Wednesday, September 06, 2023

gray marketer's counterclaims against Toyota survive, but it still must defend itself

One case, two opinions.

Toyota Motor Sales, U.S.A., Inc. v. Allen Interchange LLC, 2023 WL 5206884, No. 22-cv-1681 (KMM/JFD) (D. Minn. Aug. 14, 2023)

This opinion deals only with Allen’s counterclaims. Allen distributes Toyota replacement parts, manufactured by authorized suppliers around the world.  According to Allen, Toyota USA “sells Toyota Parts in the United States at prices substantially higher than those charged by Toyota in other places.” The Toyota parts sold by Allen Interchange and Toyota bear the same part number, and according to Allen Interchange, are identical in design, function, and quality. Toyota USA sued Allen for grey marketing in violation of the Lanham Act and related claims, asserting that material differences included the existence of a manufacturer-backed warranty, the shipping and packaging of the parts, and the appearance and condition of the parts.

Allen counterclaimed for antitrust and related unfair competition/tortious interference claims. The court declined to dismiss the counterclaims.

Lanham Act false advertising: Allen alleged that Toyota’s statements that “[t]he purchase ... of unauthorized, gray market parts within [Toyota USA’s] PMA [Primary Market Area], or anywhere, is ... a breach of your dealer agreement” constituted false advertising because the agreement in fact allows for purchases of Toyota parts from other sources, including for non-warranty repairs. The counterclaim also alleged false/misleading use of the term “Genuine Toyota Parts”; statements about safety of “gray market parts” even though they are made by Toyota entities; and misleading assertions about Allen Interchange’s products in flyers depicting a pallet with Toyota parts recognizable as an Allen Interchange shipment.

Toyota argued that its statements were literally true, but literally true claims can mislead—a classic question of fact. Plus, statements about commercial activities are actionable and Allen adequately alleged falsity. 

Toyota Motor Sales, U.S.A., Inc. v. Allen Interchange LLC, 2023 WL 5207389, No. 22-cv-1681 (KMM/JFD) (D. Minn. Aug. 14, 2023)

This is the trademark side of the case. The court denied Allen’s motion for joinder of Toyota Japan and allowed key claims to proceed.

This case is one of several that makes me think that a coherent version of trademark could emerge from cases like Abitron and Lexmark: registered trademarks get special treatment, even including (though I think it’s a bad idea) not having a harm requirement as an element of the cause of action, whereas unregistered/§43(a) claims need to show harm. This isn’t directly implicated by the case, but the reasons we might have different treatment are.

In particular, Toyota USA doesn’t own the Toyota marks; it is a licensee. This was a matter of statutory standing, not Article III standing.

First, the dilution claims require an “owner” of a famous mark to bring suit. Thus, they were dismissed. While some cases have allowed an exclusive licensee to do bring a dilution claim, Toyota USA didn’t plead that it was the exclusive licensee and acknowledged in its briefing that it wasn’t. Being an exclusive authorized importer and distributor was not enough, because an “exclusive licensee” is the sole entity with an interest in a trademark, while an “exclusive importer and distributor” could be one of multiple entities with such an interest.

Anyway, even if Toyota USA could be considered an exclusive licensee, the relevant cases covered only §43(a)(1)(A), not §43(c), which explicitly uses the term “owner” when identifying who may bring suit, whereas § 43(a) uses the broader language of “any person.” Minnesota’s trademark statute also said that “[t]he owner of a mark that is famous in this state may” seek an injunction in the event of trademark dilution. Likewise, “[o]nly the owner of the trademark has standing to seek relief for common law trademark infringement.”

Allen is definitely not out of the woods, because §43(a)(1)(A) is still available, but that should matter to the burden Toyota USA faces, including the Court’s language in Lexmark about proof of harm, which is not limited to false advertising.

No comments:

Post a Comment