Audi AG v. D'Amato

Citation
Audi AG v. D'Amato, 381 F.Supp.2d 644 (E.D. Mich. 2005) (full-text), aff’d, 469 F.3d 534 (6th Cir. 2006) (full-text); 2007 U.S. Dist. LEXIS 6357 (E.D. Mich. Jan. 30, 2007) (plaintiffs' request for attorney's fees).

Factual Background
Plaintiffs manufactured and sold cars under the registered trademarks AUDI and QUATTRO and its "Four Ring" logo. Defendant conducted business as "Quattro Enthusiasts" and maintained a website at "audisport.com," which targeted Audi enthusiasts. In 2002, defendant redesigned the site to display the Four Ring logo. In 2003, defendant's website offered for sale shirts and hats bearing the mark AUDI SPORT. Defendant also offered subscriptions to "audisport.com" e-mail addresses and offered to sell advertising on the website. Defendant's home page stated: "Who are we? We are a cooperative with Audi of America, and will be providing the latest products for your Audis and information on Audisport North America." Though defendant admitted it never received written permission to display the Audi trademarks, defendant claimed that he received "legally binding permission" from plaintiffs through emails with plaintiffs' Press Officer and with a salesperson at a Florida Audi dealership.

Trial Court Proceedings
Plaintiffs sued for trademark infringement, dilution, cybersquatting, trade dress infringement, false designation of origin, and false advertising. Defendant asserted defenses under the statute of limitations, laches, estoppel, acquiescence, and abandonment, all of which the court rejected. The court noted that there is no statute of limitations in the Lanham Act and rejected defendant's assertion that the Michigan statute of limitations should apply to the Lanham Act. Even applying Michigan's three-year statute-of-limitations period, plaintiffs timely filed suit within three years after defendant launched his website.

Moreover, the acquiescence and estoppel defenses had no merit because: (1) plaintiffs never authorized defendant to use the marks, (2) no written agreement existed between defendant and the Audi dealership, and (3) plaintiffs never granted the dealership the right to license the Audi trademarks.

In response to defendant's claim that plaintiffs abandoned the AUDI SPORT mark by canceling their trademark registration and not using the mark, the court held that plaintiffs' use of AUDI SPORT was "immaterial" because plaintiffs' claims were based on defendant's unauthorized use of the AUDI and QUATTRO trademarks in his business name "Quattro Enthusiasts" and the domain name "audisport.com."

The court then found that a likelihood of confusion existed and granted summary judgment on plaintiffs' infringement claims because the AUDI marks were "recognizable and widely known"; the parties' goods were in direct competition; the marks AUDI and AUDI SPORT were nearly identical, and "the addition of minor or generic words to the disputed domain names are irrelevant"; there was some evidence of actual confusion; the parties both used the Internet to sell their goods; the degree-of-purchaser-care factor weighed in plaintiffs' favor; and defendant's attempts to obtain authorization of the marks demonstrated that he knew that the website "audisport.com" implicated the AUDI marks and that he needed permission before using the marks.

The court rejected defendant's claim of permission, holding that neither Audi's Press Officer nor the dealer salesperson "agreed to create a legally binding contract for Defendant to use the Audi Trademarks through their emails" and, in any event, neither person had the authority to grant such a license.

Finally, defendant's false statement on his website that he possessed a "signed agreement allowing usage of Audi-owned tradenames" evidenced his intent to profit from the AUDI marks.

The court also granted summary judgment on plaintiffs' dilution claim, finding that plaintiffs' marks were famous and distinctive before defendant used them. As to the actual-dilution requirement, the court, relying on the U.S. Supreme Court's decision in Moseley v. V Secret Catalogue, held that direct evidence of dilution such as consumer surveys was not necessary when the parties' marks were identical as was the case here.

The court rejected defendant's argument that his website merely hyperlinked to hats and shirts and email services offered by the Florida dealership and thus created no liability for him. There was nothing on defendant's website indicating that the goods or services on the website "emanated" from the Audi dealership. Moreover, defendant's generation of revenue through advertising on his website exploited the goodwill of the Audi marks.

The court next held that defendant's registration and use of "audisport.com" violated the ACPA. Defendant's bad faith was established because he had no rights in the AUDI mark and never used it in connection with a bona fide, non-infringing offering of goods or services; he engaged in purely commercial activity and made no claims of fair use; he clearly intended to divert consumers from Audi's website; and the AUDI marks were famous and distinctive. And defendant could not avail himself of ACPA's safe-harbor provision because it was not reasonable for him to believe he could use the marks based on his emails with Audi's Press Officer and the dealer salesperson.

The court declined to award monetary damages to plaintiffs, finding that an injunction satisfied the equities of this case. The court permanently enjoined defendant from, among other things, making any unauthorized use of Audi's trademarks or trade dress; using any confusingly similar marks; doing anything that was likely to lead the trade or public to believe that any product or service made, distributed or sold by defendant was in any manner associated or connected with Audi or the Audi trademarks, or was sold, made, licensed, sponsored, approved, or authorized by Audi; and using the "audisport.com" domain name and any other confusingly similar domain names. The court also ordered defendant to disclose all other domain names directly or indirectly owned or registered by defendant, and to transfer to plaintiffs the domain name z'audisport.com" and any other confusingly similar domain names. Finally, the court awarded plaintiffs attorney’s fees, finding this to be an "exceptional" case based on defendant's willful conduct and his continued infringement.

Appellate Court Proceedings
On appeal, the Sixth Circuit affirmed the district court's decision that: defendant's use of the AUDI marks infringed plaintiffs' rights, laches did not bar plaintiffs' infringement claim, defendant's use diluted plaintiffs' marks, and defendant violated the ACPA, largely adopting the reasoning of the district court.

In particular, the appellate court rejected defendant's argument that any evidence of consumer confusion was "rebutted" by the disclaimer on his website, because the marks were identical and the disclaimer could be read by consumers only after arriving at defendant's website and thus was actionable initial-interest confusion.

It also rejected defendant's argument that merely having links to apparel and email hosting services offered by the dealer did not create liability because: his actions had a "commercial effect"; the URL "audiosport.com/Boutique.htm" would likely lead consumers to believe that the offered products were part of defendant's "audisport.com" website; and defendant offered to sell advertising on his site.

The Sixth Circuit also found that injunctive relief was warranted after applying the test recently articulated by the U.S. Supreme Court in Ebay v. MercExchange. Regarding the district court's award of attorney's fees, defendant argued that because the lower court declined to award monetary damages to plaintiffs, plaintiffs were not a "prevailing party" under the statute and thus could not recover attorney's fees. Though the Sixth Circuit acknowledged that it could decline to treat plaintiffs as a "prevailing party" when plaintiffs' success was "purely technical" or "de minimis," plaintiffs' success in this case was neither technical or de minimis because "injunctive relief is the remedy of choice for trademark and unfair competition cases." Finally, the court rejected defendant’s argument that he should not have to pay attorney's fees because he had changed the content of his website before Audi filed its complaint. Even accepting defendant's factual contention, the Sixth Circuit held that the district court did not abuse its discretion based on defendant's "bad faith use of counterfeit marks."

Subsequent Trial Court Proceedings
Pursuant to the district court's earlier order awarding attorney's fees, plaintiffs submitted a declaration of attorney's fees and costs seeking attorney's fees of $140,264.50 and costs of $10,960.45. Defendants opposed by claiming that plaintiffs' request was untimely under Federal Rule of Civil Procedure 54(2)(B) and that the fees were unreasonable. The court first held that Rule 54 does not apply when attorney's fees and costs are awarded under the substantive law of the action, such as a Lanham Act violation, and thus plaintiffs' request was timely under that law.

Second, the court upheld the attorney's fees because plaintiffs sufficiently "identified the attorneys responsible for the charges, their backgrounds, and the activities and amounts charged for each type of activity," and there was no evidence that their rates were unreasonable. The court awarded attorney's fees of $139,264.50, the full amount requested by plaintiffs minus $1,000 for sanctions already paid by defendants. However, because plaintiffs failed to distinguish the amount of those costs allowable under 28 U.S.C. §1290 from those which were not, the court denied plaintiffs' request for costs, except for specific travel costs of plaintiffs' counsel of $698.39 defendants agreed to pay as a condition to submitting further briefing and evidence on plaintiffs' summary judgment motion.

Source
This page uses content from Finnegan’s Internet Trademark Case Summaries. This entry is available under the Creative Commons Attribution-Share Alike License 3.0 (Unported) (CC-BY-SA).