"from the designer of" not clearly nominative fair use, court says

L&A Designs v. Xtreme ATVs, Inc., No. 3:10-cv-00627-HZ (D. Ore. Apr. 30, 2012)

I suspect that concededly bad behavior in other areas influences this latest iteration of nominative fair use, which, as scholars have cautioned, can easily be turned from bright-line, easily resolved defense to full-scale confusion inquiry all over again, thus preventing summary judgment.

L&A makes aftermarket all-terrain vehicle (ATV) parts, particularly starter clutches.  L&A was started by plaintiff Wesley Allford and Monty Lightner.  When the partnership falered, Alford bought Lightner’s 50% share of L&A, though Lightner wasn’t barred from using the design of the starter clutch developed while he was with L&A.  Lightner started his own company, L&L eXtreme, to sell competing starter clutches.

Defendant Xtreme sells aftermarket ATV parts using a Connecticut store and several websites.  Defendants Andrew & Natalie Clunan operate Xtreme.  In 2004, Xtreme began selling clutches made by Lightner.  (The L&A Designs mark was used beginning in 2003, registered in 2009.)

L&A challenged three websites, raptorstarterclutch.com, onewayraptor.com, and ladesigns.com.  The Raptor sites use the phrase, “From the designers of the L&A Designs starter clutch, this is the same dependable product built to endure Xtreme riding conditions.” The L&A Design mark was also used multiple times as a metatag on the first site.  The last site was set up to receive traffic from ladesignsllc.org, which didn’t have content of its own.  The L&A design mark was also used in metatags on ladesigns.com, with product photos marked “www.LADesigns.com Copyright 2006.”  Also, defendants used the mark to sell L&L eXtreme clutches on eBay, labeled as L&A Designs starter clutches.

Xtreme admitted that the third site violated the Lanham Act. 

The court granted defendants’ motion for judgment on the pleadings on plaintiffs’ claim for violation of the Oregon Unfair Trade Practice Act, which the court held protected only consumers, not competitors.  Prior cases allowing competitor suits to proceed hadn’t specifically addressed standing challenges.

Defendants moved for summary judgment limited to the “from the designers” phrase.  This should be easy, since L&A didn’t contest that the non-L&A clutches were in fact “from the designers,” but the court makes it hard. 

Post-Tabari, Sleekcraft doesn’t apply if a defendant uses the mark to refer to the trademarked good itself.  If that threshold condition is met, the plaintiff has the burden of showing likely confusion under the nominative fair use test.  Though L&A argued that defendants were using the mark to refer to defendants’ product, that was a mistake: there can be a reference to plaintiff’s product even if the ultimate goal is to describe defendant’s product.

Then, L&A’s product wasn’t readily identifiable without use of the mark, and defendants used no more than necessary (it’s a plain word mark, and they used the word mark; they could have used no less).  Unsurprisingly, factor three was where the analysis faltered.  The court framed the issue as whether the use “suggests sponsorship or endorsement,” which of course is confusion all over again, so what did we use a separate test for?

Defendants argued that the phrase, “From the designers of the L&A Designs starter clutch, this is the same dependable product built to endure Xtreme riding conditions” simply indicated the history of the product design.  Even though the court refused to consider “the totality of Defendants’ conduct among the three websites,” the court found the phrase “ambiguous enough” to suggest that the product was produced by L&A.  (What should defendants have said to convey the truthful information that the product had been designed by the L&A designers to the same design?)  Thus, there was a genuine issue of material fact on the “from the designers” phrase.

The remaining claims were about the use of L&A’s mark as metatags (and personal liability for the individual defendants).  The court first rejected, at least at this stage, a nominative fair use argument, “particularly since the use of the mark as a metatag is substantially different from using the mark in a phrase.”  (Sigh.  Assuming counterfactually that metatags mattered, this would be a perfectly good way to point people to a product that competed with L&A’s mark.)  Moreover, the court doubted that “the threshold condition—whether the mark was used to refer to the trademarked good—has been met.”  Given the limited argument, the court couldn’t make a nominative fair use determination.

Absent nominative fair use, we’re back with Sleekcraft.  Confusion can be either source confusion or initial interest confusion, and “[b]ecause the metatags are not visible to the consumer, initial interest confusion is more likely here”—even though the court went on to cite Network Automation for the point that Google doesn’t use metatags.  A number of the factors favored L&A (as one would expect when applying Sleekcraft to a comparative use), though the court gave no weight to similarity of marketing channels because everyone uses the internet.  Eric Goldman’s going to love this ruling on intent: “Defendant Natalie Clunan’s understanding of a metatag is important, as she is the one who inserted the metatags on the websites.  Ms. Clunan believed that search engines could use metatags, among other things, to rank search results.”  It was undisputed that raptorstarterclutch.com was started before the owners of L&A split up, and defendants argued that they sold L&A products from Lightner on the website, making the use fair.  I don’t understand how this creates a “genuine issue of material fact” on intent, but apparently it does, even though it sounds like Clunan put in metatags that she believed accurately described what they had to sell.

L&A’s evidence of actual confusion was that an L&A dealer testified that he received several phone calls from people asking about differences in the competing products, and also received defendants’ starter clutches in the mail requesting warranty service.  Defendants objected to this as hearsay and contested the witness’s credibility due to a prior conviction, but the court didn’t care about that because the evidence didn’t explain how any confusion would have been caused by the challenged use of metatags, so the court gave the actual confusion factor no weight.

Defendants sold their products for $169 or $269, but the court couldn’t make a determination about the degree of consumer care.  Overall, there were genuine issues on a number of Sleekcraft factors, so L&A’s motion for summary judgment on the metatag use was denied.