Au-Tomotive Gold, Inc., takes genuine Volkswagen badges and puts them on its upscale license plates.
The plates aren’t from Volkswagen, but the logos are.
Au-Tomotive Gold packages its plates with a disclaimer saying the plates are not produced or sponsored by Volkswagen.
Volkswagen of America, Inc., nonetheless took issue with the practice.
Au-Tomotive Gold defended based on the first-sale doctrine. The first-sale doctrine holds that a producer’s right to control distribution of its trademarked product does not extend beyond the first sale of the product.
The District of Arizona rejected the defense, granted Volkswagen’s motion for summary judgment, and entered a permanent injunction.
Au-Tomotive Gold appealed.
On May 6, the Ninth Circuit affirmed, finding the first-sale doctrine did not apply.
The court found: “It is likely that a person on the street who sees an Auto Gold marquee license plate with a VW badge will associate the plate with Volkswagen. Indeed, customers buy marquee license plates principally to demonstrate to the general public an association with Volkswagen. ‘The demand for Auto Gold’s products is inextricably tied to the trademarks themselves.’”
It added that “Post-purchase confusion creates a free-rider problem. Auto Gold contends that in ‘first sale’ cases ‘the element of ‘free-riding’ present in other post-purchase confusion cases disappears because the producer has paid the price asked by the trademark owner for the ‘ride.” This contention misses the point. When a producer purchases a trademarked product, that producer is not purchasing the trademark. Rather, the producer is purchasing a product that has been trademarked. If a producer profits from a trademark because of post-purchase confusion about the product’s origin, the producer is, to that degree, a free rider.”
The case cite is Au-Tomotive Gold Inc. v. Volkswagen of America, Inc., __ F.3d __, 2010 WL 1794018, No. 08-16005 (9th Cir. May 6, 2010).