Navajo Nation claims against Urban Outfitters survive

Navajo Nation v. Urban Outfitters, Inc., --- F.Supp.2d ----, 2013 WL 1294670 (D.N.M.)

The court largely refused to dismiss the Navajo Nation’s claims against Urban Outfitters for using “Navajo” on some of its items.  In this case, the court seemed to treat “identification meaning” the same as “trademark meaning,” allowing the Navajo Nation to claim that recognition of the Navajo as a group was recognition of “Navajo” as a mark.  I’m dubious about this, but understand why it happened here.

The Navajo Nation “is a sovereign Indian Nation with over 300,000 enrolled members,” and “acts through its political subdivision …; its wholly-owned instrumentalities …; its officers, employees, and authorized agents; and its members, the Navajo People.”  (This is one place where I get nervous about applying trademark concepts: if that isn’t naked licensing, what is?)  It alleged that it and its members had been known as “Navajo” since at least 1849, had continuously used the mark in commerce, and had made the mark famous with numerous products, including, among other things, clothing, accessories, blankets, jewelry, foods, tools, decorations, crafts, and retail services.  The Navajo Nation has registered 86 trademarks that include NAVAJO for different classes, including clothing, jewelry, housewares, and accessories, and alleged that many had become incontestable.  (Urban Outfitters argued that the Nation didn’t actually own all 86 marks, and that only 5 were incontestable.)  The Nation also alleged substantial investment in promoting the marks, resulting in over $500 million of sales of NAVAJO-branded goods. 

Further, it alleged, “NAVAJO” was inherently distinctive, and that it wasn’t a generic name for any products, since if you go into a clothing store and ask for a “Navajo” you will be greeted with incomprehension.  (What if you go into a grocery store and ask for a “Swiss”?)  The Nation alleged that, instead of using descriptive words like “geometric” or “southwestern,” Urban Outfitters chose “Navajo” in order “to trade off of the cachet and romanticism associated with the Navajo People, who form the Navajo Nation.”  Futher, UO allegedly falsely advertised a number of its “Navajo” products as “Vintage” and “Handmade,” making an expressly false claim that their goods are made by members of the Navajo Nation.

UO allegedly rolled out a product line of at least 20 items under the “Navajo” and “Navaho” names, echoing Navajo Nation tribal patterns.  Further, UO allegedly “used” the mark in its internal search engine to divert consumers, causing initial interest confusion by returning results.  (The Amazon watch case might be of relevance here.)  The Nation alleged trademark infringement, federal and state dilution, false advertising, violation of the Indian Arts & Crafts Act, and related state-law claims.

On a motion to dismiss, the court refused to consider excerpts from the trademark file histories of some of the marks referenced by the Nation in its complaint.  The Nation didn’t attach an incomplete document to its complaint, but rather UO was cherry-picking portions of the PTO record to contest the facts.  The evidentiary value of the excerpts was subject to reasonable dispute and not suited for judicial notice.  “If Defendants' position were correct, the entire trademark file history of each trademark allegedly infringed would nearly always be permissible to consider on a motion to dismiss in any trademark infringement case, an incredibly cumbersome analysis at the early stages of a case.”  Likewise, the court declined to consider evidence that “Navajo” was used as a generic descriptor of “Indian-styled” prints and designs at this stage of the case.

UO argued that the Nation failed to state a claim because it failed to allege facts showing that UO’s use of the term was as a source identifier instead of descriptively; the Nation cropped the content of the sites (presumably so that UO’s own marks wouldn’t appear).  Dismissal for failure to state a claim is appropriate only in the most extreme trademark cases, and this wasn’t one.

The Nation argued that because their marks were incontestable and fanciful, arbitrary, or suggestive, descriptive fair use was unavailable as a defense.  (I’m pretty sure that the “incontestable” part there doesn’t work, inasmuch as §33(b) is in the statute precisely to establish descriptive fair use as a defense as to incontestable marks.)  As for the fanciful etc. argument, a number of courts have (correctly) concluded that it’s the defendant’s use that must be descriptive, not the plaintiff’s, but the court didn’t resolve the issue because UO didn’t establish that the defense succeeded as a matter of law.

The Nation alleged sufficient facts to show that UO used “Navajo” as a mark, and that it didn’t “sufficiently accompany ‘Navajo’ with such distinguishing marks that a buyer exercising ordinary care would not be deceived into believing they were purchasing an item produced by the Navajo Nation.”  The Nation alleged use on similar goods to the Nation’s own goods, and that the goods compete in many of the same channels of commerce.  UO advertised “Navajo Bracelet” and “Navajo Feather Earring” “without clarifying words or images that ‘Navajo’ did not mean that it was made by a member of the Navajo Nation and was merely descriptive of the style,” and other items were advertised similarly.  When the products involved are similar, a descriptive fair use defense may fail not because likely confusion makes the use nondescriptive, but because confusion shows that a use is de facto use as a mark.  Even as to UO’s sub-brand Anthropologie, where the exhibits only showed statements saying, “We're sorry. This Product is no longer available,” could count as use; “a factual inference could be made that the product is no longer available because all those particular goods had been sold from the site.” 

Here, “Navajo” has a primary meaning referring to the Navajo tribe and its people.  “Navajo” also has a geographic component, but the tribe is the registrant.  As for dictionary definitions of “navajo blanket” and “navajo rug” as “a blanket woven by the Navaho in geometric designs of symbolic meaning,” this definition “demonstrates that, even when used as an adjective, the term conveys information that the source of the rug or blanket is the Navajo tribe or a member thereof.”  Thus, even adjectival use could create likely confusion among consumers.  Some of the items included another company’s brand in the product description, but that wasn’t enough to find, as a matter of law, that the use of another brand would eliminate all alleged confusion.

UO argued that the Nation itself acknowledged that “Navajo Style” for goods would be fair use, relying on a license agreement submitted to the PTO in connection with one trademark, but that evidence wouldn’t be considered on a motion to dismiss.  In addition, UO argued that the Nation failed to show either trademark use or bad faith as to Free People because “Navajo” was a descriptor of “vintage, pre-owned items originally from artisans who identify as Navajo Indians.” But UO’s affidavit was less than a model of clarity; it averred that the items were “believed to” be made by self-identified Navajo artisans; this again wasn’t suitable for resolution on a motion to dismiss. The allegations of use in, for example, “Vintage Handmade Navajo Necklace,” were sufficient to state a claim of confusion over origin. 

In addition, UO argued that a user’s collection of items she wanted, labeled “Navajo Beauty” and displayed on the Free People site, wasn’t trademark use by UO.  The Nation acknowledged that its claims didn’t encompass acts of UO’s customers.  The court noted that the Tenth Circuit recognizes claims based on initial interest confusion, “the unauthorized use of trademarks to divert internet traffic, thereby capitalizing on a trademark holder's goodwill.”  The court found it “unclear” whether UO was responsible for using “Navajo Beauty” to describe a collection, since the page says the collection was created by “indiehippiepixie.” However, the Nation sufficiently alleged that UO used “Navajo” to divert internet traffic.  Thus, the court didn’t decide whether there was infringement based on advertising the “Palmedo Blanket Bag” (part of indiehippiepixie’s collection) without “development of the factual record concerning how Defendants allegedly used ‘Navajo’ in their internal search engines to divert customers to products like the Palmedo Blanket Bag.”

Finally, the court couldn’t find nominative fair use as a matter of law.  And we get a new-to-me reformulation of the doctrine: “whether (1) the product is readily identifiable without use of the mark, (2) defendant used more of the mark than necessary, or (3) defendant falsely suggested he was sponsored or endorsed by the mark's holder.”  Assuming the doctrine’s validity in the Tenth Circuit, whether “Navajo” was the only word reasonably available to describe the designs of the products at issue was a fact question; the Nation alleged that “geometric” or “southwestern” would also work.  The Nation therefore successfully alleged claims of source confusion as well as sponsorship or endorsement confusion.

Of course, the court also rejected UO’s contention that Navajo was generic for clothing and accessories, given the pleadings, despite what indiehippiepixie might have thought.

Turning to dilution, the court rejected UO’s argument that the Nation failed to allege fame for the relevant goods.  The Nation represented to the PTO that its first use of the mark in connection with clothing such as shirts and jackets was in 1995 and 2005; it didn’t allege particular facts showing the extent and geographic reach of sales, advertising, and publicity. However, the Nation alleged that it and its people had been known by “Navajo” since 1849; it had continuously used the NAVAJO trademark in commerce; it had marketed and retailed clothing, jewelry, and house wares since 1941; and it had registered the NAVAJO trademark in 1943.  This was a significant duration, despite the Nation’s failure to allege many non-conclusory facts about geographic reach. It did allege that it had invested “substantial capital in promoting and protecting” the NAVAJO trademark, resulting in more than $500 million in sales of NAVAJO-branded goods, and that the NAVAJO marks were prominently featured on a number of its websites. Moreover, it alleged 86 registrations with a NAVAJO component (despite the factual dispute over how many marks the named plaintiffs actually owned). Combined with general allegations that the mark was broadly recognized by the general public as a mark for Indian-styled and Indian-produced goods, this was enough to survive a motion to dismiss.

In combination with the complaint as a whole, the allegation that UO’s use of Navajo in retailing its 23 “Navajo” products and its marketing of its “Navajo Collection” made it likely that consumers would incorrectly believe that the “Navajo” mark is an indistinct term was sufficient to allege dilution by blurring. Evidence that other fashion marketers already do that was not relevant on a motion to dismiss.

The court did agree that plaintiffs failed to allege dilution by tarnishment based on two theories, though a quality-based claim survived. The “Navajo Print Fabric Wrapped Flask” was not sufficiently unwholesome to constitute tarnishment, given that the Fire Rock Navajo Casino registered trademark includes “shot glasses” among its goods. Although the Nation bans the sale and consumption of alcohol within its borders, it admitted that there was an exception for alcohol in dining areas of a Navajo Nation Gaming Enterprise facility and that it had registered the mark for shot glasses.  Thus, as a matter of law, use on a flask wasn’t sufficiently unwholesome or unsavory to support a tarnishment claim.

In addition, the court rejected the argument that UO’s use of “Navaho” was scandalous because the official spelling uses a j.  There was no authority that misspelling is scandalous.  Indeed, the Nation’s own complaint noted that “Navaho” is a long-thought acceptable spelling, and the Nation relied on Webster’s dictionary in its briefs, which also used the terms interchangeably.

The Nation did preserve a theory that UO’s products were of significantly lower quality than the Nation’s own products, diluting the marks.  UO argued that these allegations were conclusory and that the complaint itself showed that consumers rated the products highly, with an average rating of 4.5 out of 5 stars.  The court wasn’t willing to find that the star ratings were conclusive as to quality. While the allegations of lower relative quality were “somewhat conclusory,” they were enough to create a factual issue.

The Indian Arts and Crafts Act: The IACA “is a ‘truth-in-advertising law designed to prevent products from being marketed as ‘Indian made,’ when the products are not, in fact, made by Indians as defined in the Act.”  It creates a cause of action against a defendant who sells a good in a manner that falsely suggests that it’s Indian-produced or the product of a particular Indian, Indian group, or Indian tribe.  “[T]he question for the trier of fact is what the entire sales package, including advertising, labeling, and place of sale, suggested to the average consumer.”  An art or craft work is a handcraft—“an object created with the help of only such devices as allow the manual skill of the maker to condition the shape and design of each individual product.”

The court refused to dismiss the IACA claims:

Plaintiffs allege that Defendants have displayed for marketing and retailing items such as “Navajo Bracelet,” “Navajo Glove,” “Vintage Men's Woolrich Navajo Jacket,” and “Navajo Feather Earring.” Plaintiffs contend that the products are in a traditional Indian style, and composed of Indian motifs and Indian designs, but are without identifier terms or labels; that the manner of marketing the goods falsely suggests the products are Indian products of the Navajo Nation, when in fact they are not Indian made; and that a consumer may find the products using search terms like “Indian,” “Native American,” “tribal,” or “Navajo.”

This was enough to allege a cause of action under the IACA.  Clothing and clothing accessories could be arts or crafts within the meaning of the IACA, even if the clothing was contemporary apparel.  The regulations specify that both traditional and modern apparel could qualify.

UO argued that the Nation made contrary representations to the PTO in registering “Navajo Jeans” for “clothing, namely, tops, vests, shirts, sport shorts, polo shirts, golf shirts, jackets, T-shirts, sweat shirts.”  In response to an examiner’s refusal to register the mark because registration could violate the IACA, the Nation successfully argued that “[t]he goods offered under the Mark are not art works, crafts, or handcrafts within these definitions contained in the Regulations [for the IACA].” The court wasn’t willing to find judicial estoppel based on the limited record before it, and it wasn’t clear whether judicial estoppel would apply because the IACA’s regulations might have changed after the Nation made its representation to the PTO. Anyway, it wasn’t clear whether the Nation’s statement about “goods” referred to particular types of clothing, or contemporary clothing generally. (This is an interesting issue, and the Nation does seem to have a problem here. If it wants freedom to make “Navajo”-branded garments anywhere and in any quantities, as a trademark owner normally does, isn’t that inconsistent with the IACA’s goal of supporting Native American artisans?  For what it’s worth, I don’t think the change in regulation text makes a difference—I read the old and new versions of the regulation and I don’t think that the statements about apparel represented a change in the law.) 

Given the holdings above, the New Mexico Unfair Practices Act claims also survived, with a certification to the state supreme court.  UO argued that the Nation lacked standing because it wasn’t a buyer of UO’s goods.  However, the case law simply suggested that a seller of goods couldn’t sue the buyer of its goods under the NMUPA.  Here, the Nation alleged that false representations were made to the consuming public, so the lawsuit served the statute’s consumer protection goals, albeit indirectly.  The statute said that “any person” injured could sue, and many other states with similarly broad language allow business competitor standing, though there’s no clear consensus.  Given the limited briefing on the issue of whether a competitor would need to allege a public interest component and whether, if there is one, the Nation sufficiently alleged it, the court was inclined to certify the issue to the New Mexico Supreme Court, and so the court stayed its standing ruling until it received supplemental briefing.

The state law trademark infringement and dilution claims also survived, though the Nation would have to amend the complaint to allege fame in New Mexico.