Daimlerchrysler Ag Mercedes-Benz Usa, Inc. v. Donald H. Bloom Mbz Communications, Inc.

Citations: 315 F.3d 932; 65 U.S.P.Q. 2d (BNA) 1359; 2003 U.S. App. LEXIS 291; 2003 WL 61110Docket: 01-3700

Court: Court of Appeals for the Eighth Circuit; January 9, 2003; Federal Appellate Court

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DaimlerChrysler AG and Mercedes-Benz USA appeal a summary judgment ruling against them in a trademark dispute involving the use of the phone number 1-800-637-2333, associated with the trademarks MERCEDES and MERCEDES-BENZ. DaimlerChrysler owns these trademarks, while Mercedes-Benz USA is their exclusive licensee. Donald Bloom, a part owner of a Mercedes-Benz dealership since 1984, acquired the phone number in the mid-1980s and used it to revive his dealership's business. Despite several attempts by Mercedes to negotiate the acquisition of the number between 1988 and 1992, Bloom retained it. In 1992, Mercedes issued a cease and desist letter claiming Bloom's usage violated his Dealer Agreement and interfered with their plans for a Customer Assistance Center (CAC). Bloom refused to relinquish the number, prompting Mercedes to obtain an alternative number for the CAC. In 1994, Bloom established MBZ Communications, which managed the shared use of the 1-800-MERCEDES number among several Mercedes dealers, providing call routing and marketing services. The case highlights the conflict between Bloom's use of the phone number and Mercedes' trademark rights.

MBZ's licensing system is exemplified by an agreement with House of Imports, Inc., a Mercedes dealer in Los Angeles, granting exclusive rights to use the vanity phone number 1-800-637-2333 within specified area codes covering Los Angeles and San Diego. House paid an initial fee of $39,200 and monthly fees of $3,150 for this license. Calls to 1-800-MERCEDES from the designated area codes are routed to House, which handles the calls. In contrast, calls from outside these area codes are directed to MBZ, leading to customer dissatisfaction due to MBZ's limited operating hours compared to the 24-hour availability of House's Customer Assistance Center (CAC).

In 1997, Mercedes terminated its agreements with Bloom and, in February 2000, initiated legal action against Bloom and MBZ, claiming violations of the Lanham Act, the Federal Trademark Dilution Act, and state trademark and unfair competition laws. The court denied Mercedes' motion for summary judgment while granting MBZ's, ruling that MBZ did not "use" the trademarks as defined under these laws. Mercedes appealed this decision, asserting three federal claims: trademark infringement under 15 U.S.C. § 1114, false designation of origin under 15 U.S.C. § 1125(a), and dilution of trademark under 15 U.S.C. § 1125(c). Each claim highlights the potential for confusion or deception regarding the association between Mercedes and MBZ’s use of marks in commerce.

Each provision necessitates that the defendant "use in commerce" the protected mark or a similar imitation to establish liability under the Lanham Act. A finding of actual use of the plaintiff's trademark is essential for any claim of trademark infringement or unfair competition. "Use in commerce" is defined as the bona fide use of a mark in the ordinary course of trade, not merely to reserve rights in a mark. The district court found that MBZ's licensing of a telephone number did not qualify as "use" since there was no active promotion or advertising of Mercedes' marks. Mercedes contends that MBZ can be liable for "passing off" its services as those of Mercedes and that advertising by MBZ's licensees should be imputed to MBZ. However, these arguments were rejected. Mercedes did not plead a passing off claim independently and only referred to it in relation to confusion; thus, it lacks merit. The case cited by Mercedes involves a direct misrepresentation of products, which is not analogous to MBZ's conduct. MBZ employees occasionally informed callers they reached Mercedes but did not sell goods under false pretenses, failing to establish a passing off claim. Furthermore, Mercedes' claim that the promotion by licensee dealers should be attributed to MBZ was dismissed, as the licensees are not considered related companies under the statute, and Mercedes has not claimed contributory infringement.

Mercedes contends that the district court wrongly focused solely on advertising and promotion as indicators of "use" under the Lanham Act. Citing Panavision Int'l L.P. v. Toeppen, Mercedes argues that intent to exploit a mark qualifies as "use." However, the court distinguishes this case from Panavision, stating that actual use or misleading representation is required for a violation under § 1125. Unlike Toeppen, MBZ has not registered or advertised the mark nor incorporated it into a website. The court highlights that the phone number 1-800-637-2333 lacks sufficient phonetic or visual similarity to Mercedes’ marks to qualify as a reproduction or imitation, contrasting it with the direct connection between the Panavision mark and the domain name. The court expresses skepticism about Mercedes' claim that callers would inherently associate 1-800-637-2333 with the Mercedes brand. The court finds cases involving vanity phone numbers, particularly Holiday Inns, more relevant than internet domain name cases. In Holiday Inns, the Sixth Circuit ruled that defendants operating a phone number similar to Holiday Inns' did not "use" the mark as per the Lanham Act, emphasizing that trademark rights do not extend to enjoining the use of similar phone numbers.

Review of vanity phone number cases indicates that a mark holder typically cannot seek relief unless the defendant actively advertises or promotes the alphanumeric representation of the phone number, leading the public to associate the infringer's offerings with the mark holder's brand. Licensing a toll-free number alone does not constitute "use" under the Lanham Act, even if the number's alphanumeric form resembles a protected mark. Courts have previously granted limited injunctive relief, allowing the use of the number but restricting its advertisement if it causes confusion with a protected mark. In one case, the court allowed the use of a telephone number but prohibited its advertising due to confusion likelihood. The district court's decision to grant summary judgment in favor of MBZ is upheld, affirming the court's reasoning. Additionally, state law claims were considered equivalent to federal claims, hence not separately addressed.