Brand
development is an ancient concept for businesses, and one that continues to
evolve. Advances in the Internet and technology,
and the resulting changes in consumer habits, create an environment to which
businesses must adapt as they strive to maintain brand identities. The availability of content produced by other
businesses and individuals adds to the pool of marketing resources, but also to
the potential for legal risks.
Not
immune to this phenomenon are the likes of high-end retailer Louis Vuitton,
and Hyundai, a company attempting to break into the luxury car market. Louis
Vuitton recently tested the boundaries of trademark law protection -- and in
the process, revealed some lessons for businesses both small and large about
brand protection and content use.
In
a recent decision, the influential U.S. Court of Appeals for the 2nd Circuit ruled
that Hyundai diluted Louis Vuitton’s famous trademark (the so-called “Toile
Monogram”) by airing a commercial
containing a one-second clip of a basketball bearing marks similar to Louis
Vuitton’s. The decision may seem
unlikely at first glance: the basketball is visible for a mere second, and
would viewers really be confused, in the context of the purposefully absurd
scenes depicted in the commercial, as to whether the basketball was a legitimate
Louis Vuitton product? A closer look
reveals, however, that Hyundai’s actions leading up to its use of the
contentious marks may have not only instigated Louis Vuitton’s lawsuit, but
also had significant impact on the court’s decision.
The Commercial
In
a 30-second television commercial, first aired during the 2010 Super Bowl,
Hyundai attempted to challenge the notion of luxury and marketed its Sonata as an
affordable “luxury” vehicle. The commercial
consists of a series of scenes juxtaposing everyday activities with easily recognizable
“symbols of luxury”: a yacht parked in a modest suburban neighborhood, policemen
eating caviar in a patrol car, lobster served in a working-class cafeteria . .
. and the troublesome shot of basketball players playing on a marble court with
a basketball adorned with marks similar to those trademarked by Louis
Vuitton. The idea, Hyundai explained,
was to present a “humorous social commentary on the need to redefine luxury
during a recession” and to convey to consumers that the Sonata is one luxurious
item that is available to everyone.
Seeking Content for
the Commercial
Hyundai
initially sought the permission of 13 high fashion brands to display their trademarked
designs in the commercial. Six brands
denied Hyundai’s request, while the others (Louis Vuitton among them) did not
respond. Unable to secure consent,
Hyundai went with what it thought was its next best alternative: it altered the
Louis Vuitton marks to make them more generic, such that they still evoked – but
were no longer exact copies of – the original Toile Monogram. Crucially, Hyundai admitted that it wanted to
create a quick association with luxury by creating an association with the
Louis Vuitton brand. In other words,
Hyundai sought to build the prestige of its own brand by capitalizing on
consumers’ impressions of Louis Vuitton. To make matters worse, Hyundai continued to run the commercial after
receiving a cease-and-desist letter from Louis Vuitton, and even after Louis
Vuitton commenced the lawsuit.
Trademark Dilution
The
court agreed with Louis Vuitton that Hyundai diluted the Louis Vuitton mark because,
by using a mark similar to the famous Toile Monogram, it created an association
with the Toile Monogram and impaired its distinctiveness. In its defense, Hyundai asserted that its use
of the mark fell under the fair use provision of the Trademark Dilution
Revision Act, which applies to uses such as criticism of, or commentary on, a
famous mark. Hyundai’s fair use defense
failed on somewhat of a technicality: rather than criticizing or commenting specifically
on the Louis Vuitton brand, Hyundai offered a view of luxury products in
general, and therefore was not addressing a particular
famous mark as required by the fair use provision. The court also found that
Hyundai diluted the mark willfully, thereby exposing Hyundai to the possibility
of multiple damages. While Louis Vuitton’s evidence demonstrating its (limited)
presence in the sports and car markets – buttressed by its survey results indicating
that some people associated the basketball with the Louis Vuitton brand – certainly
helped its case, the most striking evidence was that which Hyundai brought upon
itself.
The
court saw Hyundai’s failed attempt to secure permission to use the Toile
Monogram or other luxury marks as an indication that Hyundai knew that it could
not legally use the mark without consent, and the court did not look favorably
on Hyundai’s decision to simply use an altered form of the mark when it was
unable get permission. Interestingly, the fact that Hyundai featured the
basketball for such a short period of time did not help Hyundai’s case; the
court reasoned that the short time period made it more difficult for viewers to
discern that the marks on the ball differed from the Toile Monogram.
So What?
The
decision to display another brand’s trademark, whether in its original or
altered form, will almost always carry some degree of risk, so the steps
leading to the incorporation of another’s trademark into a website or other marketing
materials warrant careful attention. Hyundai’s effort to secure permission to use
a trademark was an appropriate first step, but the company faltered in its
decision-making when the trademark owners refused to cooperate. By using a slightly altered form of the Toile
Monogram, Hyundai at once limited itself from asserting a fair use argument (it
could not assert that it was commenting on the Louis Vuitton brand while using
a knock-off Louis Vuitton basketball) and exposed itself to Louis Vuitton’s
claim that the altered marks took away from the Toile Monogram’s distinctive
qualities. Had Hyundai not shied away
from using the original Toile Monogram, it might have had greater success
arguing that its use of the mark was protected as a fair commentary on Louis
Vuitton’s frivolously luxurious brand. It
would have been using the mark to refer to Louis Vuitton, and thus might not
have been liable for dilution.
The
case also bears testament to the strength of the Toile Monogram mark, which is
a result, in part, of the diligence with which Louis Vuitton polices it. Because Louis Vuitton’s marks have achieved
the status of “famous marks,” they are afforded a great deal of legal
protection. Thanks to decades of careful
monitoring, Louis Vuitton, known primarily for its contributions to the fashion
industry, managed to demonstrate that its mark had been diluted by the brief
use of a similar mark in an unexpected setting: on a basketball featured in a
car commercial.
If you have questions about the information
presented here, please contact Asya Calixto, an associate in the Intellectual
Property and Internet Law Practice Group and the author of this alert. You can
reach Asya at 617 456 8110 or acalixto@PrinceLobel.com. If you would like to learn more about
the legal services Prince Lobel's IP and Internet Law Practice Group can
provide to your organization, please contact Group Chair Robert A. Bertsche at
617 456 8018 or rbertsche@PrinceLobel.com.
