want accessories to match their cars. Thus, in addition to being related products bearing identical marks, the products at issue are destined for the same buyers. We turn next to the degree of consumer care. Confusion is less likely where buyers exercise care and precision in their purchases, such as for expensive or sophisticated items. In evaluating this factor, we consider “the typical buyer exercising ordinary caution.” Sleekcraft, 599 F.2d at 353. The class of products Auto Gold sells are relatively inexpensive and unsophisticated, and do not require a great deal of precision or care to fulfill their purpose. This factor favors Volkswagen and Audi. Evaluation of Auto Gold’s intent in using the mark is the seventh factor. “When the alleged infringer knowingly adopts a mark similar to another’s, reviewing courts presume that the defendant can accomplish his purpose: that is, that the public will be deceived.” Id. at 354. Auto Gold knowingly and intentionally appropriated the exact trademarks of Volkswagen and Audi. Auto Gold argues, however, that it does not “intend” to deceive the public as to the source of the goods, but merely sought to fill a market demand for auto accessories bearing the marks. This argument is simply a recasting of aesthetic functionality. Even if we credit Auto Gold’s proffered lack of intent, the direct counterfeiting undermines this argument. This factor tips against Auto Gold. Finally, we examine the factor that is hotly contested by the parties—evidence of actual confusion. Despite the debate, there is no material issue of fact. The district court correctly noted that Volkswagen and Audi offered no evidence of 9538 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA actual confusion. The question, then, is what is the legal significance of this uncontested fact? As we noted in Brookfield Communications, Inc. v. West Coast Entertainment Corp., “[t]he failure to prove instances of actual confusion is not dispositive against a trademark plaintiff, because actual confusion is hard to prove; difficulties in gathering evidence of actual confusion make its absence generally unnoteworthy.” 174 F.3d 1036, 1050 (9th Cir. 1999). In this case, which involves a national market and a low degree of consumer care, nothing suggests that the lack of evidence of confusion should be particularly noteworthy. Compare Cohn v. Petsmart, Inc., 281 F.3d 837, 842-43 (9th Cir. 2002) (ascribing some significance to the lack of evidence of confusion where “the parties used the same trademark in the same city for six years,” and the product at issue, veterinary services, was one for which consumers are “particularly attentive.”). Auto Gold suggests that the disclaimers on its packaging dispel any potential for confusion. Courts have been justifiably skeptical of such devices—particularly when exact copying is involved. See, e.g., Pebble Beach, 155 F.3d at 543 (upholding lower court determination that disclaimers were “inadequate where present and . . . absent from the majority of advertisements and promotional materials”), superseded on other grounds as recognized in Eppendorf-Netheler-Hinz, 289 F.3d at 356; Int’l Kennel Club of Chicago, Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1093 (7th Cir. 1988) (“[W]here the infringement in issue is a verbatim copying . . . plaintiff’s reputation and goodwill should not be rendered forever dependent on the effectiveness of fineprint disclaimers often ignored by consumers.”). Even if disclaimers may in some cases limit the potential for confusion, here they do not. Auto Gold’s disclaimers were neither consistent nor comprehensive. We note, preliminarily, that the effectiveness of these disclaimers is undercut by their AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9539 sometimes contradictory messages. For example, some labels placed on the cardboard inner lining of the license plate covers state that the product “may or may not” be dealer approved. Visible through the clear cellophane outer wrapping, these disclaimers are sometimes next to disclaimers stating “[t]his product is not endorsed, manufactured, or licensed by the vehicle manufacturer.” There are also messages on Auto Gold’s website that identify their products generally as “Factory authorized licensed products.” More importantly, “[t]he law in the Ninth Circuit is clear that ‘post-purchase confusion,’ i.e., confusion on the part of someone other than the purchaser who, for example, simply sees the item after it has been purchased, can establish the required likelihood of confusion under the Lanham Act.” Karl Storz Endoscopy-Am., Inc. v. Surgical Techs., Inc., 285 F.3d 848, 854 (9th Cir. 2002); Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817, 822 (9th Cir. 1980) (affirming a finding of infringement against a jeans maker, and noting that “point of sale materials [such as disclaimers] are removed by the purchaser and have no confusion-obviating effect when the pants are worn”).11 Shorn of their disclaimer-covered packaging, Auto Gold’s products display no indication visible to the general public that the items are not associated with Audi or Volkswagen. The disclaimers do nothing to dispel postpurchase confusion. In sum, Volkswagen and Audi do not present evidence of actual confusion. Neither, however, does Auto Gold present evidence that the disclaimers have any effect. At best, the confusion factor is in equipoise. 11 This definition of confusion reflects the 1962 amendments to § 1114 that broadened the definition of actionable confusion to include nonpurchasers (such as those seeing an item of clothing on the street), through deletion of language that limited such confusion to “purchasers as to the source or origin of such goods or services.” Pub. L. 87-772 (1962). See Karl Storz, 285 F.3d at 854. 9540 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA [10] In the final analysis, we must consider the Sleekcraft factors as a whole to determine whether a likelihood of confusion results from Auto Gold’s use of the marks. Although we do not bean count, it is significant that six of the eight Sleekcraft factors support a likelihood of confusion; the remaining two are either neutral or irrelevant.12 Most importantly, the strength of Volkswagen and Audi’s marks, Auto Gold’s intentional and exact copying of the marks, and the direct competition for a specific and limited consumer group, all weigh heavily in favor of a likelihood of confusion. Our Sleekcraft analysis benefits from a record developed through lengthy discovery, and the key facts are undisputed. Volkswagen and Audi have established a prima facie “exclusive right to use the . . . mark in commerce.” 15 U.S.C. § 1115(b). Accordingly, we reverse the district court’s denial of summary judgment in favor of Volkswagen and Audi on the issue of infringement and remand for consideration of the “first sale” defense and any other related claims or defenses.