NY District Court Sides with Audi in Infringement Suit Against Car Recycling Company

Holding:

The U.S. District Court for the Northern District of New York has ruled that Shokan Coachworks, Inc., ("Shokan"), an Audi vehicle recycling facility, infringed the "Audi" marks and logo of plaintiff Audi AG ("Audi"). Considering the strength of the "AUDI" mark, that defendants’ use was identical to Audi’s mark, and that the parties were in competitive proximity, the district court found as a matter of law that Shokan’s use of the email signature block, “Shokan Audi Parts” created a likelihood of consumer confusion. Accordingly, the district court granted Audi's motion for summary judgment with regard to Audi's trademark infringement claim over Shiokan's signature block, “Shokan Audi Parts.” On the other hand, because questions of fact remained regarding the length of time the Audi logo appeared on Shokan's website, as well as Shokan’s knowledge regarding same, the district court held that it could not decide as a matter of law that the logo’s existence on the website created a likelihood of consumer confusion, or that defendants acted in bad faith in placing the Logo on the website. Hence, the district court granted-in-part and denied-in-part Audi's motion for summary judgment on its trademark infringement claims.

Detailed Summary:

Presented before the district court in this trademark infringement action were cross motions for summary judgment by plaintiffs Audi and Volkswagen of America, Inc. (“Volkswagen”) (collectively “plaintiffs”) and by defendants Shokan and John H. Smith (“Smith”) (collectively “defendants”). Opinion, p. 1.

By way of background, plaintiffs’ complaint involved defendants’ alleged improper use of certain of plaintiffs’ registered trademarks, including the name “AUDI” as well as the “AUDI RING” logo. (“the Audi Marks”). Among others, plaintiffs’ in this action were (1) trademark and trade dress dilution in violation of Section 43 of the Lanham Act, 15 U.S.C. § 1125(c), and (2) federal trademark infringement in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114.

Plaintiff Audi is a German corporation that sells its vehicles, parts, services and other products throughout the world. Plaintiff Volkswagen is an American corporation, which is the exclusive licensee for the sale of Audi vehicles, parts, services and products in the United States. Defendant Shokan is a New York Corporation whose only facility is located in West Shokan, New York.  Defendant John Smith is the President and sole owner of defendant Shokan. Shokan is an Audi vehicle recycling facility, which has been in operation for over twenty five years, and only sells parts for Audi vehicles.

Defendants raised the defense of nominative fair use, arguing that that they only use the Audi Marks to fairly and accurately describe the Audi parts they sell. However, the district court rejected such defense, stating that defendants have failed to sufficiently explain how any of the remaining alleged incidents of infringement are appropriately deemed nominative fair use of Plaintiffs’ marks.

To summarize,  the alleged incidents of infringement were (1) defendants’ use of the “AUDI RING” logo on their website; (2) Defendants’ use of the “AUDI RING” logo as a sign or sticker on a door at their business premises; (3) Defendants’ use of the “AUDI” mark by answering their business telephone, “all Audi”; (4) defendants’ use of the ” “AUDI” mark in their email signature block, “Shokan Audi Parts”; (5) defendants’ use of the “AUDI” mark in their email address, allaudi.shokan@verizon.net; and (6) defendants’ use of the “AUDI” mark in the phrase, “Audi Parts Warehouse” as a sign or sticker on a door at their business premises.

In New Kids on the Block v. News America Publishing Incorporated, 971 F.2d 302 (9th Cir.1992), the court found nominative fair use to exist because, among other things, there was nothing to suggest the plaintiff sponsored defendant’s use of the mark.

Here, each of the alleged infringing uses could imply sponsorship by plaintiffs or defendants. Accordingly, the district court held that defendants could not avoid a finding of liability on plaintiffs’ infringement claims based on a nominative fair use defense.

The district court next held that plaintiffs have established the validity of the “AUDI"and “AUDI RING” logo trademarks as a matter of law. According to the district court, defendants incorrectly contended that proof of ownership of a trademark must be certified, citing case law which merely supports the proposition that trademarks may be authenticated because they are certified, not that certification is required. Id., p. 34, citing Nabisco v. Warner-Lambert Co., 32 F.Supp.2d 690, 695 (S.D.N.Y. 1999).

In addition, the district court found likelihood of confusion, weighing the factors set forth in Polaroid Corporation v. Polarad Electronics Corporation, 287 F.2d 492, 495 (2d Cir. 1961).  These factors are: (1) strength of the plaintiff’s mark; (2) similarity of the parties’ marks; (3) proximity of the parties’ products in the marketplace; (4) likelihood that the plaintiff will bridge the gap between the products (enter a market related to that in which the defendant sells its product); (5) evidence of actual confusion between the two marks; (6) the defendant’s bad faith (intent in adopting the mark); (7) quality of the defendant’s product; and (8) sophistication of the relevant consumer group.

The district court found that the majority of these factors, such as the strength of plaintiffs’ marks and similarity of the parties’ marks, weighed in plaintiffs’ favor.

Specifically,  the district court found no questions of fact existed regarding defendants’ use of the “AUDI” mark through the email signature block, “Shokan Audi Parts.” Defendants’ attempt to dispute Plaintiffs’ allegation that same appeared on 38,000 messages produced during discovery should fail by reason of Smith’s admission that a sampling of those emails were a true and accurate representation of messages sent by Shokan.

Considering the strength of the “AUDI” mark, that defendants’ use was identical to plaintiffs’ mark, and that the parties were in competitive proximity, the district court found as a matter of law that defendants’ use of the email signature block, “Shokan Audi Parts” created a likelihood of consumer confusion. Accordingly, plaintiffs’ motion for summary judgment was granted and defendants’ motion for summary judgment was denied, regarding plaintiffs’ trademark infringement claim as it related to the signature block, “Shokan Audi Parts.”

On the other hand, because questions of fact remained regarding the length of time the logo appeared on the website, as well as defendants’ knowledge regarding same, the district court held that it could not decide as a matter of law that the logo’s existence on the website created a likelihood of consumer confusion, or that defendants acted in bad faith in placing the Logo on the website.

Likewise , because plaintiffs failed to discharge their burden of proving the elements of their trademark infringement claim as it related to defendants’ use of the email address, allaudi.shokan@verizon.net, defendants’ motion for summary judgment was granted, and plaintiffs’ motion for summary judgment is denied, in this regard.

Regarding plaintiffs’ trademark dilution claim over defendant’s use of the Audio ring logo on their website, the district court granted plaintiffs’ motion for summary judgment. The district court held that while questions remained regarding the issue of bad faith, that absence should not preclude a finding of likelihood of confusion.  It was undisputed that the logo did appear on defendants’ website.

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