December 2008 Issue

Civil Cases

Audi AG v. Shokan Coachworks, Inc.,
2008 WL 4911730 (N.D.N.Y. 2008)


ABSTRACT
The Northern District of New York decided cross-motions for summary judgment as to whether various uses of Audi’s trademarks by a retailer of used Audi automobile parts infringed and diluted Audi’s trademarks or constituted nominative fair uses.  Although it declined to grant summary judgment for either party on most uses, it did find, among other things, that the defendant’s use of the phrase “Shokan Audi Parts” in its email signature block infringed and diluted the AUDI trademark.  The court also granted summary judgment against Audi regarding defendant’s use of an email address containing the AUDI mark because the evidence of such use—printouts of defendant’s website from the www.archive.org website—were not authenticated by a representative of the archive.org site.

CASE SUMMARY

FACTS
Plaintiff Audi AG (“Audi”), an automobile manufacturer, owns the well-known and federally registered trademarks AUDI and its ring logo.  Defendant Shokan Coachworks, Inc. (“Shokan”), a vehicle recycler and used-parts retailer specializing in Audi parts, was first sued by Audi for trademark infringement in 1990 over Shokan’s use of the AUDI mark and logo on its letterhead, business cards, and advertisements.  The parties settled that action and Shokan agreed to change logos, not use the AUDI mark as a corporate or trade name, and not use the AUDI mark except as an adjective to describe the availability of parts or its repair services.  The settlement agreement also provided that a particular advertisement attached as an exhibit complied with the agreement.  That exhibit included both the phrase “AUDI USED PARTS” and the phone number “800-ALL-AUDI.”

In 2003, Audi learned of additional potentially infringing uses of its AUDI mark by Shokan, including: the vanity telephone number 1-800-ALL-AUDI; answering the Shokan business telephone line “all Audi”; the phrases “Audi Used Parts” or “Used Audi Parts” in advertisements; the email address “allaudi.shokan@verizon.net” to conduct Shokan business; the phrase “Shokan Audi Parts” in the signature block of 38,000 emails sent by Shokan; the domain name “800allaudi.com”; and the phrases “Audi Parts Warehouse” and “1-800-ALL-AUDI” inside Shokan’s business premises.  Audi also alleged that Shokan used Audi’s ring logo on Shokan’s website and on a sign inside Shokan’s business premises.

Audi sued for trademark and trade dress infringement, dilution, false designation of origin, false advertising, and cybersquatting. Shokan asserted a laches defense regarding its use of the AUDI mark in the vanity telephone number 1-800-ALL-AUDI and in the “Audi Used Parts” phrase on the ground that each was permitted by the parties’ settlement agreement and had been used by Shokan for twenty years. The parties filed cross-motions for summary judgment.

ANALYSIS
The court granted summary judgment in favor of Shokan on its laches defense, finding that the settlement agreement unambiguously permitted Shokan’s use of the vanity telephone number 1-800-ALL-AUDI and the phrase “Audi Used Parts” shown in the “approved” advertisement attached to the agreement as an exhibit, and that Audi failed to show that Shokan exceeded the scope of usage of these items contemplated by the agreement.  The court rejected Audi’s arguments that its prosecution delay was excusable due to Shokan’s intentional copying of Audi’s marks, the doctrine of progressive encroachment, and the overwhelming likelihood of confusion for various reasons.  In particular, Audi’s delay was unreasonable because Shokan had been using and advertising the vanity phone number for over twenty years, and the delay prejudiced Shokan because most of its sales came from phone orders.

The court also granted summary judgment to Shokan regarding its use of the AUDI mark in the email address “allaudi.shokan@verizon.net.”  Audi submitted copies of Shokan’s website from the Wayback Machine at www.archive.org supported by a declaration of an Audi witness.  Consistent with a handful of other decisions, the court, held that printouts from the www.archive.org website can be authenticated only by a knowledgeable representative or employee of that website.  Accordingly, because Audi failed to prove the elements of its infringement claim regarding the email address, the court granted summary judgment for Shokan.

Regarding the merits of Audi’s remaining claims, the court denied summary judgment on most of Audi’s claims due to genuine issues of material fact, including whether customers could even view the signs inside Shokan’s premises bearing the phrase “Audi Parts Warehouse” and the Audi ring logo.  And as for Audi’s cybersquatting claim regarding the domain name "800allaudi.com", there was a question of fact as to whether the prior settlement agreement covered this use.

However, the court did grant summary judgment for Audi on its infringement and dilution claims regarding Shokan’s use of the AUDI mark as part of its email signature.  Regarding infringement, the court found that Shokan’s use of the phrase “Shokan Audi Parts” in its email signature created a likelihood of confusion based on the strength of the AUDI mark, Shokan’s use of the identical mark, and the parties’ competitive proximity.  As to dilution, the court found the AUDI mark famous based on the length of time the mark was registered, Audi’s multi-million dollar advertising campaigns, and the amount and geographic extent of Audi’s sales.  Because this case was filed before enactment of the Trademark Dilution Revision Act ("TDRA") and because Audi sought both injunctive relief and damages, the court applied the “actual dilution” standard instead of the TDRA’s lower “likelihood of dilution” standard.  Audi nevertheless was able to meet this more stringent standard.  The court found that Audi established dilution as a matter of law because Shokan used the identical Audi mark as part of its email signature.

The court also granted summary judgment for Audi on its dilution claim concerning Shokan’s use of the Audi ring logo on its website.  Although there were genuine issues of fact regarding the length of use and Shokan’s intent that precluded summary judgment on infringement, such facts were not relevant to Audi’s dilution claim.  The court granted summary judgment only as to Audi’s request for injunctive relief, thus suggesting that the court applied the lower “likelihood of dilution” standard to this use.

Finally, the court rejected Shokan’s fair use defense.  In its summary judgment motion, Shokan argued that it used Audi’s marks “fairly and accurately [to] describe the Audi parts they sell.”  At oral argument, Shokan asserted for the first time a nominative fair use defense.  The court noted the Ninth Circuit’s three-part test for nominative fair use, which is satisfied where (1) the product or service in question is not readily identifiable without use of the trademark, (2) only so much of the marks are used as is reasonably necessary to identify the product or service, and (3) the user does nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.  The court also acknowledged that the Third Circuit applies a different test for nominative fair use.

The court noted that its reviewing court, the Second Circuit, had not yet specifically adopted or analyzed the nominative fair use defense. However, because the district courts in the Second Circuit that have discussed a nominative fair use defense have all followed the Ninth Circuit test, the court here likewise applied the Ninth Circuit test. It concluded that Shokan’s use of “Shokan Audi Parts” in its email signature block (as well as its other remaining uses of “Audi”) did not qualify as nominative fair uses of the AUDI trademark. Specifically, the court found that Shokan’s uses of the AUDI mark could “imply sponsorship” by Audi and thus failed to satisfy the third prong of the Ninth Circuit’s test.

CONCLUSION
Although the Second Circuit has yet to adopt the nominative fair use doctrine, like the handful of other district courts within the Second Circuit that have decided such issues, the district court applied the Ninth Circuit test instead of the Third Circuit test.  Moreover, in an important evidentiary ruling, the district court followed the decisions of several other district courts holding that printouts of historical websites from the www.archive.org website are not admissible without a supporting declaration from an archive.org representative.