Thursday, April 19, 2012

Louis Vuitton’s Trademark Dilution Win vs. Hyundai - a Canadian Perspective

Thursday, April 19, 2012

A number of trademark bloggers south of the border, including Eric Goldman, Techdirt and Citizen Media Law Project, have commented on the surprising decision of a US court in which a one-second appearance of a Louis Vuitton esque basketball in a television commercial was found to violate Louis Vuitton’s trademark rights.

The ad for the Hyundai Sonata showed various images of luxury goods juxtaposed into everyday situations.  The scene in dispute showed a basketball covered in a pattern that looked very similar to Louis Vuitton’s registered trademark known as “toile monogram”. No, Louis Vuitton does not make basketballs (yet).

The US District Court for the Southern District of New York granted Louis Vuitton’s motion for summary judgment, stating that Hyundai had violated both federal and state trademark dilution laws. Dilution legislation protects owners of famous trademarks from having their trademarks used in a manner that weakens the distinctiveness of the mark.  Unlike infringement, dilution can exist even in absence of confusion and where the goods and services are completely different than those of the trademark owner.  

So, how would this case have been handled in Canada, you ask?  

Canada does not have an equivalent to US trademark dilution legislation, nor any specific legislation directed to “famous” trademarks. The closest comparison and most likely cause of action in Canada would be under Section 22 of the Trade-marks Act, which states “no person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.”

The scope of Section 22 remains somewhat unclear as its boundaries have yet to be truly tested by the courts.  However, the Supreme Court of Canada’s decision in Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, [2006] 1 S.C.R. 824 offers some clarity.  In Veuve, Justice Binnie set out the four-part test for proving depreciation of goodwill under Section 22: 

  1. the plaintiff’s registered trademark must have been used by the defendant in connection with wares or services;
  2. the plaintiff’s registered trade-mark must be sufficiently well known to have significant goodwill attached to it;
  3. the plaintiff’s mark must have been used in a manner likely to have an effect on that goodwill (i.e. linkage); and 
  4. the likely effect would be to depreciate the value of its goodwill (i.e. damage).

In expanding on the first element, Justice Binnie references the definition of use under Section 4 of the Act, which reads as follows:
 4.  (1)  A trade-mark is deemed to be used in association with wares if, at the time of the transfer of the property in or possession of the wares, in the normal course of trade, it is marked on the wares themselves or on the packages in which they are distributed or it is in any other manner so associated with the wares that notice of the association is then given to the person to whom the property or possession is transferred.
 (2) A trade-mark is deemed to be used in association with services if it is used or displayed in the performance or advertising of those services.
This seems to support the definition of use adopted by the court in Clairol International Corp. v. Thomas Supply & Equipment Co., [1968] 2 Ex. C.R. 552.

Referring to the facts of Louis Vuitton v. Hyundai, the image of a fictitious Louis Vuitton basketball in a television commercial for a car does not appear to meet the definition of use under Section 4.  Accordingly, if the court restricts itself to the Section 4 definition of use, it is likely that a claim such as Louis Vuitton’s against Hyundai would be rejected in Canada for failing to meet the first element of the test.  

In terms of the fourth element, although the meaning of depreciation has not been fully explored by the courts, Justice Binnie clarified that at least some evidence will need to be adduced in order to infer not just a possibility of depreciation but a likelihood of depreciation.  Thus, depreciation should not automatically be inferred just because elements 1-3 are met.  

In Hyundai’s case, it is not apparent what, if any, damage they have done to the goodwill in Louis Vuitton’s trademark.  The companies are not competitors, and there is no reason to believe that Hyundai’s use of Louis Vuitton’s mark in this context would draw consumers away from the luxury brand.  The ad does not disparage or imply anything negative about the toile monogram trademark or the Louis Vuitton brand as a whole, and in fact holds the Louis Vuitton brand up as a symbol of luxury.   

If anything, judging from the online reactions to the ad, it may have actually created a market for a possible expansion into basketball sales for Louis Vuitton.  [I am willing to bet that Twitter users @kailanhindsman (“I think a Louis vuitton football or basketball would be gangsta”) and @Dhat_Kid_DiCE (“Dyd yall See tht Louis Vuitton Basketball? Lols iWant 1 ^___^”) had no idea they would be quoted in a trademark dilution judgment.]

That being said, the US court managed to find justification for dilution in the facts of this case, and it remains to be seen how broadly Canadian courts will interpret the concept of “depreciation”. 

Given the limited run of the advertisement at issue (it aired a total of 5 times), and the questionable damage caused to the Louis Vuitton brand, this lawsuit may be more about protecting Louis Vuitton’s reputation as a trademark enforcer than it is about protecting the goodwill in its trademark.