Selling two products together doesn't plausibly cause confusion as to their source

General Motors LLC v. KAR Auto Gp., Inc., No. 20-CV-2039-CJW-KEM, 2020 WL 5371717 (N.D. Iowa Sept. 8, 2020)

When a court can’t give a doctrinal reason for its decision, that can signal a deep indeterminacy in the doctrine that can only be resolved by fiat. Here, the indeterminacy is that confusion theory has very few doctrinal brakes even when any harm of confusion seems minimal and the anticompetitive consequences of plausible threats of suit seem great.

KAR (which made me hear the Knight Rider theme, child of the 80s that I am) is an auto dealer in Iowa. The parties entered into dealer agreements allowing KAR to sell Chevrolet and Cadillac vehicles at its GM dealership. KAR formerly operated a separate automobile dealership adjacent to its GM dealership which sold Chrysler, Dodge, Jeep, and Ram made by Fiat Chrysler. KAR merged its operations in June 2020.  “The practice of selling vehicles from two different manufacturers at a single dealership is called ‘dualing’ in the car dealership industry.”

GM sued for breach of contract claims and trademark infringement, alleging that, as a result of the unauthorized dualing, consumers will be confused, make mistakes, or be deceived as to the “source, affiliation, or sponsorship” of its marks.

The court granted the motion to dismiss and denied leave to amend.

Even under the very broad notion of infringement that allows infringement when “a legitimate mark [is used] in a confusing manner,” GM failed to state a claim. GM argued that KAR’s dualing “will cause less knowledgeable consumers to confuse which vehicle brands are manufactured by plaintiff and Fiat Chrysler respectively.” It didn’t plead any infringing advertising, promotion, or marketing, only that GM marks would be present at the dualed facility.

Although likely confusion “is a factual inquiry that is seldom resolved at the motion to dismiss stage,” this was the “rare” case of inadequate allegations.

As to the factors (which of course are a bad fit here), the GM marks are strong; there was no “infringing mark or infringing product” because the marks were undisputedly being used to identify GM products. There were no allegations of intent to confuse the public about who made which vehicles. “lthough it can reasonably be expected that consumers will do their homework on a given vehicle before purchasing it, many consumers may not know or care which particular manufacturer made any given vehicle.” [Materiality as spackle! Courts tend to mention materiality when they are explaining why trademark confusion theories shouldn’t expand even further.] There was no actual confusion alleged, though “extensive discovery” had yet to be conducted.

At the end, though, all GM alleged was that KAR sold and serviced both GM and Fiat Chrysler vehicles at the same location. “The existence of two competing products in the same building does not reasonably signal that they are connected or related in any way. The mere fact that some consumers may not know which entity manufactures which vehicle model is of little consequence.” There was no authority for the idea that offering competing goods side by side is infringing just because some consumers may not know the difference [in source].

[Given that knowledge of the specific source is not required for trademark validity, per Congress’s intervention to overrule the Anti-Monopoly case, it would seem that sauce for the goose is sauce for the gander: a consumer’s lack of knowledge, or even potential confusion, about corporate parenthood of two completely dissimilar marks isn’t infringement. More strongly: a survey that found that consumers thought that Snickers and Reese’s Peanut Butter cups came from the same manufacturer because they’re found together in thousands of stores across the country should be disregarded. One version of the insight here: any confusion about whether there’s a shared corporate source of Snicker’s and Reese’s comes not from mark similarity, as required for infringement, but from marketplace structure. So too with dualing (even dualing in breach of contract). This is only hard to explain in doctrinal terms because false association theories have metastasized beyond any conceivable consumer protection interest.]

The court continued: “The Lanham Act does not require sellers to segregate products by manufacturer to affirmatively reinforce brand identity to consumers.” In a footnote, the court offered the example ofa restaurant that served both Coca-Cola and Pepsi products. “Consumers may not know that Fanta is a Coca-Cola product and Sierra Mist is a Pepsi product. That the restaurant offers both beverages, however, does nothing to confuse consumers into mistaking that they are connected in any way or originate from the same source.” Thus, GM failed to plead a use of a mark “in a false, misleading, or confusing manner.”

In addition, “[d]ualing itself is not confusing. To the contrary, it is a well-established practice in the car dealership industry.” Without more than the mere simultaneous presence of two automakers’ marks, GM didn’t allege facts that would make consumer confusion likely. Dualing itself could not be “a misleading representation. Although a representation can be made via conduct, dualing alone does not assert any fact.”

In its moving papers, GM referred to KAR’s advertising, marketing, and promotion, though not any specific items thereof; it argued that “advertising and selling both GM and Fiat Chrysler vehicles from a building branded with both GM Marks and CDJR trademarks” constituted infrignement, and speculated that “combined, misleading advertising may occur.” This wasn’t enough, and any further amendment of the complaint would be futile.