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April 02, 2012
Brief Brand Reference in TV Ad Constitutes Trademark Dilution--Louis Vuitton v. Hyundai
By Eric Goldman
Louis Vuitton Malletier, S.A. v. Hyundai Motor America, 2012 WL 1022247 (S.D.N.Y., March 22, 2012). The ad in question (also embedded below). The first amended complaint.
Back in 2007, we held a major academic symposium on the trademark dilution doctrine at SCU. My main goal was to see if two dozen leading trademark academics could find some justification--ANY justification--for the trademark dilution doctrine. We struck out, of course. The trademark dilution doctrine is an elegant intellectual exercise with intuitive appeal, but it has the fatal flaw that absolutely no social science supports that intuition.
Fortunately, we don't see too many egregious trademark dilution "wins" in court. Barton Beebe showed that trademark dilution and infringement are highly correlated, so it's rare that a court finds trademark dilution standing alone. Furthermore, we've recently had a pretty good string of defense wins in dilution cases, highlighted by the Chewy Vuiton (also a Louis Vuitton case) and Charbucks rulings, among others.
And then we have an opinion like this--where the court finds trademark dilution without finding infringement (not resolved yet) and in a situation where EVERYONE can immediately tell there was zero harm to the brand owner. Rulings like this make trademark academics shudder in fear that trademark dilution will swallow up all of trademark law and confer rights-in-gross to trademark owners. While I don't share those fears for reasons I'll explain in a bit, unquestionably this is a bad ruling.
The case involves a TV ad for Hyundai Sonata. Watch the ad:
Hyundai's goal was to show that it brings luxury to the masses, so it depicts a few fictional examples of what it might look like if luxury items were widely available. One of the examples shows four seconds of a group of men playing street basketball using a basketball covered with a lightly modified version of the famous Louis Vuitton "toile monogram" pattern (yes, the same one at issue with Louis Vuitton's ill-advised enforcement against a student-organized fashion law event at University of Pennsylvania). In particular, the ad shows a close-up of the basketball for about one second. Hyundai didn't seek permission from Louis Vuitton for use of the modified design (an ad agency rep said the modified design "came out of somebody's imagination, so there was nobody to go seek permission from"), but Hyundai unsuccessfully sought permission from thirteen luxury brands--including Louis Vuitton--for other possible vignettes in the ad.
Undoubtedly, if Louis Vuitton were to offer a basketball with its design, the crowds would go wild. (The opinion cites several Twitter comments coveting the fake basketball). They should be thanking (not suing) Hyundai for showing them the enthusiastic market demand for such an item. But Louis Vuitton doesn't roll that way, preferring to sue anyone who depicts the logo in unexpected contexts. Sigh.
Meanwhile, the ad was a failure for Hyundai. Still widely seen as the purveyor of cheap Korean cars, its latest attempt to try to move upscale didn't go anywhere, and Hyundai pulled the ad after 5 showings. Yes, this means that Louis Vuitton is making (and winning!) a federal case over five seconds of human history. SIGH.
The Court's Doctrinal Discussion.
Blurring. On the key question of how Hyundai's use blurred Louis Vuitton's trademark rights, the court follows the Lanham Act's 6 factor statutory test rather tendentiously, which kind of misses the big picture. By evoking the logo, Hyundai didn't introduce a new definition of the logo--and the court repeatedly notes that the depiction went past so quickly that consumers couldn't recognize the differences. Nor did Hyundai introduce a new product into the marketplace; the basketball was fictional. So to the extent "blurring" is a proxy for harm to Louis Vuitton's brand, there was no harm at all. Yet, the court mechanically breezes past this crucial point. In my opinion, it's a pretty damning indictment of the six factors as a screen for blurring.
From my perspective, Louis Vuitton's strongest evidence of "harm" is that "[a]ccording to Louis Vuitton's expert, among those who recognized the Louis Vuitton mark, sixty-two percent believed the ad was approved by Louis Vuitton." Taking this at face value, this "harm" sounds in confusion, though, not dilution. Furthermore, this type of sponsorship confusion is highly problematic; it's a one-way rights escalator as we move towards a "permission culture," and it still doesn't show how either Louis Vuitton or consumers suffered any harm (let alone a harm cognizable under dilution law) from thinking Louis Vuitton approved the ad.
Nowhere does the court connect the dots to explain how Hyundai's usage "impaired the distinctiveness" of Louis Vuitton's mark. Instead, the court condemns Hyundai for its intentional evocation of Louis Vuitton's brand without permission. For that reason alone, I think this opinion could be vulnerable to an appeal.
The court separately finds blurring under New York's state dilution law.
Willfulness. Even if Louis Vuitton establishes its prima facie case, getting an injunction isn't all that valuable because Hyundai already scuttled the ad. To get damages under dilution, Louis Vuitton has to show that Hyundai “willfully intended to trade on the recognition of the famous mark.” Generally, we've assumed this statutory language applied only when the defendant was actually selling goods bearing the brand. Here, the court finds the requisite willfulness because:
* Hyundai asked for permission for other luxury brand usages (yet another reminder that judges often punish defendants who ask for permission rather than forgiveness)
* Hyundai continued running the ads after getting Louis Vuitton's C&D
* Hyundai modified the logo so that it would still evoke Louis Vuitton's logo
Does this evidence a willful intent to trade on Louis Vuitton's reputation? No, and it's not even close. Hyundai intended to evoke Louis Vuitton, but there's no trading taking place because of that evocation. This ruling also could be vulnerable on appeal.
Fair Use. The federal dilution law expressly has a fair use defense. Hyundai fails to get it because it admitted its brand evocation was satire (a commentary on society's standards of luxury), not a parody (a commentary about Louis Vuitton's brand). Indeed, Hyundai admitted that it could have substituted other luxury brands to achieve an identical effect. Hyundai's related claim that it was making a noncommercial use of the mark failed because the subject material was an advertisement.
Consumer Confusion. The court denies Hyundai's summary judgment on the infringement claim.
If the case goes to trial, it will be interesting to see what damages a jury awards. There is no intellectually defensible way to compute damages to Louis Vuitton's brand from Hyundai's ad. They can't even value it at a hypothetical licensing fee because Hyundai only asked for free licenses and Louis Vuitton wouldn't have licensed this usage anyway. As a result, any damages computation will be purely fictional. Ideally, the jury would come back with zero damages, because that's really the appropriate way to signal the complete lack of harm here.
However, I'm hoping Hyundai will appeal this ruling. There are a number of points where the court got it wrong, fairly clearly IMO, so there are good grounds for a reversal. If it pursues the appeal, Hyundai probably ought to try new appellate counsel. The opinion bristles with hostility to Hyundai's arguments, making me think defense counsel miscalculated its pitch to this judge.
Even if Hyundai ends up losing the case at the end, I'm not sure this would signal the sky is falling due to the dilution doctrine. Although the judge never says it outright, much of the opinion is based on the fact that Hyundai referenced a third party brand in its own ad. In my Advertising Law course, I teach that when the advertiser references an individual in its ad without the individual's permission, the advertiser loses the publicity rights lawsuit. (All of the publicity rights cases in our Advertising Law casebook are defense losses). Maybe this case stands for nothing more than that a non-competitor can't reference a famous third-party brand in its ad copy without permission (a competitor may qualify for the comparative advertising exception to dilution law). While that shouldn't be the law, that legal conclusion nevertheless wouldn't be the end of advertising or of trademark law.
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