Opinion
Case No. 2:99CV0084
March 21, 2003
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Before the Court is defendant Hyundai Motor America, Inc.'s ("Hyundai") renewed motion for partial summary judgment. In 1998, Hyundai began to use the name "HYUNDAI ADVANTAGE" in connection with its automobile warranties. Thereafter, plaintiff, Western Diversified Services ("Western") filed this suit alleging that Hyundai is infringing upon its "ADVANTAGE", "ADVANTAGE PLUS", and "ADVANTAGE MVP" trademarks in violation of the Lanham Act. Western also alleges that Hyundai violated the Federal Trademark Dilution Act, the Utah Unfair Practices Act and the common law tort of intentional interference with prospective economic relations. Having considered the parties' oral arguments, briefs and the relevant law, the Court issues the following Memorandum Opinion and Order.
Western admits that the "ADVANTAGE MVP" mark has been abandoned and that defendant is entitled to summary judgment with respect to that mark.
II. BACKGROUND
The facts of this case are largely undisputed. Western is in the business of selling extended or "aftermarket" automobile service warranties. These warranties do not come standard with the purchase of an automobile but are independently purchased by car buyers. Approximately 7,000 car dealers offer Western's aftermarket warranties nationwide, and Western sells approximately 15,000 warranties a month. Western markets its warranties under the federally registered service marks "THE ADVANTAGE" and "THE ADVANTAGE PLUS". Western has owned and used these service marks since 1983.
Hyundai is a manufacturer of automobiles. Included with the purchase of each Hyundai automobile is a manufacturer's warranty. In addition, Hyundai offers its customers the option of purchasing an extended service warranty.
In 1998 Hyundai was in the process of choosing a name for its manufacturer's warranties. Sometime before September 16, 1998 Hyundai's legal department asked its outside counsel if the name "THE HYUNDAI ADVANTAGE" could be lawfully used for those warranties. Outside counsel conducted a trademark search and opined that such a mark was "possible" but that there were "risks" because of Western's "THE ADVANTAGE" and "THE ADVANTAGE PLUS" registrations. Hyundai proceeded to use "THE HYUNDAI ADVANTAGE" as its name for its manufacturer's warranties.
At approximately the same time, Hyundai's product assurance department was attempting to chose a name for its extended warranties. The product assurance department had previously developed the name "BUMPER-TO-BUMPER PLUS" for Hyundai's extended warranties. However, that name was determined to be unusable due to regulatory reasons. Therefore, in October of 1998, Hyundai's product assurance department began to use the "THE HYUNDAI ADVANTAGE" name for its extended warranties as well.
The product assurance department is a subdepartment of Hyundai's service department. It is the service department that administers the extended warranty program.
That same month, Western sent a letter to Hyundai's legal department demanding that Hyundai cease using all names that included the word "ADVANTAGE". Hyundai refused to cease its use of the "THE HYUNDAI ADVANTAGE" and on December 18, 1998 introduced its aftermarket warranties with the name "THE HYUNDAI ADVANTAGE". Western commenced this suit on February 11, 1999.
On April 4, 2001, after hearing oral arguments relating to both Hyundai's manufacturer and extended warranties, this Court granted summary judgment for Hyundai with respect to Hyundai's manufacturer's warranties. However, the Court held in abeyance — pending further discovery by Western — judgment regarding Hyundai's extended warranties. Supplemental briefs were then filed by both parties and on December 11, 2002 this Court again heard oral arguments related to Hyundai's motion for summary judgment as it related to its extended warranties.
III. DISCUSSION A. Standard of Review
Federal Rule of Civil Procedure 56(c) provides that summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In considering whether genuine issues of material fact exist, the Court determines whether a reasonable jury could return a verdict for the nonmoving party in the face of all the evidence presented. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Clifton v. Craig, 924 F.2d 182, 183 (10th Cir. 1991). The moving party need not negate the nonmoving party's claims, but need only point out that "there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). For purposes of this motion, the Court construes all facts and reasonable inferences in the light most favorable to plaintiff. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Wright v. Southwestern Bell Tel. Co., 925 F.2d 1288, 1292 (10th Cir. 1991).
B. Lanham Trademark Act
Western's first claim alleges trademark infringement in violation of Lanham Trademark Act of 1946, ("Lanham Act"). 15 U.S.C. § 1125(a). The Lanham Act provides national protection for trade and service marks used in interstate and foreign commerce. See 15 U.S.C. § 1051-1127; First Savings Bank, F.S.B., v. First Bank System, 101 F.3d 645 (10th Cir. 1996). For purposes of its motion for summary judgment, Hyundai does not contest Western's claim that the Lanham Act was not violated. Rather, Hyundai argues that Western's Lanham Act claim should be dismissed because even if Hyundai's use of the word "advantage" were found to be in violation of the Lanham Act, Western is not entitled to any damages. Monetary recovery for a violation of trademark rights is governed by 15 U.S.C. § 1117. Section 1117 provides that upon a finding of a violation of the Lanham Act, a court may award (1) the plaintiff's actual damages, (2) the defendant's profits resulting from the sale of infringing goods or services and (3) the costs of the action including attorney fees. See 15 U.S.C. § 1117(a); Bishop v. Equinox, 154 F.3d 1220 (10th Cir. 1998). The Court will first address whether plaintiff is entitled to actual damages.
15 U.S.C. § 1114 states:
Any person who shall, without the consent of the registrant (a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or (b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive shall be liable in a civil action by the registrant for the remedies hereinafter provided.
1. Actual Damages
An award of actual damages pursuant to the Lanham Act is premised on a plaintiff's ability to show that it has been deprived of revenue it would have otherwise received from the sale of its goods or services as a result of consumer confusion as to the source of that product or service. Actual confusion can be shown by direct evidence — including an audited financial report showing a diversion of sales or direct testimony — or by circumstantial evidence such as consumer surveys. Brunswick Corp. v. Spinit Reel Co., (10th Cir. 1987). In this case, Western is not entitled to an award of actual damages because Western has not shown that it has been damaged by consumer confusion or deception. Indeed, Western has not put forth any evidence direct or circumstantial — that could lead to a finding of confusion. Western, therefore, has conceded that it cannot prove actual damages and that it is not entitled to recover damages under this theory. Instead Western argues that it is entitled to a disgorgement of defendant's profits "resulting from the sale of the [Hyundai's] infringing goods or services." 15 U.S.C. § 1117(a).
2. Hyundai's Profits
Proof of actual damages is not required in order to recover monetary damages in a trademark infringement case. Bishop v. Equinox Int'l Corp., 154 F.3d 1220, 1223 (10th Cir. 1998) (" Bishop I"). This is because the Lanham Act, while designed to protect a misappropriation of property, was also designed to prevent unjust enrichment and to deter willful infringement; these latter two rationales provide the basis for disgorgement of an infringer's profits. See Bishop v. Equinox Inst'l Corp., 256 F.3d 1050, 1054-55 (10th Cir. 2001) (" Bishop II"). The unjust enrichment and deterrence rationales are premised on society's desire — as expressed by Congress and the courts — to prevent trademark infringement regardless of whether the plaintiff has suffered quantifiable harm. Therefore a party may be entitled to recovery of a portion of a defendant's profits "even where the plaintiff was not actually injured by the defendant's unfair use of the disputed trademark." Id. at 1054.
Whatever the rationale, however, an award pursuant to the Lanham Act is "subject to the principles of equity." 15 U.S.C. § 1117(a). This is especially important in disgorgement of profit cases. The fact that there may not be provable damages in such cases underscores the absolute reliance such recovery has on equitable principles. The Tenth Circuit emphasized this point when it said:
We have also instructed the district courts to fashion equitable remedies to meet the individual needs of each case, carefully weighing the equities on both sides of the scale to determine whether, in that district court's judgment and within its wide discretion, the plaintiff may receive a portion of the infringing defendant's profits.Bishop II, 256 F.3d at 1054-55. In disgorgement of profit cases, a court "carefully weigh[s] the equities on both sides of the scale," by considering both the plaintiff's right to recover lost revenue as well as the defendant's right to retain profits that were properly and legally earned. Such a balancing test, however, is not attempted without some consternation because of the distinct possibility that an "accounting [of defendant's profits] may overcompensate for a plaintiff's actual injury and create a windfall judgment at the defendant's expense." Bishop I, 154 at 1223 (quoting George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1540 (2d Cir. 1992)). Therefore, the courts have limited the circumstances in which a party may be awarded another party's profits.
While we have stated that trademark infringement "may properly be remedied through an award of profits," so that unjust enrichment of the defendant may be avoided or so that the defendant will be deterred from future wrongdoing, we have never stated that a plaintiff must necessarily be so compensated whenever a defendant wrongfully appropriates the plaintiff's trademarked property to make a profit.Bishop II, at 1054-55. In order to distinguish then between those cases in which profits should be awarded from those that do not merit such an award, the Tenth Circuit has established a baseline requirement — that is a plaintiff must show that the alleged infringer's adoption of its mark was done willfully or in bad faith. Bishop I, 154 F.3d at 1222; see Int'l Star Class Yacht Racing Ass'n v. Tommy Hilfiger, USA., Inc., 80 F.3d 749 (2d Cir. 1996).
At the summary judgment hearing, a substantial portion of the testimony was directed to the issue of what constitutes willfulness or bad faith. Although Western initially argued that a party acted in bad faith if they "knowingly misappropriate[d] [another's] property rights," it subsequently admitted that a party acted willfully only if it could be shown that the alleged infringer had "intended to trade on the goodwill of another." The Court finds that this latter definition is the proper standard by which an alleged infringer's actions should by judged.
Western: "I need to show willfullness or bad faith. Willfullness under the law translates into a knowing appropriation of our goodwill."
Court: ". . . Do you need to intend to trade upon the goodwill of the other name?"
Western: "The goodwill and yes, the good name."
Court: "Do you agree, that that is what your intent has to be."
Western: "Yes."
Court: "Not just to use the name but in using it attempt to gain a benefit from using somebody else's name?"
Western: "Yes, that is correct."
Sum. Judgt. Hrg. Tr. at 16:12-17:3.
This is true despite the fact that the Court is not aware of any case within this Circuit that has addressed the definition of willfullness in the context of disgorgement of profits. While a number of courts have analyzed its meaning in the context of a claim for damages based on a likelihood of confusion, in that context the party's intent is only one factor among many. Therefore, in cases of actual confusion monetary recovery may be warranted even though the infringer's intent was proper and pure. However, recovery based on a theory of unjust enrichment or deterrence requires a court to find malevolent intent on the part of the defendant. Notwithstanding the different tests for the two types of recovery, a review of the Tenth Circuit's treatment of the willfulness standard in the context of actual confusion is useful.
The Tenth Circuit has identified several factors, originally set forth in Restatement of Torts § 729 (1938), that are relevant to whether there is a likelihood of confusion between two marks. These include:
(a) the degree of similarity between the designation and the Wade-mark or trade name in
(i) appearance;
(ii) pronunciation of the words used;
(iii) verbal translation of the pictures or designs involved;
(iv) suggestion;
(b) the intent of the actor in adopting the designation;
(c) the relation in use and manner of marketing between the goods or services marketed by the actor and those marketed by the other;
(d) the degree of care likely to be exercised by purchasers. Jordache Enters., Inc. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1484 (10th Cir. 1987) (emphasis added). This list is not exhaustive. All of the factors are interrelated, and no one factor is dispositive. Id.
When determining whether the intent of a defendant weighs for or against a finding of likelihood of confusion, "[t]he proper focus is whether defendant had the intent to derive benefit from the reputation or goodwill of plaintiff" Jordache Enters., Inc. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1484 (10th Cir. 1987); see also Restatement (Third) of Unfair Competition § 37(1)(a) (1995) (premising award of profits on evidence that "the actor engaged in the conduct with the intention of causing confusion or deception"). While the "deliberate adoption of a similar mark may lead to an inference of intent to pass off goods as those of another," Universal Money Centers, Inc., v. American Telephone Telegraph, 22 F.3d 1527, 1531 (10th Cir. 1994), "mere knowledge of a similar mark should not foreclose further inquiry." GTE Corp. v. Williams, 904 F.2d 536, 541 (10th Cir. 1990). Rather, the intent of the defendant must be determined within the "larger factual context of the case." Universal Money Centers, 22 F.3d at 1531.
Based on these standards, the Court finds that in order to successfully recover an award of Hyundai's profits, Western must show that Hyundai chose the name "THE HYUNDAI ADVANTAGE" with the intent to benefit from Western's reputation or goodwill. The Court is not unaware of the fact that the above cited standards were developed in the context of a claim for actual confusion. However, based on the equitable underpinnings of an award of disgorgement of profits, the potential for overcompensating for a plaintiff's actual injury and the fact that a finding of infringement does not automatically entitle a party to an award of profits, it is clear that the definition of willfulness in a disgorgement of profits case must be at least as stringent as it is in an actual damages case. Were the Court to find that Western need only show that Hyundai knew about Western's similar marks to establish bad faith, the Court would in effect lower the standard required in disgorgement of profit cases below that of cases predicated upon actual damages — an outcome that is contrary to the policy behind recovery of an infringer's profits. Thus, the Court will now turn to the issue of whether Western has met its burden to show that Hyundai intended to benefit from Western's reputation or goodwill when it chose the name "THE HYUNDAI ADVANTAGE" for its extended warranties. The Tenth Circuit's decision in Universal Money Centers, Inc. v. American Telephone Telegraph Co., 22 F.3d 1527 (10th Cir. 1994), is instructive on this issue.
In Universal Money Centers, plaintiff Universal Money Center ("UMC") was in the business of providing electronic banking cards to customers of various financial institutions. The cards bore one of UMC's four federally registered trademarks — each of which included the word "UNIVERSAL".
AT T subsequently developed a combination calling and retail credit card. In an effort to develop a name for that card, AT T sponsored a "name game" contest with its employees. The best entries were selected and subjected to consumer reaction studies. The winning entry included the word "universal." In accordance with its normal operating procedures, AT T's in-house trademark counsel then conducted a trademark search. That search revealed approximately 200 registered marks containing the word "universal," including UMC's marks. AT T's in house counsel advised her superiors that the word "universal" was available, but that its use posed a risk because the word was widely used and because AT T was "particularly vulnerable to complaints of infringement because we are AT T." AT T subsequently introduced its card to the public with the name "AT T UNIVERSAL."
UMC filed suit alleging trademark infringement under 15 U.S.C. § 1114(1) and seeking monetary damages from AT T. The district court, however, dismissed UMC's claims on summary judgment.
The Tenth Circuit affirmed the district court's ruling. After addressing the similarity of the marks the court turned to the question of the "intent of AT T in adopting the term `universal.'" The Court stated:
Here viewing the evidence in the light most favorable to UMC, there are absolutely no facts to support an inference that AT T adopted the word "Universal" with the intent to derive benefit from UMC's marks. AT T's in-house trademark counsel undoubtedly knew about UMC's federally registered marks and that UMC and other owners of the mark might challenge AT T's use of the word "universal." However, in the larger factual context of this case, this is simply not enough. Indeed, the fact that AT T has spent more than $60 million in promoting its card strongly suggests that AT T is relying on its own publicity and reputation, and not that of UMC.Id. at 1532 ( citations omitted).
Similarly to the Tenth Circuit's reasoning in Universal, the Court finds that viewing the evidence in the light most favorable to Western, the facts do not support an inference that Hyundai adopted "THE HYUNDAI ADVANTAGE" mark with the intent to profit from the goodwill or reputation of Western. The facts of this case show that Hyundai knew about Western's marks. However, as the Tenth Circuit in Universal found, "in the larger factual context of this case, this is simply not enough" to infer that Hyundai intended to trade on the benefit or goodwill of Western's reputation. Critical to the "larger factual context" in this case is the way in which Hyundai chose the name for its marks.
Hyundai's product assurance department had previously developed the name "BUMPER-TO-BUMPER PLUS," for its aftermarket warranties. However, that name was determined to be unusable due to "compliance reasons." Therefore, after already having chosen the name for its manufacturer's warranties, in October of 1998 Hyundai began to use THE HYUNDAI "ADVANTAGE" in connection with its extended warranties as well. Ms. Denise Lowery, a member of the product assurance department and an employee of Hyundai at the time that the name was adopted, stated in her deposition that at the time the decision was made to use "THE HYUNDAI ADVANTAGE" she had never heard of Western, their products or their "ADVANTAGE" marks. She testified that the first time she heard of Western was when the litigation commenced. Thus, similarly to AT T, it is clear that those responsible for choosing the "THE HYUNDAI ADVANTAGE" name for Hyundai's extended warranties did not know about Western's competing marks. Logically, therefore, those in charge of choosing the name could not have intended to take advantage of Western's reputation or goodwill.
Hyundai's counsel extrapolated on this issue. He said, "[b]ecause of compliance reasons that I don't truly understand, and it is a very heavily regulated area, one of their outside vendors who acts as a reinsurer where necessary, and certain states said those names will not pass muster in these states and you need to come up with another name." Sum. Judgt. Hrg. Tr. at 38:14.
Moreover, while Hyundai, through its legal department, did know about Western's marks, the legal department proceeded to use the mark only after requesting its outside counsel to conduct a trademark search to determine if the use of the name was permissible. Similarly to the outside counsel of AT T, Hyundai's outside counsel opined that such a mark was "possible" even though there were "risks" because of Western's "THE ADVANTAGE" and "THE ADVANTAGE PLUS" marks. Thus, Hyundai's knowledge of Western's marks was obtained only after Hyundai had preliminarily decided to use "THE HYUNDAI ADVANTAGE". Therefore, the undisputed evidence shows that no one within Hyundai chose "THE HYUNDAI ADVANTAGE" with the intent to benefit from Western's mark.
Furthermore, the fact that Hyundai continued to use the mark even after the legal department was made aware of Western's marks does not show that it proceeded in bad faith or willfully attempted to profit from Western's name. Indeed, a party's failure to stop using a mark in the face of threatened lawsuit can be a sign of a party's good faith belief that they are entitled to use that mark. King of the Mountain Sports, Inc. v. Chrysler Corp., 968 F. Supp. 568, 574 (D. Colo. 1997), aff'd, 185 F.3d 1084 (10th Cir. 1999); See W.W.W. Pharmaceutical Co. v. Gillette Co., 984 F.2d 567, 575 (2d Cir. 1993) ("[g]ood faith can be found if a defendant . . . has requested a trademark search or has relied on the advice of counsel"). In this case, similarly to AT T in Universal Money Centers, Hyundai conducted a search to ascertain the extent of the use of the word "advantage" before proceeding to use "THE HYUNDAI ADVANTAGE" name. Hyundai's outside counsel explained that the use of the name was possible despite some risks. The fact that Hyundai proceeded to use the name in the face of these risks does not by itself show bad faith on the part of Hyundai. Indeed similarly to AT T and UMC in Universal Money Centers, Hyundai is a nationally recognized, multi-national corporation while the party claiming infringement is smaller and less well-known. Thus, Hyundai, based simply on its size, and the fact that it is a nationally recognized manufacturer of automobiles could reasonably have expected that the "risks" referred to by its outside counsel included the fact that Hyundai's use of the word "advantage" might be challenged simply because they are Hyandai. Far from showing the intent to take advantage of Western's marks, Hyundai's actions at worst show questionable business judgment. A more reasonable interpretation, however, shows a party who weighed the risks of using its name and chose to proceed based on its own assessment of whether the name "advantage" could lawfully be used. These facts, however, do not lead to an inference that Hyundai decided to proceed in order to benefit from Western's marks.
Moreover, the fact that Western cannot show either a likelihood of or actual confusion and therefore cannot show it has suffered any actual damages also weighs in favor of Hyundai's motion. The Tenth Circuit has stated that, "a finding of actual damages remains an important factor in determining whether an award of profits is appropriate." Bishop I, 154 F.3d at 1223. In this case, Western acknowledges that sales of their products have gone up since Hyundai adopted the name "THE HYUNDAI ADVANTAGE". (Summary Judgment Hearing at 30:9-12.) While such an increase could be for any number of reasons and is clearly not dispositive of the issue before the Court, the fact that sales have not decreased simply supports Western's inability to show any actual damages. Thus, if Western cannot show that any of the revenue that it would otherwise have received has been placed in the hands of Hyundai, any potential disgorgement of profits cannot reasonably be based on a rationale of unjust enrichment. Instead, the sole rationale left for disgorging Hyundai's profits in this case is to deter Hyundai's alleged unlawful conduct. However, because Western has not put forth any facts showing that Hyundai's actions warrant such deterrence, the Court believes that a shifting of revenue in this case from Hyundai could very well result in a windfall for Western at Hyundai's expense.
Finally, similarly to AT T, Hyundai has spent a large amount of its own resources in promoting "THE HYUNDAI ADVANTAGE" name. Hyundai claims spending on its mark is comparable to the $60 million spent by AT T to promote its "universal" marks. Thus, Hyundai has not simply chosen a name that is allegedly similar to Western's mark and then sat back waiting for Western's advertising and already established goodwill to help promote Hyundai's mark as well. Instead, Hyundai's expenditures strongly suggest that Hyundai is relying on its own reputation and goodwill to promote "THE HYUNDAI ADVANTAGE".
In summary, the "larger factual context of th[is] case" shows that those responsible for choosing the allegedly infringing name did not even know about Westerns's existence or its marks before "THE HYUNDAI ADVANTAGE" was chosen. The facts also show that Western has suffered no actual damages based on Hyundai's use of its mark and that Hyundai has invested a substantial amount of money to promote its own mark. While Hyundai's legal department did know about Western's marks after choosing the mark but before introducing the the mark to the general public, this knowledge does not require a finding that the use of the mark was in bad faith. Hyundai only proceeded to use the mark after requesting a trademark search, weighing the strength of the competing users mark and relying on the advice of outside counsel. Therefore, it is just as appropriate to infer from Hyundai's use of the mark that Hyundai had a good faith belief that they were indeed entitled to use the word "advantage" in "THE HYUNDAI ADVANTAGE". Even assuming that Hyundai's use of the mark after requesting a trademark search does not confer good faith status upon Hyundai, the Court finds that no reasonable jury could find for Western. Instead, after "carefully weighing the equities on both sides of the scale," the Court finds that this not a case in which unjust enrichment and deterrence would be properly applied. The facts simply do not permit an inference that Hyundai adopted "THE HYUNDAI ADVANTAGE" mark with the intent to profit from the goodwill or reputation of Western. Therefore, the Court finds that Hyundai's motion for summary judgment as to Western's Lanham Act claims should be GRANTED.
C. Trademark Dilution Act
Western also asserts a claim for trademark dilution pursuant to the Federal Trademark Dilution Act ("Act"). 15 U.S.C. § 1125(c). The Act states:
The owner of a famous mark shall be entitled . . . to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark . . .15 U.S.C. § 1125(c). The Act therefore applies "only to those marks which are both truly distinctive and famous, and therefore most likely to be adversely affected by dilution." S.Rep. No. 100-515, at 42; Thane International v. Trek Bicycle Corp., 305 F.3d 894, 904 (9th Cir. 2002). The rationale behind the "famous" requirement is clear. "Dilution is a cause of action invented and reserved for a select class of marks-those marks with such powerful consumer associations that even non-competing uses can impinge their value." Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 875. Therefore, "[i]f dilution protection were accorded to trademarks based only on a showing of inherent or acquired distinctiveness, we would upset the balance in favor of over protecting trademarks, at the expense of potential non-infringing uses." Id.
The Act also lists eight non-exclusive facts that "a court may consider" to determine whether a mark is distinctive and famous. 15 U.S.C. § 1125(c)(1). They include:
(A) the degree of inherent or acquired distinctiveness of the mark; (B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used; (C) the duration and extent of advertising and publicity of the mark; (D) the geographical extent of the trading area in which the mark is used; (E) the channels of trade for the goods or services with which the mark is used; (F) the degree of recognition of the mark in the trading areas and channels of trade used by the mark's owner and the person against whom the injunction is sought; (G) the nature and extent of use of the same or similar marks by third parties; and (H) whether the mark was registered . . . on the principal register.Id.
Registration on the principal register creates a presumption of distinctiveness. 15 U.S.C. § 1057(b). Because Western's "ADVANTAGE" and "ADVANTAGE PLUS" marks are registered on the federal registry, the Court assumes for purposes of this opinion that both marks have obtained the requisite degree of "distinctiveness" necessary for protection under the Act.
Traditionally, courts have recognized two forms of dilution: blurring and tarnishment. Blurring occurs when another's use of a mark creates "the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product." Playboy Enterprises, Inc. v. Welles, 279 F.3d 796, 805 (9th Cir. 2002). Tarnishment, on the other hand, occurs "when a famous mark is improperly associated with an inferior or offensive product or service." Id.
Clearly, a narrow definition of "famousness" is critical to the proper application of the dilution statute. At its core, the statute requires a court to determine whether "consumers are likely to transfer associations evoked by a truly famous mark to an unrelated product." Thane, 305 F.3d at 908. The requirement that the statute be limited to those marks which are universally recognized ensures at least some uniformity in the application of the statute. Were a court required to determine whether a less well-known mark evoked those same associations, the difficulty of determining whether a mark produced in the minds of consumers a certain degree of recognition and fondness would produce a complex analysis that would likely be without any guiding standard or uniformity. See TCPIP Holding Co., Inc. v. Haar Communications, Inc., 244 F.3d 88, 99-99 (2d Cir. 2001).
While it is clear, then, that the statute requires a mark to be famous it is not entirely clear just how famous a mark must be. See Thane, 305 F.3d at 910. Indeed, Congress likely passed the Act "counting on Courts to understand the legislature's intentions and to interpret the word or phrase in a sensible manner to carry out those intentions." TCPIP, 244 F.3d at 95. A brief review of the legislative history, of the statute is, therefore, in order.
According to the legislative history, dilution occurs only when "the unauthorized use of a famous mark reduces the public's perception that the mark signifies something unique, singular, or particular." H.R. Rep. No. 104-374, at 3 (1995) reprinted in 1995 U.S.C.C.A.N. 1029, 1030. A potential candidate for dilution can be described as having an "aura" about it. Id.; S.Rep. No. 100-515, at 7 (1988). Some hypotheticals noted by Congress include cases of "DUPONT shoes, BUICK aspirin, and KODAK pianos." H.R. Rep. No. 104-374, at 3.
These examples show that only marks that have achieved such "fame among the general consuming public, as opposed to a more particularized segment of the public, are susceptible to the kind of out-of-market free riding that Congress sought to prevent in passing the antidilution statute." Thane, 305 F.3d at 911; see also LP. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 46, 49 (1st Cir. 1998) (noting that "mark [must] be truly prominent and renowned" to merit protection under FTDA and that "courts should be discriminating and selective in categorizing a mark as famous"); Avery Dennison Corp. v. Sumpton, 189 F.3d 868 (9th Cir. 1999) (quoting Frank L. Schecter, The Rational Basis for Trademark Protection, 40 HARV. L.REV. 813 (1927) (explaining that a potential candidate for dilution is one which has obtained "such powerful consumer associations that even non-competing uses can impinge on their value")). In other words the allegedly famous mark must be a "household name." A.B.C. Carpet Co., Inc. v. Naeini, 2002 WL 100604, at *5 (E.D.N.Y. 2002).
The Court rejects the proposition embraced by the Ninth Circuit that a mark famous in only a limited geographic area or specialized market segment can be famous for the purposes of the Federal Antidilution Statute. Thane, 305 F.3d at 908. Based on the examples within the legislative history as well as the repeated admonition by Congress that the anti-dilution statute be applied only to marks that are unique and singular, the Court finds that such a holding is contrary to the intent of the act. See TCPIP Holding Co. v. Haar Communications Inc., 244 F.3d 88, 93 (2d Cir. 2001); McCarthy on Trademarks and Unfair Competition, § 24:109 (4th ed.) (Citing as potential candidates for the application of the antidilution statute: TIFFANY and COCA-COLA. Also explaining that "as a general matter, a trademark is sufficiently distinctive to be diluted by a nonconfusing use if the mark retains its source significance when encountered outside the context of the goods or services with which it is used by the trademark owner.").
Western argues that its marks are famous and therefore capable of being diluted because it sells approximately 15,000 warranties a month and because approximately 7,000 dealers offer its warranties for sale. However, these facts alone do not show that Western's marks are so well recognized that its product is set apart and automatically recognized in the minds of consumers simply by virtue of its name — "ADVANTAGE". Moreover, the fact that Western has spent some unspecified amount to advertise its marks provides little if any support in the dilution context. See id. at 99-100 (finding that plaintiff's showing that it had annual sales of $280 million and advertising expenditures in the "tens of millions of dollars" did not demonstrate necessary degree of fame); Advantage Rent-A-Car, Inc. v. Enterprise Rent-A-Car, Co., 238 F.3d 378, 381 (5th Cir. 2001) (finding that Enterprise's showing that it had spent more than $130 million on advertising containing mark "We'll Pick You Up" in various media outlets, including commercials shown on prime time national television, did not demonstrate necessary degree of fame); Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 879 (9th Cir. 1999) (finding that Avery Dennison's showing that its marks had been in use for at least seventy years and that it had annual sales of $3 billion and advertising expenditures of $5 million did not demonstrate necessary degree of fame); Western has provided no other facts that could support their contention that their marks are famous.
On the other hand there are literally thousands of companies using the name "advantage" including companies within the vehicle warranty, financing, insurance and sales service industries. Thus, the extreme commonality of the word in everyday language, along with the fact that the word "advantage" is used by a large number of companies in a substantial variety of businesses shows the difficulty that Western faces in establishing that its mark is one that is indeed singular or unique. The Court finds that Western has failed to overcome this high hurdle.
Viewing the evidence in the light most favorable to Western, the Court finds that Western has not established that its "THE ADVANTAGE" and "THE ADVANTAGE PLUS" trademarks are sufficiently strong to be entitled to dilution protection. Specifically, they have not demonstrated that the "ADVANTAGE" and "ADVANTAGE PLUS" have become so prominent and renowned as to have achieved the requisite degree of fame required for protection by the Federal Trademark Dilution Act. Hyundai's motion for summary judgment on Western's Trademark Dilution Act claims is therefore GRANTED.
D. Utah Unfair Practices Act
Western's fourth cause of action purports to set forth a claim for "unfair methods of competition" in violation of Utah's Unfair Practices Act ("UPA"). UTAH CODE ANN. §§ 13-5-1, et seq. In support of its claim, Western alleges no new facts, but simply incorporates by reference facts alleged in connection with its federal Lanham Act claims. Thus, Western assumes that the Lanham Act claims specified in its complaint also amount to "unfair practices" and/or "unfair methods of competition" under this particular Utah statutory scheme. Western has not alleged a claim for common law unfair competition.
The UPA is designed, in part, to prevent "[u]nfair methods of competition in commerce or trade. . . ." UTAH CODE AM. § 13-5-2.5. "The [Utah] Legislature declared that the purpose of this act is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair and discriminatory practices by which fair and honest competition is destroyed or prevented." UTAH CODE ANN. § 13-5-17. Thus, it is unclear whether the legislature intended for a claim of trademark infringement to fall within the statutory framework of the UPA.
Western points to the fact that the Utah Code states that trademark infringement is included with the definition of "unfair competition." Section 76-10-1009 states that `us[ing] the registered trademark of another, without the consent of the owner thereof' is "an unfair trade practice and an unfair method of competition." UTAH CODE ANN. § 76-10-1009. However, this definition is found in the Chapter 10 of the Utah Criminal Code, a section of the code completely unrelated to the UPA. Furthermore, § 76-10-1009 goes on to state that the "Utah State Trade Commission shall have jurisdiction over violations and may proceed against a violator as provided by the Trade Commission Act." Thus, this statute is only applicable to criminal violations and may only be enforced by the Utah State Trade Commission. Therefore, the Court finds that this section does not apply to a suit between two private parties; § 76-10-1009 only applies to criminal matters and cannot properly be used to interpret the UPA in this case.
Chapter 10 is entitled "Offenses Against Public Health, Safety, Welfare and Morals."
Section 76-10-1009 states:
The Utah State Trade Commission shall have jurisdiction over violations and may proceed against a violator as provided by the Trade Commission Act. The trade commission may institute an investigation upon receiving an informal complaint from a person who claims to have been injured by the violation of this part. Upon receiving a sworn complaint from a person claiming to be injured by a violation of this part, the trade commission must institute an investigation. If evidence of a violation is found by the commission or is produced by the complainant, the commission must take appropriate enforcement proceedings as provided in the Trade Commission Act.
UTAH CODE ANN. § 76-10-1009.
The case law on this issue is equally unhelpful. No state or federal court has ever decided if the UPA applies to a claim of trademark infringement. of the few published cases relating to the UPA from the Tenth Circuit, none pertains to trademarks, or traditional "unfair competition." Instead, consistent with the stated purpose of the UPA in § 13-5-17, the cases involve allegations of antitrust violations, predatory and discriminatory pricing practices, and conspiracies to fix prices and restrain trade. E.g., Utah Foam Products Co. v. The Upjohn Company, 154 F.3d 1212, 1216-17 (10th Cir. 1998) (price discrimination); SCFC ILC, Inc. v. Visa USA, Inc., 819 F. Supp. 956, 962-67 (D. Utah 1993) (Sherman Act and Clayton Act antitrust violations); Rio Vista Oil, Ltd. v. Southland Corporation, 667 F. Supp. 757, (D. Utah 1987) (price discrimination conspiracy).
Utah state courts have applied the UPA in a similar fashion. See, e.g., Burt v. Woolsulate, Inc., 146 P.2d 203-05 (Utah 1944) (UPA designed to prevent unfair and discriminatory pricing practices); Trade Commission v. Bush, 259 P.2d 304-07 (Utah 1953) (price discrimination); Belliston v. Texaco, Inc., 521 P.2d 379-80 (Utah 1974) (UPA claim brought as companion to Robinson-Patman and Clayton Act claims).
Based on the totality of the statutory language of the UPA, the Court finds as a matter of law that the legislature did not intend to include trademark infringement within the ambit of the UPA. If the Court were to construe the UPA as broadly as Western urges here, the UPA would effectively eliminate a large number of claims for relief including the tort of intentional interference with prospective economic relations. The Court, however, declines to eviscerate these other causes of action by placing each of them with the UPA umbrella. The Court therefore finds that the UPA does not support a claim for trademark infringement. Accordingly, Hyundai's motion for summary judgment on Western's Unfair Practices Act claim is therefore, GRANTED.
E. Intentional Interference With Prospective Economic Relations
Under Utah law, a party alleging intentional interference with prospective economic relations ("IIPER") must show: (1) that the defendant intentionally interfered with the plaintiff's existing or potential economic relations; (2) that the defendant did so for an improper purpose, or by improper means; and (3) that such interference caused injury to the plaintiff. Leigh Furniture Carpet Co. v. Isom, 657 P.2d 293, 304 (Utah 1982).
The first and second requirements have not been met by Western. Viewing the evidence in the light most favorable to the plaintiff, the Court cannot find any facts which indicate that Hyundai intended to interfere with Western's economic relations or business in general. As the Court noted above, there are no facts to support Western's assertion that Hyundai chose the "THE HYUNDAI ADVANTAGE" mark with the intent to benefit from Western's "ADVANTAGE" or "ADVANTAGE PLUS" marks. There is also no evidence before the Court that supports a finding that by choosing its mark, Hyundai intended to interfere with Western's business for any other improper purpose. Thus, the first and second prongs of the IIPER test are not met.
The third prong of the IIPER is also clearly not met. While the Lanham Act provides for recovery pursuant to a theory of unjust enrichment, IIPER requires Western to show that the alleged interference caused injury to their business. However, Western has not met this requirement. Western has not produced one customer who said they bought Hyundai's warranty instead of Western's warranty because they were confused. Nor has Western provided the Court with any fact that could even lead to the inference that Western's sales have been negatively impacted because of Hyundai's use of "THE HYUNDAI ADVANTAGE". In fact, Western testified at the summary judgement hearing that its sales have not declined since Hyundai began using "THE HYUNDAI ADVANTAGE". (Summary Judgment Hearing at 30:9-12.). Thus, because Western cannot show any injury, economic or otherwise, Hyundai's motion for summary judgment as to Western's intentional interference with prospective economic relations claim is GRANTED.
IV. CONCLUSION
Based on the foregoing, the Court GRANTS defendant's motion for summary judgment as it relates to Hyundai's extended warranties. IT IS SO ORDERED.