Select Auto Imports Inc. v. Yates Select Auto Sales, LLC
Docket: Case No. 1:15-cv-00679-GBL-JFA
Court: District Court, E.D. Virginia; July 7, 2016; Federal District Court
Gerald Bruce Lee, United States District Judge, presided over a two-day non-jury trial involving Select Auto Imports, Inc. against Yates Select Auto Sales, LLC, and Jeffrey Lee Yates, regarding claims of trademark infringement and unfair competition under the Lanham Act and Virginia law. Key claims included federal trademark infringement (Count I), unfair competition (Count II), Virginia trademark infringement (Count IV), and common law unfair competition (Count V). Select Auto Imports had previously dismissed claims against co-defendant Saleiman Azizi and for monetary damages, while also withdrawing its claim for trademark cyberpiracy.
Yates Select Auto Sales conceded several points relevant to the case, including Select Auto Imports’ ownership of the SELECT AUTO IMPORTS mark and that Yates Select Auto Sales used its own mark 'in commerce' related to goods and services. The sole issue was whether Yates Select Auto Sales' use of its mark was likely to confuse consumers. The Court determined that all nine factors assessing the likelihood of confusion favored Select Auto Imports or were neutral. Consequently, the Court ruled in favor of Select Auto Imports, granting a permanent injunction against Yates Select Auto Sales, requiring them to stop using the YATES SELECT AUTO SALES mark or any similar marks.
In non-jury trials, the judge is responsible for fact-finding and assessing evidence credibility, with the authority to disregard testimonies deemed untruthful or unreliable. The judge must make explicit findings of fact and separate conclusions of law as per Federal Rule of Civil Procedure 52(a)(1).
To comply with Rule 52(a), a trial court must provide more than just ultimate fact statements; it must articulate the subordinate facts that support its rulings. While the court is not required to address every factual issue or provide detailed evidentiary findings, the findings must be adequate to support its ultimate conclusions. It is unnecessary for the court to negate each factual contention explicitly, as long as the affirmative facts found collectively undermine the rejected claims. The sufficiency of the findings is evaluated based on their relevance and comprehensiveness in relation to the case's issues and their evidentiary support.
In the findings of fact, Select Auto Imports is identified as a Virginia corporation operating a used car dealership at 5630 S. Van Dorn Street, Alexandria, since at least 1987. It has a federal trademark registration for the mark SELECT AUTO IMPORTS, which became incontestable in 2013. An attorney conducted an investigation prior to adopting the mark and found no similar businesses using 'Select' in the D.C. metropolitan area. Select Auto Imports has promoted its dealership under this mark, including on its website, and sells approximately fifty cars monthly. The defendant, Yates Select Auto Sales LLC, operates a competing dealership nearby, with Jeffrey Lee Yates as its organizer.
In October 2014, Jeffrey Lee Yates acquired a used car dealership in Alexandria, Virginia, previously named Alexandria Motors, and renamed it Yates Select Auto Sales. He chose the name 'Yates' as it is a family house mark used since 1962 in various businesses in the area. Prior to this acquisition, neither Mr. Yates nor his family had been involved in car sales. On October 10, 2014, he registered Yates Select Auto Sales, LLC with the Virginia State Corporation Commission but has not registered the YATES SELECT AUTO SALES mark with the USPTO. Mr. Yates selected 'Select' to convey that vehicles sold were carefully chosen by trained staff, aiming to associate quality with the vehicles offered.
Mr. Yates acknowledged awareness of Select Auto Imports but denied any intent to imitate its name, noting a favorable impression from a past vehicle purchase there. In January 2014, logo concepts were created for Yates Select Auto Sales, resembling other Yates family logos, which were also drafted for his other businesses. Yates Select Auto Sales employs these logos across various merchandise and online platforms. The term 'Yates Select' is the primary branding element. Prior to the mark's commercial use, Dunner Law PLLC, representing Select Auto Imports, sent a cease and desist letter claiming that the YATES SELECT AUTO SALES mark infringes on the SELECT AUTO IMPORTS mark.
Yates Select Auto Sales began using its name in February 2015, disregarding warnings from Select Auto Imports, and registered the domain www.yatesselectautosales.com on February 26, 2015. General manager Mr. Azizi instructed the website administrator to update the business name from 'Alexandria Motors' to 'Yates Select Auto Sales' and to modify the homepage banner accordingly, which was completed shortly after. Mr. Yates did not approve the new banner upon seeing it for the first time in October 2015, leading to its subsequent removal. Following the name change, the dealership at 3030 Duke Street updated its signage to reflect the new name.
Select Auto Imports's legal team communicated with Mr. Azizi and Mr. Yates multiple times in March 2015 without receiving a response to their second letter sent on March 20, 2015. On May 28, 2015, Select Auto Imports filed a lawsuit against Yates Select Auto Sales, citing trademark infringement and unfair competition. Yates Select Auto Sales primarily advertises online and by word of mouth, selling about nine cars per month.
The court assessed the likelihood of confusion using nine factors, noting the strength of the SELECT AUTO IMPORTS mark, which was registered by the USPTO in 2002 without needing proof of secondary meaning. Select Auto Imports has operated for nearly three decades, has spent over $6 million on advertising from 2005 to 2014, and generated over $150 million in revenue in the past five years. At trial, it was established that Select Auto Imports holds the only active federal trademark for a mark with 'Select' and 'Auto' related to used car sales.
Active businesses promoting products online in Virginia include 'Virginia Select Auto,' located in Amherst and operating in Charlottesville, Richmond, and Roanoke with the consent of Select Auto Imports. These businesses do not operate within the geographic market of the Plaintiff. Select Auto Imports and Yates Select Auto Sales are the only dealerships in the Washington, D.C. area featuring both 'Select' and 'Auto' in their names.
Select Auto Imports primarily uses the trademark SELECT AUTO IMPORTS and sometimes refers to itself simply as 'Select' or 'Select Auto' in advertisements, highlighting the term 'Select' in slogans. In contrast, Yates Select Auto Sales uses the YATES SELECT AUTO SALES mark but admits 'Yates Select' is the dominant portion. The business also markets itself as 'Yates Select Auto' and has maintained a specific logo on its website.
Both companies sell used cars, including a range of domestic and imported vehicles, with overlapping inventories of luxury brands. Yates Select Auto Sales sold 67 cars from March to September 2015, with a focus on imports and luxury vehicles. Both dealerships offer a varied selection of cars in terms of price, age, and mileage. Although they serve out-of-state customers, the majority of their sales are concentrated within the D.C. metropolitan area. Yates Select Auto Sales is considering expanding to additional locations in Alexandria.
Select Auto Imports and Yates Select Auto Sales share significant similarities in their operations, as both sell used cars to the public and have similar facilities, including parking lots for display and offices for transactions. They employ identical advertising channels such as their websites, social media platforms (Google, Twitter, Facebook), blogs, store signage, and branded merchandise like polo shirts and hats.
Mr. Yates, the owner of Yates Select Auto Sales, was aware of Select Auto Imports prior to naming his business, having purchased a vehicle from them. He claimed that he chose the name 'Select' due to a memory of a grocery brand, but the court found this testimony unconvincing.
There have been multiple instances of actual consumer confusion between the two businesses. Notably, a customer mistakenly went to Yates Select Auto Sales after being directed to 'Select' by a relative, leading to a series of misunderstandings regarding the ownership and service of the purchased vehicle. Additional cases involved customers seeking specific vehicles believed to be available at Select Auto Imports, only to learn those cars were at Yates Select Auto Sales.
In terms of product quality, Select Auto Imports ensures thorough inspections of their vehicles, refusing to sell cars with frame damage or body panel replacements, whereas Yates Select Auto Sales sells vehicles in various conditions. The consumer base for both businesses is the general public, with varying levels of expertise regarding used cars.
Jurisdiction over this case is established under various federal statutes, including 15 U.S.C. § 1121 and 28 U.S.C. §§ 1331, 1337, and 1338, allowing the Court to hear both federal and state law claims. Venue is deemed appropriate as all defendants are located in the district where the claims arose.
The Court has determined that the likelihood of confusion analysis favors Select Auto Imports, indicating that Yates Select Auto Sales’s use of a similar mark is likely to confuse consumers regarding the source of goods and services. As a result, Select Auto Imports is entitled to a permanent injunction against Yates Select Auto Sales, prohibiting the use of the YATES SELECT AUTO SALES mark or any confusingly similar marks.
To establish a trademark infringement or false designation of origin claim, Select Auto Imports must show it owns a valid mark, that Yates Select Auto Sales used a similar mark in commerce, and that such use is likely to confuse consumers. Yates Select Auto Sales concedes the first four elements, which simplifies Select Auto Imports' burden to demonstrating likelihood of consumer confusion.
The likelihood of confusion is assessed through nine factors, including the strength of the mark, similarity between the marks, similarity of goods or services, marketing methods, intent of the defendant, evidence of actual confusion, product quality, and consumer sophistication. The analysis considers both the conceptual and commercial strength of the SELECT AUTO IMPORTS mark, with conceptual strength categorized into five levels of distinctiveness. Commercial strength relates to the mark's recognition in the marketplace and its ability to indicate the source of goods.
The USPTO's registration of the SELECT AUTO IMPORTS mark, without requiring proof of secondary meaning, indicates that the mark is inherently distinctive and suggestive rather than merely descriptive. This determination aligns with case law, including U.S. Search, LLC v. U.S. Search.com Inc., which affirms that suggestive marks provide strong evidence of distinctiveness. The USPTO specifically requested the disclaimer of 'Auto Imports,' indicating that 'Select' is the suggestive component. The USPTO has registered multiple marks containing 'Select' for automobile-related goods and services, further establishing its view of 'Select' as suggestive. The deference afforded to USPTO determinations means that such registrations serve as prima facie evidence regarding the mark's descriptive or suggestive nature. A suggestive mark, which implies qualities or characteristics of a product without explicitly describing it, receives greater protection against similar marks, influencing the likelihood of confusion analysis. This protection extends to not only directly competing products but also closely related goods. Given that SELECT AUTO IMPORTS is deemed suggestive by the USPTO, it is entitled to protection against infringement from used car dealerships.
The SELECT AUTO IMPORTS mark, despite being potentially descriptive, has acquired secondary meaning due to its nearly three decades of exclusive use in the Washington, D.C. metropolitan area, substantial advertising expenditures, and significant sales success. This establishes the mark as commercially strong, preventing competitors like Yates Select Auto Sales from using it on similar products. Secondary meaning is supported by factors such as the length of use, advertising spend (over $11 million), and sales (approximately $6 million over eight years), reinforcing the mark's identity in the market.
Third-party use of similar marks does not diminish this conclusion, as their relevance depends on actual market usage and consumer familiarity, which has not been demonstrated in this case. Select Auto Imports has identified over 25 businesses using the term 'Select' in various locations, including Virginia and Maryland, without pursuing legal action against them, indicating a lack of significant market confusion. The owner, Mike Hajimohammad, acknowledges awareness of this extensive use but maintains that the focus remains on the Washington, D.C. area. Yates Select Auto’s arguments regarding third-party usage do not affect this analysis, and case law confirms that trademark owners are not obligated to challenge all similar uses unless there is a substantial likelihood of confusion.
A federal trademark registration offers a nationwide presumption of priority; however, injunctive relief for a senior user is only warranted in areas of demonstrated actual use, as established in Emergency One, Inc. v. Am. Fire Eagle Engine Co. The majority of Select Auto Imports’s operations are concentrated in the Washington, D.C. area, focusing solely on the sale of used cars, which does not justify pursuing unrelated markets. The Court deems the SELECT AUTO IMPORTS mark as suggestive or at least descriptive with secondary meaning, indicating its commercial strength, thereby favoring Select Auto Imports.
Regarding mark similarity, the Fourth Circuit evaluates visual, phonetic, and semantic aspects. The SELECT AUTO IMPORTS and YATES SELECT AUTO SALES marks exhibit significant similarities in all three categories: both contain the identical words "Select" and "Auto," and "Imports" is a subset of "Sales." Their logos are also nearly mirror images, sharing the same color scheme of red, black, and white/gray, which raises concerns given that junior users are expected to avoid confusing marks.
The dominant elements of each mark further underscore their similarity: "Select" is predominant in SELECT AUTO IMPORTS due to its emphasis in advertising, while "Yates Select" serves as the dominant portion of YATES SELECT AUTO SALES. The term "Select" is likely to be most memorable for consumers, aligning with legal precedents that identify dominant portions of marks as those most indicative of source origin.
Consumers commonly refer to the business as "Yates Select," and the branding prominently features both "Yates" and "Select" in its advertising, including its online logo and physical signage. Courts often find similarity in trademarks when there is overlap in the dominant terms, regardless of other dissimilarities. This principle is supported by case law, where courts have ruled that the addition of a house mark does not necessarily reduce the likelihood of confusion and may even exacerbate it.
The marks "SELECT AUTO IMPORTS" and "YATES SELECT AUTO SALES" are deemed similar, supporting Select Auto's position. Additionally, both businesses sell used cars, including many of the same brands, predominantly luxury imports like Mercedes-Benz. This significant overlap in goods emphasizes the potential for consumer confusion, as shown in relevant case precedents. Overall, the similarity in marks and the overlap in the products offered weigh in favor of Select Auto.
In Swatch, the court considered the dissimilarity argument based on price differences between the defendant's watches ($16-$20) and the plaintiffs' watches ($50-$250), ultimately emphasizing the importance of protecting trademark owners' ability to expand into related markets. The court concluded that the market for both parties' goods was associated, favoring the plaintiff.
Similarly, in the case of Select Auto Imports versus Yates Select Auto Sales, the overlap in inventory supported a finding of similarity, particularly as Yates intended to expand its dealership locations in Alexandria. Geographic proximity between the two businesses further amplified this similarity, as courts have previously recognized that businesses located close to one another increase the likelihood of consumer confusion, citing cases where proximity played a significant role in trademark disputes.
The court determined that the goods and services offered by both Select Auto Imports and Yates Select Auto Sales were similar, thus favoring Select Auto Imports.
Regarding the similarity of facilities, the Fourth Circuit assesses whether the purposes of the businesses align. In this case, both dealerships provided transportation through used car sales and were located within four miles of each other, featuring similar physical characteristics such as parking lots and offices for transactions. Consequently, this factor also weighed in favor of Select Auto Imports.
Finally, the similarity of advertising was evaluated based on the overlap in outlets and customer bases, which need not be identical but must exhibit some degree of commonality.
Yates Select Auto Sales’s advertising channels significantly overlap with those of Select Auto Imports, as both utilize similar platforms including their websites, Google, Twitter, Facebook, blogs, store signage, and branded merchandise. This similarity, combined with the geographic proximity of the dealerships, suggests a likelihood of confusion among consumers. The court holds that these factors favor Select Auto Imports.
Moreover, evidence of Yates's intent to confuse is supported by his prior knowledge of Select Auto Imports, the closeness of the dealerships, and the reputational strength of Select Auto Imports. Yates's familiarity with Select Auto Imports, stemming from a favorable past experience, strengthens the inference of bad faith. Despite Yates's claims of not being involved in the website’s development or logo design, as the owner, he bears responsibility for his business's actions.
The court concludes that Yates Select Auto Sales intended to mislead consumers regarding the source of its goods and services, leading to a finding that this factor also weighs in favor of Select Auto Imports. Even if there were no intent to confuse, a belief that the mark would not cause confusion is not a valid defense, as intent does not negate the potential for unfair competition. Actual confusion is regarded as strong evidence of likely confusion in trademark cases.
Evidence of actual consumer confusion is a significant indicator of the likelihood of confusion in trademark disputes. Even minimal instances of such confusion can be persuasive, as established in Copy Cop, Inc. v. Task Printing, Inc. The presence of actual confusion serves as strong proof of a likelihood of confusion; however, it is not a requirement due to the inherent challenges in gathering such evidence. Instances of actual confusion are difficult to document, as noted in General Mills, Inc. v. Fage Dairy Processing Industries.
In the case at hand, Yates Select Auto Sales has recorded at least three distinct instances of actual consumer confusion since its mark was introduced a year ago. These included direct confusion where customers intended to purchase the plaintiff's product but mistakenly bought the defendant's due to the similarity of the marks, as highlighted in 1-800 Contacts, Inc. v. Lens.com, Inc. The threshold for establishing evidence of actual confusion is low, often requiring only a handful of instances over several years. Courts may deem confusion instances as de minimis if contrasted against numerous opportunities for confusion, but even under high traffic scenarios, a few instances can be compelling.
In this case, three instances of confusion within a year—given the limited sales volume of both Yates Select Auto Sales and Select Auto Imports—are considered significant rather than de minimis. Therefore, this factor favors Select Auto Imports.
Regarding the sophistication of the consuming public, the Fourth Circuit indicates that buyer sophistication is relevant only when the market isn't the general public. There is no evidence to suggest that the consumers of the products from both parties are experts or highly trained professionals, implying that the general consumer's sophistication does not mitigate the likelihood of confusion.
The Fourth Circuit Court of Appeals emphasized the sophistication of buyers in specific markets, noting that construction firms often employ highly trained procurement professionals, while consumers in broader markets, such as automotive sales, vary significantly in sophistication. In the case at hand involving Select Auto Imports and Yates Select Auto Sales, the Court determined that consumers are not trained professionals, rendering this factor neutral. The Court ultimately concluded that Yates Select Auto Sales's use of a confusingly similar mark was likely to cause consumer confusion regarding the source of its goods and services.
The Court granted a permanent injunction against Yates Select Auto Sales, mandating the cessation of all use of the YATES SELECT AUTO SALES mark and any similar marks. Defendants are also required to destroy all materials bearing the infringing mark and amend their business registration to eliminate the use of any confusingly similar marks. They must provide a compliance report within thirty days of the injunction’s entry, and the Court retains jurisdiction for enforcement actions. Additional points include the credibility of Mr. Yates's claims regarding the awareness of the original logo, the classification of trademarks (fanciful, arbitrary, suggestive, descriptive, and generic), and the types of evidence that can demonstrate actual confusion among consumers, including anecdotal and survey evidence. Overall, the Court ruled in favor of Select Auto Imports on multiple counts of the Amended Complaint.
