Levi Strauss’s Trademark and Domain Name Claims May Block Unauthorized Resales — Levi Strauss v. Papikian

[Post by Venkat Balasubramani]

Levi Strauss & Co v. Papikian Enterprises, C 10-05051 JSW (N.D. Cal.; Aug. 24, 2011) [pdf]

Facts: Levi Strauss owns trademarks for “Levi’s,” “501” and other terms. It sells its products directly and to authorized retailers but does not sell through “distributors, wholesalers or jobbers.” Retailers are contractually restricted from reselling “first quality merchandise.” Papikian registered several domain names (501USA.com, 550jeans.com, 517jeans.com) through which he offered Levi Strauss products for sale. Levi Strauss grumbled about his use of various Levi Strauss trademarks and how Papikian sold goods to EU residents. The parties engaged in settlement discussions which were not fruitful, and ultimately Levi Strauss brought suit, alleging trademark and cybersquatting claims. Levi Strauss alleged that in response to some of Levi Strauss’s complaints, Papikian made some changes to his website, but at some point along the way, these changes reverted, and Papikian’s website “looked more professional, offered [Levi Strauss] products exclusively, and make more extensive use of [Levi Strauss] trademarks.”

Papikian brought a motion for summary judgment, which the court denies.

Discussion:

First sale defense: Papikian argued that his sales of Levi Strauss products was protected under the first sale doctrine. Similar to the first sale doctrine in copyright, courts have held that “the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product.” (One big difference is that unlike copyright law, trademark law does not allow trademark owners to control importation of trademarked goods, other than counterfeits.) However, resellers who wish to take advantage of the first sale rule have to carefully tread the line between a retailer merely carrying/selling the goods and “suggesting affiliation” with the trademark owner. While the court doesn’t describe the actual evidence put forth by Levi Strauss, it finds that Levi Strauss put forth sufficient evidence to create a factual question on the issue of whether Papikian crossed the line.

Nominative fair use: Papikian argued that his use of Levi Strauss trademarks was protected under the nominative fair use defense. Once a defendant shows that it is using the trademark to refer to the trademarked good, the burden shifts to the plaintiff to show a likelihood of confusion. The court finds that Levi Strauss sufficiently created a factual dispute on this point; again, the court looks to the changes to Papikian’s website and the fact that it had disclaimers at one point but no longer does. The court also cited to Toyota Motor Sports v. Tabari and noted that Papkian’s domain names were the types of domain names that the Ninth Circuit hinted could suggest sponsorship or endorsement.

Cybersquatting: The court also denies Papikian’s request for summary judgment on Levi Strauss’s ACPA claim. The court says that there are “material facts in dispute with regard to Papikian’s intent.” The court notes that Papikian’s fair use defense remains unresolved. Additionally, Levi Strauss presented evidence of an adverse WIPO decision against Papikian. The order does not contain any discussion of the ACPA’s safe harbor provision, which protects registrants who “believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.”

European law: The order thus far has been bad news for Papikian, but there is one ray of light. Levi Strauss asserted claims under EU trademark law against Papikian. It argued that Papikian’s importation of products into the EU without Levi Strauss’s consent violated “Articles 5 and 7 of the First Council Directive 89/104/EEC of 21 December 1988, to approximate the laws of the Member States relating to trademarks, as amended by the Agreement on the European Union of 2 May 1992.” The court declines to exercise jurisdiction over this claim out of comity. The relevant treaties provide for the “independence” of various member countries, and having tribunals in one country adjudicate the rights under the trademarks of another country would undermine the “spirit of cooperation” that underlies the comity doctrine. The court says that while it declines to exercise supplemental jurisdiction over Levi Strauss’s claims in this case, this does not mean that it would decline supplemental jurisdiction “over every case involving foreign trademarks.”

[The court also rejects Papikian's request for summary judgment on the dilution claims, finding that Papikian failed to demonstrate the absence of factual disputes with respect to these claims.]

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The court’s refusal to entertain Levi Strauss’s claims under EU law is noteworthy. Allowing it to proceed with those claims would allow Levi Strauss to enforce an importation ban into the EU based on EU trademark law, something that it clearly could not do under US trademark law. The court did not discuss it in those terms, but it would be an end run around the fact that trademark law does not permit the trademark owner to control exportation or importation to allow the trademark owner to enforce a foreign ban on importation without consent. It would have also sharply limited the first sale defense.

Once the EU claims are taken out of the picture, you’re left with claims by a trademark owner against a re-seller, who is legitimately selling the trademark owner’s goods. The re-seller should have some amount of leeway to use the trademark owner’s mark in order to refer to the trademarked goods and in the re-seller’s domain name, but the court’s order doesn’t cut the re-seller much slack. The repeated tweaks to Papikian’s site, along with the removal of the disclaimer and Levi Strauss’s vague allegations that Papikian used more than Levi Strauss’s marks than was necessary, is enough to get past summary judgment. As prior posts demonstrate, courts readily seem to find a hook to deny summary judgment to a reseller-defendant who raises first sale and nominative fair use defenses. (See “eBay Resales Constitute Trademark Infringement Despite First Sale Doctrine–Beltronics v. Midwest” (alleged warranty misstatements);”Online Resale of Expired Cosmetics May Be Trademark Infringement–Mary Kay v. Weber” (“expired” cosmetics that plaintiff argued were materially different)). One takeaway here is that trademark first sale and nominative fair use defenses remain murky and fact-specific.

Previous related posts:

eBay Resales Constitute Trademark Infringement Despite First Sale Doctrine–Beltronics v. Midwest

Online Resale of Expired Cosmetics May Be Trademark Infringement–Mary Kay v. Weber

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