Toyota Cannot Prevent Use of Lexus In Auto Brokers’ Domain Names

Toyota’s attempt to prevent two auto brokers from using “Lexus” as part of their domain name has come to a screeching halt at the Ninth Circuit Court of Appeals.

The court ruled that an injunction against the auto brokers was too broad because it prohibited the brokers from using the term “Lexus” in its domain name when in fact the auto broker solicited bids and arranged for customers to buy Lexus cars from authorized dealers. The use of Lexus in the domain name was “nominative fair use,” the court found.The auto brokers—Farzad and Lisa Tabari—registered and used the domain names buy-a-lexus.com and buyorleaselexus.com. The brokers contacted authorized Lexus dealers to arrange deals for customers. Toyota, the owner of the Lexus brand, contended the use of Lexus in the domain name infringed its trademark. The Tabaris represented themselves pro se.

“When customers purchase a Lexus through the Tabaris, they receive a genuine Lexus car sold by an authorized Lexus dealer, and a portion of the proceeds ends up in Toyota’s bank account,” the court wrote. “Toyota is using this trademark lawsuit to make it more difficult for consumers to use the Tabaris to buy a Lexus.”

The trial court had granted Toyota’s request for an injunction to prevent the Tabaris from using the term “Lexus” in any domain name. This, the appellate court said, was too broad. “The Tabaris are prohibited from doing business at sites like independent-lexus-broker.com and we-are-definitely-not-lexus.com, although a reasonable consumer wouldn’t believe Toyota sponsors the websites using those domains. Prohibition of such truthful and non-misleading speech does not advance the Lanham Act’s purpose of protecting consumers and preventing unfair competition; in fact, it undermines that rationale by frustrating honest communication between the Tabaris and their customers.”

Under nominative fair use, a party has the right to use a trademark of another if the product is not readily identifiable without the mark, if the party uses the mark only as necessary, and if there is no suggestion that the owner sponsors or endorses the use.

The appellate court observed that “customers who use the internet for shopping are generally quite sophisticated about such matters and wouldn’t be fooled” by the use of the term “lexus” in the Tabaris’ domain name. “When a domain name making nominative use of a mark does not actively suggest sponsorship or endorsement, the worst that can happen is that some consumers may arrive at the site uncertain as to what they will find. But in the age of FIOS, cable modems, DSL and T1 lines, reasonable, prudent and experienced internet consumers are accustomed to such exploration by trial and error.”

“One way or the other, the Tabaris need to let consumers know that they are brokers of Lexus cars, and that’s nearly impossible to do without mentioning Lexus, be it by domain name, metatag, radio jingle, telephone solicitation or blimp.”

Toyota Motor Sales, U.S.A. v Farzad Tabari and Lisa Tabari, Ninth Circuit No. 07-55344, filed July 8, 2010.