Wednesday, May 30, 2012

Delayed but long post on LV v. Hyundai

Louis Vuitton Malletier, S.A. v. Hyundai Motor America, 2012 WL 1022247 (S.D.N.Y.)

During the post-game show of the 2010 Super Bowl, Hyundai ran a 30-second commercial that its counsel later described as “a humorous, socio-economic commentary on luxury defined by a premium price tag, rather than by the value to the consumer.” It consisted of brief vignettes that show “policemen eating caviar in a patrol car; large yachts parked beside modest homes; blue-collar workers eating lobster during their lunch break; a four-second scene of an inner-city basketball game played on a lavish marble court with a gold hoop; and a ten-second scene of the Sonata driving down a street lined with chandeliers and red-carpet crosswalks.”  The inner-city basketball game scene included a one-second shot of a basketball decorated with a pattern resembling Louis Vuitton’s toile monogram on a chestnut-brown background.  On the Luxury ad basketball, the LV was changed to LZ, and the proportions of the other designs were slightly altered.  The ad aired five times over a month. The court granted summary judgment in LV’s favor on trademark dilution.

Hyundai wanted to offer “luxury for all … by poking fun at the silliness of luxury-as-exclusivity by juxtaposing symbols of luxury with everyday life (for example, large yachts parked beside modest homes).”  LV’s mark was a symbol of “old” luxury, and Hyundai said it was trying to distinguish those old symbols, including LV’s, and redefine luxury during a recession to include the Hyundai Sonata. 

The court emphasized the deliberateness of Hyundai’s evocation of LV’s mark.  One former marketing executive, for example, testified that Hyundai designed “a brown basketball as you'd expect with some gold emblems on it to represent luxury definitely laddering and borrowing equity from Louis Vuitton. And I believe we changed as much as we could to make it so it wasn't a complete logo. But [we] tried to make it look like that so we would get that quick reference to luxury and people would get the luxury reference quickly. It was the simplest thing.”  Hyundai was trying to fight its own lower-quality brand image, and the court thought it was doing so by grabbing on to LV’s image.  As Mark McKenna has noted, this reads “use as a mark” out pretty much entirely—Hyundai didn’t adopt LV’s mark as its own, even though it referred to it.  It’s almost a European concept of free riding, which doesn’t do much to explain why we still allow comparative advertising in the US.  The court also didn’t like that Hyundai sought, but didn’t get, royalty-free permission to display 13 luxury brands in the ad.  Six brands said no and the others, including LV, never responded.

As Eric Goldman explained, the court found blurring based on the six-factor TDRA test.  The mark and the basketball design were virtually indistinguishable.  The one-second duration of the basketball clip heightened the similarity because the speed made it hard to discern any differences, but was intended to “register luxury with the snap of the fingers.”

LV also had high distinctiveness and exclusive use.  Hyundai argued that LV permitted unlicensed, third-party uses in a Black Eyed Peas video and in promotional material for musicians Dwight Yoakam and Jim Jones. LV sent a C&D to the Black Eyed Peas and was unaware of the other uses until they were raised in a deposition.  At most, this was “two minor lapses in enforcement.”  (Argh!  Unless these were commercial uses, they didn’t interfere with LV’s legitimate rights, and not going after them shouldn’t matter at all—it’s offhand comments like this one that lead TM owners to claim they “have” to control any representation of our pervasively branded world, and have the right to do so besides.)  Hyundai also argued that LV engaged in self-dilution by licensing Tiffany jewelry and providing celebrities with LV products, but the court thought that requiring royalties in the former case and deliberately using celebrities as a marketing strategy in the latter was sufficent control.

Hyundai’s undisputed intent to create an association with LV weighed in favor of dilution.  Hyundai argued that the association was expressive in nature and wouldn’t impair the LV marks, but the court thought this was “ipse dixit” (even though there are a number of cases that have recognized that unauthorized uses that refer back to the famous mark can increase the single-source meanings of the famous mark).

In addition, LV submitted evidence of actual association between the marks.  (Note the assumption that the basketball is functioning as a mark… for what?)  The Charbucks case concluded that a survey showing that 30.5% said that Starbucks was the first thing that came to mind on hearing Charbucks (and 3.1% reporting Starbucks as a possible source of Charbucks) was evidence of actual association.

LV pointed to Hyundai’s own expert, Dr. Jerry Wind, who used the Luxury ad and a basketball-less control.  In the test group, 19% identified LV as one of the brands shown.  Ninety percent of the test group noticed the basketball, and 30% stated it reminded them of LV, while 58% noticed a pattern or design on the basketball.  When asked to list which brand or product was advertised, 79% mentioned Hyundai first, and 5% mentioned LV first.  No respondent thought less favorably of LV, and only 2% believed the two were affilated.  Nine percent said the basketball made them more likely to buy a Hyundai.  “Other participants believed that the commercial advertised non-specified car manufacturers, caviar, lobsters, basketballs, yachts, Spaulding, the police or chandeliers.”  (Did we live and fight in vain?  (reference)).

LV’s expert also did a survey, with the control group seeing a standard orange basketball instead.  Seventy-two percent of the test group noticed the basketball design, 5% in control, and 15% of the test group recognized the design as LV’s, while 29% recognized it as some type of luxury mark.  That 15% was consistent with the percentage of the buying public that’s aware of the LV mark.  (This would seem fatal to “household name” status, but no.)  Among those who recognized the design as LV’s, 62% believed that LV authorized the use.  Large percentages of both groups thought the ad promoted Hyundai’s luxury qualities.  LV also submitted unedited tapes of focus groups on the ad, but the court wasn’t going to wade through them and LV didn’t provide a guide for what the court should look for.  LV also pointed to tweets reacting to the ad, e.g., “I think a Louis vuitton football or basketball would be gangsta,” “Dyd yall See tht Louis Vuitton Basketball? Lols iWant ^___^,” and “were they just playing ball with a LV basketball lol.”

Although the survey showed only 19% unguided recognition of LV in the ad, that was “evidence” of association in light of the Charbucks case, and anyway LV wasn’t requried to prove actual confusion, but whether a famous mark’s power had been whittled away by unauthorized use or its distinctiveness blurred.  LV’s expert said that, among those who recognized the LV mark, 62% believed the ad was approved by LV (which we conventionally call confusion); this was probative evidence of association of LV with Hyundai and with the Luxury ad.  (Adding to the roster of mathematically confused courts, the court said that it was “statistically significant” that 19% of respondents identified LV without prompting, as was the 30% who, when asked to focus their attention on the basketball, said it reminded them of LV.  I wish there were some sort of Microsoft alert that would pop up and ask “are you sure you don’t mean ‘significant’?”)  The tweets also provided “substantial and unrebutted” evidence of actual association reflecting “interest and enthusiasm about a Louis Vuitton basketball.”

Thus, weighing the statutory factors, LV was ahead on each one, and Hyundai failed to produce evidence that would enable a reasonable jury to find in its favor, including considerable evidence of intent to create an association.  Hyundai argued that LV’s use wasn’t exclusive because two recording artists used LV marks in promotional images, but LV didn’t know about those until this case, and it had a record of aggressive enforcement against counterfeits, and the marks’ appearance in a video for My Humps and in a use by Tiffany led to a C&D and a royalty agreement.  On similarity, the basketball design was virtually indistinguishable from LV’s marks, and the brevity of the appearance in the ad made it more difficult to distinguish the two.

Hyundai argued that the TDRA didn’t apply because it didn’t use LV’s marks to designate its own products.  Unlike in Tiffany v. eBay, however, the court said, Hyundai used the LV marks for “its own branding goals” (question: as eBay didn’t when it ran ads saying Tiffany jewelry could be found on its site?), “and, in the minds of some consumers, created actual association between Hyundai and Louis Vuitton.”  (But the TDRA specifies how actionable dilution must take place; we know that a number of things that might create associations are excluded from its scope, and before relying on the creation of association a court should first decide whether the type of behavior at issue falls within the TDRA’s categories.) 

The ad’s creators testified that the ad was “definitely laddering and borrowing equity from Louis Vuitton.” The court thus rejected Hyundai’s argument that the pattern wasn’t being used to designate Hyundai’s own goods or services—dilution is not a false designation of origin claim.  A blurring claim can arise even if a mark doesn’t designate origin.  (Then … is it a mark?)  LV established blurring as a matter of law.

LV also established willfulness, given a record “replete” with statements that Hyundai intentionally used the LV marks to promote the Sonata and draw on LV’s image in consumers’ minds.  Hyundai also believed it needed permission to use other luxury brands in the ad: it asked 13 companies, six of whom declined and others, including LV, never responded.  Even after LV’s C&D, Hyundai ran the ad through the NBA All–Star Weekend and, after LV sued, the Academy Awards.  Further, the deliberate alteration of the LV pattern “demonstrates a consciousness that Hyundai could not lawfully use the marks.”  The aim was to evoke LV in particular, but also to change the mark enough to avoid a permission requirement.  This was a “conscious intent within Hyundai to ladder and borrow from the equity of Louis Vuitton marks.”  (I’m sure “ladder” is some branding jargon, but all I can think of are stockings with runs in them.)

Hyundai argued that its intent was expressive, but that was a matter for its fair use defense.  (Why isn’t a belief, even a wrong one, in a fair use defense sufficient to avoid willfulness?  Because it’s a commercial, I guess.)  No reasonable juror could find for Hyundai on willfulness.

Unsurprisingly, LV also established blurring under NY law, which does not require fame but has a “substantial” similarity requirement.

The court then turned to the fair use defense, which could be available in a commercial context: “identifying, parodying, criticizing, or commenting upon the famous mark owner or the goods and services of the famous mark owner.”  Charbucks found no parody where there was, at most, a subtle satire of Starbucks.  Here, the record showed that Hyundai had no intent to parody, criticize, or comment on LV.  Hyundai argued that the presence of the design reflected a broader social commentary designed to “challenge consumers to rethink what it means for a product to be luxurious.”  But Hyundai disclaimed comment etc. on LV specifically and thus could not, as a matter of law, invoke fair use.  Individuals involved in the ad’s creation testified in response to questions, for example, that they weren’t commenting on LV. E.g., “It wasn't the intent to try to—the intent wasn't specific to—the same reason why we didn't use specific brands on any of the other things we did. It was just to convey luxury.”  They could have used other brands, and had nothing to say about LV specifically.  Hyundai argued that “The symbols of ‘old’ luxury, including the [Louis Vuitton] Marks, were used as part of the Commercial's humorous social commentary on the need to redefine luxury during a recession, even though the Commercial's overall intent was not to comment directly on [Louis Vuitton] or the other luxury symbols.” And since some symbol had to be chosen to evoke luxury, Hyundai chose LV.  The court understood this to mean that there was no commentary on LV at all; LV and other brands were only “proxies” for a broader observation about “old” luxury.  That wasn’t comment on the famous mark owner or its goods or services.  Thus, no reasonable trier of fact could sustain the fair use defense.

Comment: I think Barton Beebe might have interesting things to say here about how the idea that LV, as a luxury brand, could stand in or for luxury brands generally, and be subject to commentary on luxury brands generally, is inherently offensive to LV’s supposedly unique status, and yet at the same time LV does very much want to be known as a luxury brand.  Why you can’t criticize or comment on a genus by identifying some members thereof remains unclear to me (if I comment on American presidents with examples, aren’t I commenting on the examples?, but the court thought its conclusion was a standard application of the rule that comment/parody must be directed to the plaintiff’s mark.  It also cited Rogers v. Koons for the proposition that fair use arguments have been rejected when the use is directed at “expansive social criticism” rather than “targeted” comment or parody.  This is wrong on a number of levels, not least of them that Blanch v. Koons indicates a rather different subsequent view of fair use—and Blanch has it right, since a court has no business telling a speaker “use a better example” or “if you target a general phenomenon, you have to make up a hypothetical example instead of using a real one” (at least in the absence of defamation or false advertising, not implicated here).

True, the court noted, the TDRA contemplates commercial parody etc.  But “[i]n other contexts” (citing state law and FTDA dilution cases), promotional use weighs against fair use.  Hyundai itself cited copyright and non-TDRA cases, but those didn’t involve “subtle” satires.  Rather, they were “over-the-top, umistakable parodies” (citing, e.g., Cliffs Notes, Inc. v. Bantam Doubleday Dell Publishing Grp., Inc., 886 F.2d 490 (2d Cir. 1989); Tommy Hilfiger Licensing. Inc. v. Nature Labs. LLC, 221 F. Supp. 2d 410 (S.D.N.Y.2002)).  While it clearly wouldn’t make a difference in this case, I’m fascinated by the way that precedents work here: the parody is clear in retrospect, but the plaintiffs certainly didn’t think so, and readers are invited to make their own assessments:

The court also denied Hyundai’s motion for summary judgment on the TM infringement claim.  Hyundai argued that the strength of the LV mark made confusion less likely in a case involving commentary, but the court found that the “jest or commentary” was less apparent than in the Old Farmer’s Almanac case on which Hyundai relied for this proposition.  The court accepted that the competitive proximity between the parties was minimal and that LV was unlikely to bridge the gap to automobiles, but enough other factors favored LV to avoid summary judgment.

LV argued sponsorship/approval confusion, and there was some evidence of tweets that “misapprehended the authenticity” of the LV-like ball, and other posts mentioning an “apparent nexus” with Hyundai.  E.g., “Did I just see a Louis Vuitton basketball in a Hyundai commercial? ? ?”; “That luxury hyndai sonata commercial is hard body. LV basketball wit marble & gold backboard was so sick!”; “in one of Hyundai's ad, there is a guy holding a basketball with the LV logo.”  I don’t know why any of this is evidence of sponsorship confusion, but apparently it is, though tweets that mentioned the instant litigation were not.  “While anecdotal and limited, the postings to Twitter reflect some actual confusion as to Louis Vuitton's role in the Hyundai ad, in the same fashion as letters or phone calls.”  LV’s reliance on focus group statements was insufficient to provide other evidence of confusion.

Hyundai’s expert testified that its survey showed net 8% of likely Sonata consumers, the relevant group, either believed that Hyundai and LV were affiliated or that LV granted permission to use its marks.  Ten percent said they were more likely to buy a Sonata because of the presence of the basketball.  (!)  LV challenged the control group for using a ball with an “atypical” chestnut-brown color “that mimics the Louis Vuitton marks.”  The survey also asked “In creating the commercial, do you think the company that produces the advertised brand or product [X] got or was required to get permission from any other company or brand?”  But this is a compound question that requires participants to draw a legal conclusion, and other cases have found similar questions to deserve little weight.  (Why this formulation doesn’t drive up yes responses, making LV’s case weaker, is unclear to me.)

LV’s own expert opinions weren’t directed to likely Sonata purchasers, but instead looked at misapprehension among all consumers who recognized the LV mark.  This might be relevant to dilution, but carries little or no weight for confusion.  In the end, the Hyundai survey’s flaws were better assessed by a jury, to be weighed against “a scattering of Twitter postings by unknown users”; actual confusion favored neither party.

Bad faith certainly didn’t favor Hyundai as a matter of law: intentional copying/evocation of LV; failed attempts to seek permission; refusal to stop airing the ad.

Proving once again that, if we’re going to have a multifactor confusion test for everything, the Second Circuit should really get rid of “product quality” as a factor, the court also agreed that it was irrelevant in this case because of the lack of competitive proximity, even though LV argued that its luxury reputation was at risk.

Though both parties’ consumers were sophisticated, the close similarity of the marks could still lead a sophisticated consumer to conclude that the design in the ad originated with LV (which of course is exactly the same as being confused about sponsorship … sigh), or could distinguish between the marks.

The court also rejected Hyundai’s First Amendment arguments as relevant to confusion, because of the “subtle” commentary in the ad and the “broader social critique” it offered.  Such motivations are “unworthy of protection,” though I would have thought broad commentary justified more First Amendment protection—newsworthy topics, after all, are regularly illustrated with examples, often of people or institutions who didn’t choose to become examples for others.

Hyundai also moved for summary judgment on damages, because even with willfulness no reasonable juror could conclude that even one Sonata was sold because of the presence of the basketball.  LV argued instead that damages could be measured by the $3.2 million Hyundai spent to produce and air the ad, or instead by the estimate of its expert, who opined that the LV designs were “integral” to the Luxury ad (seriously?), that the ad caused a spike in visits to Hyundai's website, and that “approximately $14.5 million” in profits could be attributed to the ad.  This was, the court held, a dispute best submitted to the finder of fact. 

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