Former distributor's continuing use of "authorized distributor" leads to TM and false advertising claims

Axon Enterprise, Inc. v. Luxury Home Buyers, LLC, No. 2:20-cv-01344-JAD-VCF, |2023 WL 4636917 (D. Nev. Jul. 19, 2023)

In what seems likely a missed opportunity due to insufficient investment in the defense, the court grants summary judgment against an argument that “Taser” is generic (quick quiz before reading further: what is the generic name for a Taser device?) but also narrows the issues somewhat; the larger infringement, cybersquatting, and false advertising claims can’t be resolved on summary judgment. [Edit: Please note that the court later granted reconsideration on the infringement claims.]

Axon makes Taser “non-lethal weapons” (but that can’t be the generic name—anything that encompasses a Taser and a beanbag gun is clearly too broad). Defendant LHB is a former distributor now selling used Tasers that its owner refurbishes in his home workshop. Axon sued for infringement of the Taser word and design marks and for holding Taser-related domain names for ransom. Axon apparently characterizes its non-lethal electric weapons as “conducted energy weapons.”

When it was an authorized Axon distributor, LHB’s owner registered various domain names including taser.org and tasers.org to help it market Tasers online. LHB currently owns 64 domain names containing references to Taser or Axon Taser models. “And while neither party knows exactly when their distributor relationship ended, they agree that it ceased sometime around 2000.” Does that sound like the claims against the domain names might be lached?

On websites, emails, and mailers, LHB uses Axon’s Taser character, stylized word, and design marks, often in proximity to its own marks. On several of its websites, LHB also makes representations that it is an “Authorized TASER® Distributor” and that “TASER® is a Trademark of the Mister Stungun.”

Its marketing also focuses on the superiority of the Taser X26E CEW over other models—that is of course the refurbished model it sells, while Axon has moved on—stating that the X26E “wield[s] the highest degree of takedown power of total and absolutely unsurpassed effectiveness[;]” “offers the highest degree of takedown power ever available with the same level of safety[;]” “has the most powerful technology and stopping force[;] “lasts for over 20 years—and works every time[;]” and has “twice the power” of the X26P CEW. LHB also advertises that its products are “factory refurbished,” “professionally refurbished,” “thoroughly tested,” “refurbished to the highest standard,” “completely refurbished” to “work like new,” “even better than new,” and reprogrammed “with the latest software.”

Axon was entitled to summary judgment on genericity. LHB offered only two news articles and a Ninth Circuit opinion that use the word “Taser” without the trademark symbol:

The mere fact that two article authors and a Ninth Circuit panel utilized the mark without a corresponding trademark symbol does not show as a matter of law that the primary significance of “Taser” to consumers is as a type of good rather than a source identifier. And the context of each reference was to refer to an Axon product or to distinguish other products as alternatives to Axon’s weapons.

Even if they were generic uses, two articles and one opinion weren’t sufficient to overcome the “strong presumption” of validity of a registered mark.

Likely confusion: Obviously, this is a nominative use. But is it a nominative fair use? Toyota Motor Sales v. Tabari asks whether “(1) the product was ‘readily identifiable’ without use of the mark; (2) defendant used more of the mark than necessary; or (3) defendant falsely suggested [it] was sponsored or endorsed by the trademark holder.”

The court rejected Axon’s argument that LHB could have identified its products by calling them CEWs; they were Taser brand products. However, it used more of the marks than reasonably necessary, favoring Axon (the court seems to be treating this as a balancing test, to be finalized in the third factor). The court applies the non-empirical but fairness-based line of 9th Circuit cases stating that using logos and not just names risks confusion. (When I see these claims I think about all the businesses using Facebook, Twitter, LinkedIn etc. logos on their materials to identify their social media accounts. Does anyone think that increases the likelihood of confusion over affiliation? Just as with first sale, there is an unambiguous truth—I have a legit product to sell, I have an account on this site—coupled with a less-significant possibility of confusion about whether there’s a greater relationship than that. I don’t think using the logo guarantees confusion, but the context of social media may be much more clarifying than the context of resales.)

Most importantly, there were genuine issues of fact about whether LHB suggested Axon’s sponsorship or endorsement. LHB argued that it avoided consumer confusion by fully disclosing that its products are refurbished and by maintaining the basic nature of the Taser through the refurbishment process. “Axon responds that the first-sale doctrine isn’t dispositive of this prong because affiliation confusion can still exist for disclosed refurbished products.”  

As the Ninth Circuit held in Sebastian International v. Longs Drug Stores, first sale doctrine “is not rendered inapplicable merely because consumers erroneously believe the reseller is affiliated with or authorized by the producer.” The Sebastian court thus held that, “[w]hen a purchaser resells a trademarked article under the producer’s trademark, and nothing more, there is no actionable misrepresentation.”

Still, that’s limited to using the trademark on a resold article and its immediate packaging, but not using stylized marks and logos on advertising materials. Axon didn’t seek to enjoin the sales of refurbished Tasers.

Axon’s evidence of actual confusion was three emails from various police officers and personnel inquiring about any affiliation between Axon and LHB, as well as declarations from two officers that they were confused about an affiliation between the parties. LHB pointed out that it markets to thousands of police departments, and one declaration only states that he was under the belief that LHB “could be affiliated with Axon.” Still, that was enough to create a genuine issue of fact. [Note that the cases are just divided on this—inquiries and uncertainty often indicate that the inquirers correctly understood that they needed to know more before concluding that there was an affiliation. Compare this to the treatment of ambiguity in advertising law—outside of trademark, courts make consumers work much harder.]

The context of the use also mattered. Axon pointed to LHB’s phrases such as “100% certified to work like new,” false description of itself as “an [a]uthorized TASER® distributor” (this was, LHB argued, an oversight on some of its websites left over from when that was true), use of Axon’s stylized mark in the top left corner of every single page on accreditedsecurity.com, and incorporation of Axon’s globe/bolt logo into that same page. It argued that LHB’s disclaimers were ineffective at curing confusion because of their placement alone—they appear in small font at the bottom of LHB’s website and are thus “buried and easy to miss.” However, the disclaimers were not ineffective as a matter of law. Whether LHB suggested affiliation was an issue of fact.

False advertising: As noted above, LHB made superiority claims for the model it sold; claims that its products were “factory refurbished,” “professionally refurbished,” “thoroughly tested,” “refurbished to the highest standard,” “completely refurbished,” “work like new,” and reprogrammed “with the latest software”; and affiliation statements that it is an “[a]uthorized TASER® [d]istributor” and “TASER® is a [t]rademark of the Mister Stungun.”

The product superiority claims failed. Although these statements weren’t puffery, but specific and measurable, they weren’t shown to be false either. Although LHB admitted it never tested that model against others, it relied on “two media articles, his personal opinions, stories from his customers, and unspecified google searches.”

But this wasn’t a “tests prove” case. [Did the statements inherently suggest the existence of scientific research backing them up? I might’ve gone the other way on this.] Thus, showing that reliable studies didn’t support the claims didn’t suffice to falsify them. Axon didn’t submit any evidence of falsity. The closest it got was an expert report stating that “Axon has established a 5-year useful life for its CEW products and strongly discourages ... use of CEWs beyond their 5-year useful life.” “But a manufacturer’s strong recommendation of a product’s useful lifespan does not show that the device cannot last for more than 20 years.”

Refurbishment quality: Axon argued that LHB’s Tasers cannot be “factory refurbished” because the process takes place only in its principal’s home or in the homes of his independent contractors; nor “professionally refurbished” because he has no degree or expertise in mechanical engineering; nor “thoroughly tested” because LHB does not run independent testing other than superficial inspection; nor “refurbished to the highest standard” because LHB identified no standards it was using; nor “completely refurbished” to “work like new” because Tasers are sonically welded together such that their internal components cannot be examined or replaced. And finally, while Axon agrees that LHB’s Tasers might be reprogrammed “with the latest software,” it argues that such a claim is misleading because the last X26E firmware update was in 2014 and LHB does not have access to the most recent updates for two of the other Taser models he sells.

LHB responded that each Taser “undergoes several aesthetic and functionality inspections” in which he “installs new batteries, new firmware, cleans any internal carbon build-up in the front cartridge, clears any error codes, and ensures each element of the [display] functions properly.” Its principal maintains a “designated space [that] LHB references as a ‘factory’ area to perform the refurbishment process.”

The court found that reasonable jurors could disagree about the “subjective” meanings of the claim. [Doesn’t that mean that evidence of consumer deception is required, in the absence of literal falsity?]

Affiliation statements: Everybody agrees that neither “[a]uthorized TASER® [d]istributor” nor “TASER® is a [t]rademark of the Mister Stungun” is true. But Axon still needs to show deception and materiality. Literal falsity leads to a presumption of materiality and deception, and “[n]othing in the record suggests that those presumptions should not apply here.” [This might be a good case for why there shouldn’t always be such a presumption, although I think it should still exist in many cases; neither “always” nor “never,” the more recent judicial trend, is ideal.]

But Axon wasn’t just seeking a permanent injunction; it sought compensatory damages, but pointed to no evidence of actual injury or damages from the false affiliation statements. It lost summary judgment on damages but won summary judgment as to injunctive relief.

Trial only on LHB’s refurbishing-quality statements.

Nevada deceptive trade practices: Similar results, but somewhat different remedies for the affiliation statements. LHB knew it was aware the distributor relationship was over well before Axon filed suit. Nevada’s law allows a court to require a liable party “to pay to the aggrieved party damages on all profits derived from the knowing and willful engagement in a deceptive trade practice and treble damages on all damages suffered by reason of” that practice. And its consumer-fraud statute requires a court to award a deceptive-trade-practices claimant “any damages that the claimant has sustained; any equitable relief that the court deems appropriate; and the claimant’s costs in the action and reasonable attorney’s fees.” Thus, Axon could recover damages and attorney’s fees but would have to prove the amount.

Then, surprisingly reversing the result on the product superiority statements in the Lanham Act context, the court says that although there’s no evidence of falsity, “Nevada law imposes liability for disparaging claims based on true-but-misleading statements,” so that would have to go to trial. But the Lanham Act also imposes liability for true-but-misleading statements; it just requires evidence that consumers were misled to do so—here, about the nature and quality of LHB’s supporting evidence. Having a different result on the state law claim is conceptually weird but does highlight that traditional common-law claims are more likely to be decided on vibes, whereas Lanham Act false advertising has adopted a technocratic, probabilistic structure that often demands survey or other empirical evidence.

The court also denied summary judgment on the ACPA claim, even though one of LHB’s websites listed its various Taser-related domains with a headline banner labeled “Domain Names for Sale.” The court agreed that bad faith could arise after registration of a domain name. Still, there were genuine disputes over bad faith because the prior distributorship, and current sales of refurbished Tasers, weighed against things like LHB’s offer to sell the domain names to Axon. Even redirecting four of the contested domains to porn sites didn’t sufficiently show intent to tarnish the Taser mark for summary judgment purposes.

Laches (I wondered!): Although Axon had knowledge of some of the contested domains since at least 1999, LHB didn’t fully analyze the laches standard or offer evidence that it suffered prejudice from delay. Summary judgment for LHB on laches denied.