August/September 2011 Issue
Levi Strauss & Co. v. Papikian Enters., Inc.,
2011 WL 3739550 (N.D. Cal. Aug. 26, 2011)
Plaintiff owns the trademarks LEVI’S and 501 for clothing. Defendants bought genuine discontinued LEVI’S jeans and sold them on their “501USA.com” website. Defendants moved for summary judgment on plaintiff’s trademark and cybersquatting claims, asserting, among other things, that the first-sale doctrine protected their sales of genuine products. The court denied defendants’ motion, however, and held that a genuine issue of material fact existed as to whether defendants’ sales constituted infringement because their use of plaintiff’s mark in their domain name suggested a false association between the parties.
Levi Strauss & Co. (“LS&C”) owns the trademarks LEVI’S and 501 for clothing. Defendants Papikian Enterprises, Inc. and Galoust Papikian (collectively “Papikian”) bought genuine out-of-season and out-of-stock LEVI’S jeans and sold them on their website at “501USA.com.” Papikian used metatags such as “501” and “LEVIS JEAN” on the “501USA.com” website. LS&C sued Papikian for trademark infringement, dilution, and cybersquatting, among other claims. Papikian filed a motion for summary judgment on all counts, asserting various defenses, including the first-sale doctrine and nominative fair use.
Generally, the first-sale doctrine holds that, with some exceptions, the right of a trademark owner to control the distribution of its branded products does not extend beyond the first sale of the product. As a result, the resale of genuine goods bearing the producer’s trademark by the first or subsequent purchaser of the original article normally does not constitute trademark infringement. In this case, the court cited the Ninth Circuit’s holding in Sebastian v. Longs Drugs, which determined that the stocking, displaying, and selling of genuine products were protected under the first-sale doctrine, and thus did not infringe the trademark rights of the original producer.
The Sebastian court noted, however, that “conduct by the reseller other than merely stocking and reselling genuine trademark products may be sufficient to support a cause of action for infringement.” It gave as a possible example a situation where a seller used a mark to suggest an affiliation with the trademark owner.
Applying the dicta of Sebastian to this case, the court noted that although LS&C did not directly respond to Papikian’s arguments involving the first-sale doctrine, LS&C did allege that Papikian did more than “stock, display, and resell” genuine LEVI’S products, i.e., Papikian used LS&C’s mark in its domain name and throughout its website to mislead consumers into assuming that Papikian was an authorized retailer of LS&C. According to the court, LS&C “put forth evidence from which a reasonable juror could conclude that Papikian’s website and his use of LS&C’s marks suggests he is an authorized LS&C retailer or is otherwise affiliated with LS&C which could negate Papikian’s first sale defense.” In determining whether Papikian had met its burden of establishing that no reasonable trier of fact could find other than in its favor, the court held that although Papikian may be able to establish the first-sale defense at trial, it had failed to meet this burden on the existing summary judgment record.
In addition, the court denied Papikian’s motion for summary judgment on its nominative-fair-use defense, which required Papikian to show that (1) the product was not readily identifiable without LS&C’s mark; (2) it did not use more of the mark than necessary; and (3) it did not falsely suggest that LS&C sponsored or endorsed Papikian. LS&C argued that there were disputed issues of fact on the second and third factors. Although LS&C did not provide evidence of actual confusion, the court held that Papikian’s domain name “501USA.com” was the type of domain name that could suggest sponsorship or endorsement by LS&C under the Ninth Circuit’s decision in Toyota v. Tabari, which gave several examples of such names, including “trademark-usa.com” domain names. Also, although Papikian put some disclaimers on its website, LS&C submitted web pages that featured numerous LS&C marks and showed that Papikian’s disclaimers may not always be obvious or prominently displayed.
This case is of interest because it appears to be one of the few times that a court has considered whether the use of a third party’s trademark in a domain name for a website selling genuine goods transformed the sale of such goods—normally protected by the first-sale doctrine—into trademark infringement.