Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc. And Toyota Motor Corp.

875 F.2d 1026, 10 U.S.P.Q. 2d (BNA) 1961, 1989 U.S. App. LEXIS 6644

• Court: Court of Appeals for the Second Circuit
• Decided: May 18, 1989
• Docket: 862, Docket 89-7001
• Status: Published

Opinions

VAN GRAAFEILAND, Circuit Judge:

Toyota Motor Sales, U.S.A., Inc. and its parent, Toyota Motor Corporation, appeal from a judgment of the United States District Court for the Southern District of New York (Edelstein, J.) enjoining them from using LEXUS as the name of their new luxury automobile and the division that manufactures it. The district court held that, under New York’s antidilution statute, N.Y.Gen.Bus.Law § 368-d, Toyota’s use of LEXUS is likely to dilute the distinctive quality of LEXIS, the mark used by Mead Data Central, Inc. for its computerized legal research service, 702 F.Supp. 1031 (1988). On March 8, 1989, we entered an order of reversal, stating that an opinion would follow. This is the opinion.¹

THE STATUTE

Section 368-d of New York’s General Business Law, which has counterparts in at least twenty other states, reads as follows:

Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name shall be a ground for injunctive relief in cases of infringement of a mark registered or not registered or in cases of unfair competition, notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.

THE PARTIES AND THEIR MARKS

Mead and Lexis

Mead is a corporation organized under the laws of Delaware with its principal place of business in Miamisburg, Ohio. Since 1972, Mead has provided a computerized legal research service under the trademark LEXIS. Mead introduced evidence that its president in 1972 “came up with the name LEXIS based on Lex which was Latin for law and I S for information systems.” In fact, however, the word “lexis” is centuries old. It is found in the language of ancient Greece, where it had the meaning of “phrase”, “word”, “speaking” or “diction”. Pinkerton, Word for Word, 179 (1982). “Lexis” subsequently appeared in the Latin where it had a substantially similar meaning, i.e., “word”, “speech”, or “language”. Oxford Latin Dictionary (1983); Lewis and Short, A Latin Dictionary (1980); Lewis, An Elementary Latin Dictionary (1979).

Like many other Latin words, “lexis” has been incorporated bodily into the English. It can be found today in at least sixty general dictionaries or other English word books, including Webster’s Ninth New Collegiate Dictionary and Webster’s New World Dictionary. Moreover, its meaning has not changed significantly from that of its Latin and Greek predecessors; e.g., “Vocabulary, the total set of words in a language” (American Heritage Illustrated Encyclopedic Dictionary); “A vocabulary of a language, a particular subject, occupation, or activity” (Funk & Wagnalls Standard Dictionary). The district court’s finding that “to establish that LEXIS is an English word required expert testimony at trial” is clearly erroneous. Anyone with a rudimentary knowledge of English can go to a library or bookstore and find the word in one of the above-mentioned standard dictionaries.

Moreover, the record discloses that numerous other companies had adopted “Lexis” in identifying their business or its product, e.g., Lexis Ltd., Lexis Computer Systems Ltd., Lexis Language and Export Information Service, Lexis Corp., Maxwell Labs Lexis 3. In sum, we reject Mead’s argument that LEXIS is a coined mark which originated in the mind of its former president and, as such, is entitled per se to the greater protection that a unique mark such as “Kodak” would receive. See Esquire, Inc. v. Esquire Slipper Mfg. Co., 243 F.2d 540, 543 (1st Cir.1957); Intercontinental Mfg. Co. v. Continental Motors Corp., 230 F.2d 621, 623 (C.C.P.A.1956).

Nevertheless, through its extensive sales and advertising in the field of computerized legal research, Mead has made LEXIS a strong mark in that field, and the district court so found. In particular, the district court accepted studies proffered by both parties which revealed that 76 percent of attorneys associated LEXIS with specific attributes of the service provided by Mead. However, among the general adult population, LEXIS is recognized by only one percent of those surveyed, half of this one percent being attorneys or accountants. The district court therefore concluded that LEXIS is strong only within its own market.

As appears in the Addendum to this opinion, the LEXIS mark is printed in block letters with no accompanying logo.

Toyota and Lexus

Toyota Motor Corp. has for many years manufactured automobiles, which it markets in the United States through its subsidiary Toyota Motor Sales, U.S-A. On August 24, 1987 Toyota announced a new line of luxury automobiles to be called LEXUS. The cars will be manufactured by a separate LEXUS division of Toyota, and their marketing pitch will be directed to well-educated professional consumers with annual incomes in excess of $50,000. Toyota had planned to spend $18 million to $20 million for this purpose during the first nine months of 1989.

Before adopting the completely artificial name LEXUS for its new automobile, Toyota secured expert legal advice to the effect that “there is absolutely no conflict between ‘LEXIS’ and ‘LEXUS.’ ” Accordingly, when Mead subsequently objected to Toyota’s use of LEXUS, Toyota rejected Mead’s complaints. The district court held correctly that Toyota acted without predatory intent in adopting the LEXUS mark.

[T]he absence of predatory intent by the junior user is a relevant factor in assessing a claim under the antidilution statute, ... since relief under the statute is of equitable origin,_

Sally Gee, Inc. v. Myra Hogan, Inc., 699 F.2d 621, 626 (2d Cir.1983) (citations omitted).

However, the district court erred in concluding that Toyota’s refusal to acknowledge that its use of LEXUS might harm the LEXIS mark, deprived it of the argument that it acted in good faith. If, as we now hold, Toyota’s mark did not dilute Mead’s, it would be anomalous indeed to hold Toyota guilty of bad faith in proceeding in reliance on its attorney's correct advice to that effect. See Sweats Fashions, Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1565 (Fed.Cir.1987); E.S. Originals Inc. v. Stride Rite Corp., 656 F.Supp. 484, 490 (S.D.N.Y.1987); Inc. Publishing Corp. v. Manhattan Magazine, Inc., 616 F.Supp. 370, 394-96 (S.D.N.Y.1985), affd, 788 F.2d 3 (2d Cir.1986); Procter & Gamble Co. v. Johnson & Johnson, Inc., 485 F.Supp. 1185, 1201-02 (S.D.N.Y.1979), aff'd, 636 F.2d 1203 (2d Cir.1980). Indeed, even if the attorney’s professional advice had been wrong, it does not follow that Toyota’s reliance on that advice would have constituted bad faith. Information Clearing House, Inc. v. Find Magazine, 492 F.Supp. 147, 161-62 (S.D.N.Y.1980).

The LEXUS mark is in stylized, almost script-like lettering and is accompanied by a rakish L logo. See Addendum.

THE LAW

The brief legislative history accompanying section 368-d describes the purpose of the statute as preventing “the whittling away of an established trade-mark’s selling power and value through its unauthorized use by others upon dissimilar products.” 1954 N.Y.Legis.Ann. 49 (emphasis supplied). If we were to interpret literally the italicized word “its”, we would limit statutory violations to the unauthorized use of the identical established mark. This is what Frank Schechter, the father of the dilution theory, intended when he wrote The Rational Basis of Trademark Protection, 40 Harv.L.Rev. 813 (1927). See id. at 830-33; see also Shire, Dilution Versus Deception — Are State Antidilution Laws an Appropriate Alternative to the Law of Infringement?, 77 Trademark Rep. 273-76 (1987). However, since the use of obvious simulations or markedly similar marks might have the same diluting effect as would an appropriation of the original mark, the concept of exact identity has been broadened to that of substantial similarity. Community Federal Savings and Loan Ass’n v. Orondorff 678 F.2d 1034 (11th Cir.1982) (quoting Pro-phy-lac-tic Brush Co. v. Jordan Marsh Co., 165 F.2d 549, 553 (1st Cir.1948)); Dreyfus Fund, Inc. v. Royal Bank of Canada, 525 F.Supp. 1108, 1124 (S.D.N.Y.1981); 2 J. McCarthy, Trademarks and Unfair Competition § 24:13 at 215 (2d ed. 1984). Nevertheless, in keeping with the original intent of the statute, the similarity must be substantial before the doctrine of dilution may be applied. See Alberto-Culver Co. v. Andrea Dumon, Inc., 466 F.2d 705, 709 (7th Cir.1972); Consolidated Cosmetics v. Neilson Chemical Co., 109 F.Supp. 300, 310 (E.D.Mich.1952); Ehrlich, Anti-Dilution Laws Give Plaintiffs Powerful Weapon Against Copiers, Nat’l L.J., May 16, 1983, at 28.

Indeed, some courts have gone so far as to hold that, although violation of an antidi-lution statute does not require confusion of product or source, the marks in question must be sufficiently similar that confusion may be created as between the marks themselves. See Holiday Inns, Inc. v. Holiday Out in America, 481 F.2d 445, 450 (5th Cir.1973); King Research, Inc. v. Shulton, Inc., 324 F.Supp. 631, 638 (S.D.N.Y.1971), aff'd, 454 F.2d 66 (2d Cir.1972). We need not go that far. We hold only that the marks must be “very” or “substantially” similar and that, absent such similarity, there can be no viable claim of dilution.

The district court’s opinion was divided into two sections. The first section dealt with Toyota’s alleged violation of the Lanham Act, and the second dealt with the alleged dilution of Mead’s mark under New York’s antidilution statute. The district court made several findings on the issue of similarity in its Lanham Act discussion; it made none in its discussion of section 368-d. Assuming that the district court’s finding of lack of physical similarity in the former discussion was intended to carry over into the latter, we would find ourselves in complete accord with it since we would make the same finding. See Addendum; see also Blue Bell, Inc. v. Jaymar-Ruby, Inc., 497 F.2d 433, 435 (2d Cir.1974). However, if the district court’s statement in its Lanham Act discussion that “in everyday spoken English, LEXUS and LEXIS are virtually identical in pronunciation” was intended to be a finding of fact rather than a statement of opinion, we question both its accuracy and its relevance. The word LEXUS is not yet widely enough known that any definitive statement can be made concerning its pronunciation by the American public. However, the two members of this Court who concur in this opinion use “everyday spoken English”, and we would not pronounce LEXUS as if it were spelled LEXIS. Although our colleague takes issue with us on this point, he does not contend that if LEXUS and LEXIS are pronounced correctly, they will sound the same. We liken LEXUS to such words as “census”, “focus” and “locus”, and differentiate it from such words as “axis”, “aegis” and “iris”.² If we were to substitute the letter “i” for the letter “u” in “census”, we would not pronounce it as we now do. Likewise, if we were to substitute the letter “u” for the letter “i” in “axis”, we would not pronounce it as we now do. In short, we agree with the testimony of Toyota’s speech expert, who testified:

Of course, anyone can pronounce “lexis” and “lexus” the same, either both with an unstressed I or both with an unstressed U, or schwa — or with some other sound in between. But, properly, the distinction between unstressed I and unstressed U, or schwa, is a standard one in English; the distinction is there to be made in ordinary, reasonably careful speech.

In addition, we do not believe that “everyday spoken English” is the proper test to use in deciding the issue of similarity in the instant case. Under the Constitution, there is a “ ‘commonsense’ distinction between speech proposing a commercial transaction, which occurs in an area traditionally subject to government regulation, and other varieties of speech.” Central Hudson Gas & Electric Corp. v. Public Service Comm’n, 447 U.S. 557, 562, 100 S.Ct. 2343, 2349, 65 L.Ed.2d 341 (1980) (quoting Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 455-56, 98 S.Ct. 1912, 1918-19, 56 L.Ed.2d 444 (1978)). “The legitimate aim of the anti-dilution statute is to prohibit the unauthorized use of another’s trademark in order to market incompatible products or services”, and this constitutes a “legitimate regulation of commercial speech.” L.L. Bean, Inc. v. Drake Publishers, Inc., 811 F.2d 26, 32-33 (1st Cir.), cert. denied, 483 U.S. 1013, 107 S.Ct. 3254, 97 L.Ed.2d 753 (1987). “Advertising is the primary means by which the connection between a name and a company is established ... ”, Beneficial Corp. v. Beneficial Capital Corp., 529 F.Supp. 445, 448 (S.D.N.Y.1982), and oral advertising is done primarily on radio and television. When Mead’s speech expert was asked whether there were instances in which LEXUS and LEXIS would be pronounced differently, he replied “Yes, although a deliberate attempt must be made to do so.... They can be pronounced distinctly but they are not when they are used in common parlance, in everyday language or speech.” We take it as a given that television and radio announcers usually are more careful and precise in their diction than is the man on the street. Moreover, it is the rare television commercial that does not contain a visual reference to the mark and product, which in the instant case would be the LEXUS automobile. We conclude that in the field of commercial advertising, which is the field subject to regulation, there is no substantial similarity between Mead’s mark and Toyota’s.

There are additional factors that militate against a finding of dilution in the instant case. Such a finding must be based on two elements. First, plaintiff’s mark must possess a distinctive quality capable of dilution. Allied Maintenance Corp. v. Allied Mechanical Trades, Inc., 42 N.Y.2d 538, 545, 399 N.Y.S.2d 628, 369 N.E.2d 1162 (1977). Second, plaintiff must show a likelihood of dilution, Sally Gee, Inc. v. Myra Hogan, Inc., supra, 699 F.2d at 625. As section 368-d expressly states, a plaintiff need not show either competition between its product or service and that of the defendant or a likelihood of confusion as to the source of the goods or services. Allied Maintenance Corp. v. Allied Mechanical Trades, Inc., supra, 42 N.Y.2d at 543, 399 N.Y.S.2d 628, 369 N.E.2d 1162.

Distinctiveness for dilution purposes often has been equated with the strength of a mark for infringement purposes. P.F. Cosmetique, S.A. v. Minnetonka, Inc., 605 F.Supp. 662, 672 (S.D.N.Y.1985); Allied Maintenance Corp. v. Allied Mechanical Trades, Inc., supra, 42 N.Y.2d at 545, 399 N.Y.S.2d 628, 369 N.E.2d 1162. It also has been defined as uniqueness or as having acquired a secondary meaning. Allied Maintenance, supra, 42 N.Y.2d at 545, 399 N.Y.S.2d 628, 369 N.E.2d 1162. A trademark has a secondary meaning if it “has become so associated in the mind of the public with that entity [Allied] or its product that it identifies the goods sold by that entity and distinguishes them from goods sold by others.” Id. In sum, the statute protects a trademark’s “selling power.” Sally Gee, Inc. v. Myra Hogan, Inc., supra, 699 F.2d at 624-25. However, the fact that a mark has selling power in a limited geographical or commercial area does not endow it with a secondary meaning for the public generally. See Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 121 (8th Cir.1987); Truck Equipment Service Co. v. Fruehauf Corp., 536 F.2d 1210, 1219 (8th Cir.), cert. denied, 429 U.S. 861, 97 S.Ct. 164, 50 L.Ed.2d 139 (1976) (quoting Shoppers Fair of Arkansas, Inc. v. Sanders Co., 328 F.2d 496, 499 (8th Cir.1964)); Restaurant Lutece, Inc. v. Houbigant, Inc., 593 F.Supp. 588, 596 (D.N.J.1984); Scott v. Mego International, Inc., 519 F.Supp. 1118, 1138 (D.Minn.1981).

The strength and distinctiveness of LEXIS is limited to the market for its services —attorneys and accountants. Outside that market, LEXIS has very little selling power. Because only one percent of the general population associates LEXIS with the attributes of Mead’s service, it cannot be said that LEXIS identifies that service to the general public and distinguishes it from others. Moreover, the bulk of Mead’s advertising budget is devoted to reaching attorneys through professional journals.

This Court has defined dilution as either the blurring of a mark’s product identification or the tarnishment of the affirmative associations a mark has come to convey. Sally Gee, Inc. v. Myra Hogan, Inc., supra, 699 F.2d at 625 (quoting 3A Callman, The Law of Unfair Competition, Trademarks and Monopolies § 84.2 at 954-55). Mead does not claim that Toyota’s use of LEXUS would tarnish affirmative associations engendered by LEXIS. The question that remains, therefore, is whether LEXIS is likely to be blurred by LEXUS.

Very little attention has been given to date to the distinction between the confusion necessary for a claim of infringement and the blurring necessary for a claim of dilution. Shire, supra, 77 Trademark Rep. at 293. Although the antidilution statute dispenses with the requirements of competition and confusion, it does not follow that every junior use of a similar mark will dilute the senior mark in the manner contemplated by the New York Legislature.

As already stated, the brief legislative history accompanying section 368-d described the purpose of the statute as preventing “the whittling away of an established trademark’s selling power and value through its unauthorized use by others upon dissimilar products.” The history disclosed a need for legislation to prevent such “hypothetical anomalies” as “Dupont shoes, Buick aspirin tablets, Schlitz varnish, Kodak pianos, Bulova gowns, and so forth”, and cited cases involving similarly famous marks, e.g., Tiffany & Co. v. Tiffany Productions, Inc., 147 Misc. 679, 264 N.Y.S. 459 (1932), aff'd, 237 A.D. 801, 260 N.Y.S. 821, aff'd, 262 N.Y. 482, 188 N.E. 30 (1933); Philadelphia Storage Battery Co. v. Mindlin, 163 Misc. 52, 296 N.Y.S. 176 (1937). 1954 N.Y.Legis.Ann. 49-50.

It is apparent from these references that there must be some mental association between plaintiff’s and defendant’s marks.

[I]f a reasonable buyer is not at all likely to link the two uses of the trademark in his or her own mind, even subtly or subliminally, then there can be no dilution.... [Dilution theory presumes some kind of mental association in the reasonable buyer’s mind between the two party’s [sic] uses of the mark.

2 J. McCarthy, supra, § 24.13 at 213-14.

This mental association may be created where the plaintiff’s mark is very famous and therefore has a distinctive quality for a significant percentage of the defendant’s market. Sally Gee, Inc. v. Myra Hogan, Inc., supra, 699 F.2d at 625. However, if a mark circulates only in a limited market, it is unlikely to be associated generally with the mark for a dissimilar product circulating elsewhere. See, e.g., Estee Lauder, Inc. v. Cinnabar 2000 Haircutters, Inc., 218 U.S.P.Q. 191 (S.D.N.Y.), aff'd, 714 F.2d 112 (2d Cir.1982); Markel v. Scovill Mfg. Co., 471 F.Supp. 1244 (W.D.N.Y.), aff'd, 610 F.2d 807 (2d Cir.1979). As discussed above, such distinctiveness as LEXIS possesses is limited to the narrow market of attorneys and accountants. Moreover, the process which LEXIS represents is widely disparate from the product represented by LEXUS. For the general public, LEXIS has no distinctive quality that LEXUS will dilute.

The possibility that someday LEXÜS may become a famous mark in the mind of the general public has little relevance in the instant dilution analysis since it is quite apparent that the general public associates nothing with LEXIS. On the other hand, the recognized sophistication of attorneys, the principal users of the service, has substantial relevance. See Sally Gee, Inc. v. Myra Hogan, Inc., supra, 699 F.2d at 626. Because of this knowledgeable sophistication, it is unlikely that, even in the market where Mead principally operates, there will be any significant amount of blurring between the LEXIS and LEXUS marks.

For all the foregoing reasons, we hold that Toyota did not violate section 368-d. We see no need therefore to discuss Toyota’s remaining arguments for reversal.

ADDENDUM

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1 . Mead also alleged that Toyota had violated the Lanham Act, 15 U.S.C. § 1125(a), but the district court dismissed this cause of action and Mead has not appealed the dismissal.

2 . Similarly, we liken LEXUS to NEXXUS, a nationally known shampoo, and LEXIS to NEXIS, Mead's trademark for its computerized news service. NEXXUS and NEXIS have co-existed in apparent tranquility for almost a decade.