Nissan Motor v. Nissan Computer

Citation: Nissan Motor Co. v. Nissan Computer Corp., 89 F. Supp. 2d 1154 (C.D. Cal. 2000), aff’d, 246 F.3d 675 (9th Cir. 2000); 204 F.R.D. 460 (C.D. Cal. 2001) (defendant's motion for leave to add counterclaims denied); 2002 U.S. Dist. LEXIS 6365 (C.D. Cal. Jan. 8, 2002) (plaintiff's motion for partial summary judgment granted); 61 U.S.P.Q.2d (BNA) 183 (C.D. Cal. 2002) (defendant's motion for partial summary judgment granted); 231 F. Supp. 2d 977 (C.D. Cal. 2002) (plaintiff's motion for permanent injunction granted), ‘’aff'd in part, rev'd in part,’’ 378 F.3d 1002 (9th Cir. 2004).

Factual Background
Uzi Nissan had used his surname "Nissan" as a trade name for various businesses since 1980. In 1991, he incorporated defendant Nissan Computer Corporation. Defendant registered the domain name "nissan.com" in 1994 and "nissan.net" in 1996, and used both names for websites offering computer-related services. In 1995, plaintiff Nissan Motor Co. sent defendant a letter expressing its concern about defendant's use of the word "Nissan" in its domain name but apparently took no further action at that time. In August 1999, defendant modified its website to include a "Nissan Computer" logo that was allegedly confusingly similar to plaintiff's logo and also included numerous banner advertisements linking to various automobile-related websites.

The parties met in October 1999 to discuss a possible transfer of the "nissan.com" domain name, but the discussions broke down when plaintiff refused to buy the domain names for several million dollars.

Trial Court Proceedings
Plaintiff filed suit on December 10, 1999, asserting various claims. After the court denied plaintiff's motion for a temporary restraining order, plaintiff sought a preliminary injunction to enjoin defendant from displaying advertisements and links on its websites and to require defendant to display a disclaimer and link to plaintiff's website or, alternatively, to enjoin defendant from using the domain names pending resolution of the trial.

The court held that defendant's domain names infringed plaintiff's federally registered NISSAN mark, finding that (1) although NISSAN was a Hebrew and Arabic surname and word, it had acquired secondary meaning and was a strong mark; (2) the marks were essentially identical; (3) the goods and services were similar to the extent defendant posted automobile-related links and advertising on its sites; (4) both parties used the Internet as a marketing and advertising channel; (5) plaintiff provided examples of actual confusion and strong evidence of "initial interest confusion" in the form of a survey; and (6) although defendant did not initially register the domain names to confuse consumers, an intent to confuse could be inferred from defendant's later inclusion of automobile-related information and a confusingly similar logo.

Although the court entered a preliminary injunction, it determined that the likelihood of confusion "may be mitigated by less restrictive measures than proposed by plaintiffs." Specifically, the court required defendant to prominently display in the upper portion of the first page of its websites: (1) a statement identifying the websites as affiliated with "Nissan Computer Corporation," and (2) a statement disclaiming affiliation with plaintiff and identifying the location of plaintiff's website (although a direct link to plaintiff's site was not required).

Defendant was also enjoined from displaying on its sites any automobile-related information, advertising, or links, including links to automobile-related portions of Internet search engines. The court expressly permitted defendant to continue conducting and advertising its own computer business under the NISSAN mark, to continue using the word "Nissan" as a metatag, and to display non-automobile-related third-party ads and links on its websites.

Appellate Court Proceedings
In an unpublished decision, the Ninth Circuit affirmed the district court's grant of a preliminary injunction as plaintiff demonstrated a likelihood of success on its trademark infringement claim. The court noted that defendant "clearly altered its website so as to capitalize on the 'initial interest confusion' of consumers who visited the websites looking for plaintiff's products." And the district court "narrowly tailored" the injunction to prevent defendant from further capitalizing on initial interest confusion by diverting users to advertisers offering competing products.

Subsequent Trial Court Proceedings
In March 2000, defendant posted a link on its sites titled "Nissan Motor's Lawsuit Against Nissan Computer," which directed users to the site "ncchelp.org." The new site contained a banner stating "We Are Being Sued!!!" and links to defendant's "story" and "news" about the suit and media reports in addition to auto-related advertisements. Defendant owned and operated this site through an alter ego, The Internet Center. The district court held that defendant intended to confuse consumers by altering its website to contain auto-related content but granted defendant's motion for summary judgment on non-automobile-related use of the website.

Nissan Motor later sought leave to amend its answer to assert counterclaim s based on state law for interference with prospective economic advantage, unfair competition/unfair trade practices, unjust enrichment/constructive trust, accounting, violation of right of publicity in name, and false advertising. These proposed counterclaim s were all based on allegations that Nissan Motor purchased "nissan" and "nissan.com" as Internet search terms from various search-engine operators which, when entered into the search engines, took the user to plaintiff's websites instead of defendant's "nissan.com" website.

For example, a search for "nissan.com" on the GoTo.com search engine yielded a list of sites including defendant's. However, at the top of the results page the following text appeared "Quick Hit Result: The Official site for nissan.com," which when clicked on linked the user to plaintiff's website. Nissan Company argued that these actions would lead users to "believe that Nissan Computer is no longer in business and, as a result, Nissan Computer will lose its customers and suffer irreparable damage to its goodwill."

The court denied defendant's motion to leave, agreeing with plaintiff's argument that its purchase of the "nissan" and "nissan.com" search terms was lawful because of its rights to the NISSAN trademark under federal trademark law. In short, defendant's registration of the domain names "nissan.com" and "nissan.net" did not "trump" plaintiff's use of its NISSAN mark on the Internet or anywhere else. The court did not rule out the possibility that one could infringe or dilute another's mark by purchasing a search term to manipulate a search engine's results list like one could do with using another's mark in metatags. But this was not such a case because plaintiff could not infringe or dilute its own mark. This analysis applied equally to both "nissan" and "nissan.com" as search terms even though plaintiff did not own the "nissan.com" domain name, because the ".com" portion of the domain name did not indicate source but rather merely described the commercial nature of the enterprise registering the domain name.

After the court indicated at oral argument its intention to reach this result, Nissan Computer eventually conceded that it could not stop Nissan Motor from purchasing "nissan" as a search term because of its rights to the NISSAN mark but maintained its position as to the domain name "nissan.com" to prevent others from attempting to divert or confuse its customers. According to the court, however, Nissan Computer’s argument defied logic because a consumer looking for Nissan Computer’s website and who enters "nissan.com" into a search engine already knows the location of defendant's website (i.e., "nissan.com"). "Typing 'nissan.com' into a search engine to obtain the domain name for 'nissan.com' is as pointless, as the plaintiffs correctly point out, 'as telephoning a business and asking for its telephone number.'"

In January 2002, the court granted both plaintiff's and defendant's motions for partial summary judgment, dismissing three of defendant's claims alleging fraud by plaintiff in registering its trademarks and plaintiff's ACPA claim. The court dismissed defendant's claim that plaintiff made a misrepresentation to the USPTO when it filed an application to register the NISSAN mark in 1998 for computer software related to automotive products and repair, notwithstanding its knowledge of defendant's prior use of NISSAN in the software field. Defendant's assertion of rights to use of the NISSAN mark in the computer field, however, was too broad. The court held that defendant's use of NISSAN was in a limited market segment and did not extend to automotive diagnostic software.

In granting defendant's motion for summary judgment on plaintiff's ACPA claim, it found that the majority of the bad-faith intent factors favored defendant. Specifically, defendant registered domain names that incorporated part of his preexisting service mark and business name; "Nissan" was the surname of the owner of the defendant; defendant had no pattern of registering domain names containing others' trademarks; and defendant had been using the domain names in its computer business since 1994. Plaintiff's arguments to the contrary did not establish otherwise. First, although the court had earlier found that defendant had infringed plaintiff's trademark rights regarding auto-related products and services, that finding did not establish that defendant had the bad-faith intent to profit from plaintiff's mark, as required under the ACPA.

Second, defendant's registration of "nissan.com/.net" instead of "nissancomputer.com/.net" did not establish the requisite bad-faith intent to profit. This case was distinguishable from ‘’Virtual Works’’, where the defendant registered "vw.net" instead of "vwi.net" or "vwi.org" that corresponded to its full business name "Virtual Works Inc." Unlike this case, the defendants in ‘’Virtual Works’’ registered the "vw.net" name knowing that it might be confused with Volkswagen and that they had hoped to sell the name to Volkswagen for a lot of money.

Third, even though defendant may have intended to divert traffic from plaintiff's website, it did not create the requisite likelihood of confusion between the sites. Finally, even though defendant offered to sell the "nissan.com" name to plaintiff for fifteen million dollars, that offer did not run afoul of the ACPA because it "requires that the offer to sell be made without having used the domain name in the bona fide offering of any goods or services." Here, defendant had used the name in its computer business for over four years.

In November 2002, the court ruled on plaintiff's motion for a permanent injunction and transfer of the "nissan.com" and "nissan.net" domain names. Although the court refused to order transfer of the names, it did enjoin defendant from: (1) posting commercial content at "nissan.com" and "nissan.net;" (2) posting advertising (and permitting advertising to be posted by third parties) at "nissan.com" and "nissan.net;" (3) posting disparaging remarks or negative commentary regarding plaintiff at "nissan.com" and "nissan.net;" (4) placing, on "nissan.com" or "nissan.net," links to other websites containing commercial content, including advertising; and (5) placing, on "nissan.com" or "nissan.net," links to other websites containing disparaging remarks or negative commentary regarding plaintiff.

The court rejected defendant's argument that an injunction would be an impermissible retroactive application of the FTDA because that Act specifically authorizes prospective relief. Defendant also argued that an injunction prohibiting all use of the domain names would be overbroad and violate its First Amendment rights. The court agreed, noting that noncommercial speech is specifically exempted from the FTDA. For example, the court questioned "how there is anything commercial about the defendants using nissan.com to post, for instance, family photographs." Accordingly, the court held that defendants could continue to use the domain names for "noncommercial purposes." But the court concluded, however, that disparaging remarks or negative commentary about plaintiff at sites using the domain names would be "sufficiently commercial to bring the defendants' use of the domain names within the scope of the FTDA. . . ."

Although use of a mark to criticize a company is not inherently commercial speech when the mark is used as part of a name that conveys its critical nature (e.g., "fuckgeneralmotors" and "ballysucks"), the mark itself is also the domain name in this case. The negative commentary would exploit the goodwill built up by plaintiff in the NISSAN mark in order to harm plaintiff, thus transforming the use into a commercial one. The court noted that defendant was free to post critical commentary on other websites as they had already done at "ncchelp.org." Finally, after weighing the equities of the case, the court decided that defendant should retain ownership of the domain names, primarily because they consisted of the surname of defendant's owner and defendant did not have a pattern of cybersquatting.

Subsequent Appellate Court Proceedings
The parties cross-appealed. Defendant appealed, among other things, the adverse determinations on laches, dilution, and retroactivity of the FTDA as well as the scope of the permanent injunction. Plaintiff sought a broadening of the injunction and transfer of the domain names "nissan.com" and "nissan.net" in exchange for the fair value of defendant's investment in them.

Regarding dilution, the court first addressed the preliminary issues of laches and retroactivity. The appeals court did not need to resolve the parties' arguments regarding the applicable statute of limitations for laches, however, because the district court did not abuse its discretion in finding that defendant was not prejudiced by plaintiff's delay in bringing suit.

The Ninth Circuit joined three other circuits in holding that application of the FTDA was not retroactive because it authorized only prospective relief. The court next addressed the issue of when the fame of plaintiff's mark should be measured for purposes of assessing plaintiff's dilution claim. Plaintiff argued that fame should be measured from defendant's first "objectionable" use of NISSAN, i.e., use of "Nissan" by itself in 1994 in the domain names. Relying on the anti-dissection rule used in analyzing likelihood of confusion, plaintiff argued that "Nissan" by itself was a different commercial use in commerce of the NISSAN mark than was the earlier-used name "Nissan Computer Corp." Defendant argued that fame should be measured from its first actual use of the NISSAN mark, i.e., no later than 1991 when Nissan Computer Corp. was incorporated.

The court analyzed the language of Section 43(c), which states in pertinent part that "The owner of a famous mark shall be entitled . . . to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous . . . ." (emphasis added.) The court agreed with the Federal Circuit that the wording "such use" referred to any use of the mark in commerce and not to the particular use challenged in the litigation. Otherwise, "owners of famous marks would have the authority to decide when an allegedly diluting use was objectionable, regardless of when the party accused of diluting first began to use the mark." The court thus held that "any commercial use of a famous mark in commerce is arguably a diluting use that fixes the time by which famousness is to be measured."

Here, the court held that defendant's use of "Nissan" in the Nissan Computer Corp. name in 1991 was the date to measure the fame of the NISSAN mark. Turning to the merits of the dilution claim, the court found triable issues of material fact as to the fame of plaintiff's NISSAN mark in 1991, noting questions about plaintiff's survey evidence; that "Nissan" is a common Jewish/Israeli last name, a biblical term, and an Arabic word for April; that "Nissan" is part of the trade name of over 190 unrelated U.S. businesses; and that thousands of domain names contain the word "nissan." The court thus reversed the finding of dilution and remanded the case to the district court to determine fame as of 1991 and whether there has been "actual dilution" under ‘‘Moseley’’.

The Ninth Circuit next addressed whether the links on defendant's sites to other sites with disparaging remarks about plaintiff were non-commercial protected speech and therefore non-diluting under the FTDA. The court disagreed with plaintiff's contention that the First Amendment was implicated only when a trademark was used as part of a communicative message (e.g., nissansucks.com), not as a source identifier such as defendant's "nissan.com" and "nissan.net" domain names. The court noted, however, that the lower court's injunction did not bar use of the "nissan.com" domain name, but rather enjoined only specific content on the "nissan.com" website. The injunction thus controlled the communicative message, not the source identifier, and implicated the First Amendment.

As a "content-based" restriction, it was presumptively invalid and not subject to a "time, place, and manner" analysis. It was thus irrelevant that defendant had alternative locations on the Internet on which it could post negative commentary about plaintiff (e.g., the "ncchelp.org" website).

Plaintiff also argued that defendant's negative commentary was commercial because it had an effect on plaintiff's commerce, relying on ‘’Jews for Jesus.’’ The court declined, however, to adopt an "effect on commerce" test. It instead relied on a Fourth Circuit case, ‘’CPC Int'l v. Skippy, Inc.,’’ which stated that "trademarks [should] not be transformed from rights against unfair competition to rights to control language." The Ninth Circuit concluded that the permanent injunction violated the First Amendment to the extent it prevented defendant from placing links to sites with negative commentary.

Regarding trademark infringement, the Ninth Circuit agreed with the district court that plaintiff was entitled to summary judgment regarding defendant's use of "nissan.com" to post links to automobile-related websites because it capitalized on consumers' initial interest. The court also agreed with the district court that defendant was entitled to summary judgment as to non-auto-related ads. Finally, the appeals court held that the lower court did not abuse its discretion when it refused to order the transfer of defendants' domain names to plaintiff. However, because the injunction was based only on the dilution claim, the court noted that if plaintiff wanted to request broader relief based on trademark infringement through initial interest confusion, it would need to do so with the district court.

This page uses content from Finnegan’s [[Internet] trademark Case Summaries]. This entry is available under the GNU Free Documentation License.