Audi V. Shokan Coachworks: Trademark Infringement in Email Signature

Background:

Automobile manufacturer Audi AG (“Audi”) had previously sued Shokan Coachworks Inc. (“Shokan”), a vehicle recycler and used-parts retailer specializing in Audi parts, for trademark infringement in 1990 over Shokan’s use of the AUDI mark and logo on its letterhead, business cards and advertisements. The parties settled that lawsuit, with Shokan agreeing to change its logo and refrain from using the AUDI mark except as an adjective to describe its repair services.  The settlement also specifically approved a Shokan ad that used the phrase “AUDI USED PARTS” and the phone number “1-800-ALL-AUDI.”

In 2003, Audi again sued Shokan for trademark and trade dress infringement, dilution, false designation of origin, false advertising, and cybersquatting. At issue were Shokan’s use of the phone number 1-800-ALL-AUDI; answering the Shokan business line “all Audi;” using the phrases “Audi Used Parts” or “Used Audi Parts” in ads; using the email address “allaudi.shokan@verizon.net;” ("email address") using the phrase “Shokan Audi Parts” in the signature block of 38,000 emails sent by Shokan; the doman name “800allaudi.com;” and the phrases “Audi Parts Warehouse” amd “1-800-ALL-AUDI” inside Shokan’s business premises. Audi also alleged that Shokan used Audi’s ring logo on its website and on a sign inside the business premises.

The parties filed cross-motions for summary judgment, with each party winning some and losing some. The opinion on all cross-motions is Audi v. Shokan Coachworks, Inc., 2008 WL 4911730, No. 1:07-CV-00173 (N.D.N.Y. 2008).

The doctrine of laches protected Shokan on previously-decided claims

Shokan asserted a laches defense regarding its use of 1-800-ALL-AUDI and in using “Audi Used Parts” in advertisements, on the grounds that both were permitted in the parties’ previous settlement agreement and had been used by Shokan for 20 years.

The court agreed with Shokan, finding that Audi had failed to show that Shokan exceeded the scope of usage contemplated by the original settlement agreement. The court rejected Audi’s argument that its prosecution delay was excusable, as Shokan had been using the phone number and advertising for so long that the delay prejudiced Shokan. 2008 WL 4911730, *10-13.

Improper authentication prevented summary judgment on email address

The court granted summary judgment in favor of Shokan on the email address “ due to Audi’s failure to properly authenticate supporting documents. Audi submitted copies of Shokan’s website, which included the email address as contact information. However, Audi used the archive.org website to generate the submitted images supported by declaration of an Audi witness. Courts have held that printouts from archive.org can only be authenticated by a knowledgeable representative of that website. Audi’s failure to produce such a representative meant Audi failed to properly authenticate the printouts, which means the Court could not consider those printouts in support of Audi’s motion for summary judgment. 2008 WL 4911730, *24.

Likelihood of confusion and dilution created in email signature block

The court did grant summary judgment in favor of Audi on its infringement and dilution claims regarding Shokan’s use of the AUDI mark in its email signature block., “Shokan Audi Parts.” The court found that the signature block created a likelihood of consumer confusion based on the parties’ competitive proximity, the strength of the AUDI mark, and Shokan’s use of the identical mark. 2008 WL 4911730, *19.

The court also agreed with Audi’s dilution argument regarding the signature block. The Audi mark was famous based on the length of time it had been registered, the high cost of Audi’s advertising campaigns, and the amount and geographic reach of Audi’s sales. The case was filed before enactment of the Trademark Dilution Revision Act, which establishes a “likelihood of dilution” standard, so the court applied the previously applicable “actual dilution” standard. Even with this higher standard, Audi established actual dilution as a matter of law because of Shokan’s use of the identical mark in its signature block. 2008 WL 4911730, *20

No nominative fair use by Shokan

The court rejected Shokan’s nominative fair use defense. The court followed the lead of many other district courts in the 2nd Circuit in following the 9th Circuit test – rather than the 3rd Circuit test -- for nominative fair use (though the 2nd Circuit Court itself had not yet adopted any test for nominative fair use). The 9th Circuit’s three-part test for nominative fair use determines whether 1) the product or service in question is not readily identifiable without use of the trademark; 2) only so much of the marks are used as is reasonably necessary to identify the product or service; and 3) the user does nothing that would suggest sponsorship or endorsement by the trademark holder. 2008 WL 4911730, * 14-16.

The court determined that Shokan’s email signature block and its other uses of the “Audi” mark could not qualify as nominative fair use because Shokan’s use could “imply sponsorship” by Audi, thus failing the third prong of the test. 2008 WL 4911730, *16.

Question of good faith in cybersquatting claim is a question of fact

As to the domain name “800allaudi.com,” there was as genuine issue of fact as to whether the prior settlement covered those claims. The prior settlement, allowing Shokan to use the vanity phone number, prevented the court from being able to find, as a matter of law, that Shokan’s use of the phone number as a domain name constituted bad faith under the Anticybersquatting Consumer Protection Act. The court specifically noted that issues such as good faith are “singularly inappropriate for determination on summary judgment.” 2008 WL 4911730, *21.

Conclusion

Shokan should serve as a sobering reminder for practitioners that printouts of historical websites from the archive.org website are not admissible without a supporting declaration from an archive.org representative. The case is also indicative of a trend of federal courts to adopt the 9th Circuit test for nominative fair use, as opposed to the 3rd Circuit’s different nominative fair use test.

Finally, the scope of the parties’ previous settlement agreement had a significant impact on the outcome of these cross-motions. While Audi likely believed it was allowing narrow uses, Audi’s previous allowance of those uses raised questions of fact as to whether similar uses would also be allowed. Practitioners should learn from this case and take care to craft settlement agreements very narrowly to avoid a similar situation.