9th Circuit Closes Counterfeiting Loophole Created by Lower Court
On August 11, in Au-Tomotive Gold, Inc. v. Volkswagen of Am., Inc., 457 F.3d 1062, the 9th Circuit reversed a decision of the Arizona federal district court that had created a safe haven for trademark infringers and counterfeiters. The district court held that a manufacturer's unauthorized VW and Audi license plates and key chains were not counterfeits because "[t]he VW and Audi logos are used not because they signify that the license plate or key ring was manufactured or sold (i. e., as a designation of origin) by Volkswagen or Audi, but because there is a[n] aesthetic quality to the marks that purchasers are interested in having." It concluded that this use of the marks is "protected under the aesthetic functionality doctrine" of trademark law and entered an order declaring that Auto Gold's "license plates, license plate frames and key chains displaying Volkswagen and Audi trademarks . . . are not trademark infringements and/or trademark counterfeiting." On August 11, 2006 the 9th Circuit correctly reversed this ruling.
Generally, functional features can't be protected as trademarks. Courts have relied on this principle to hold that a purely decorative use of a designation is not "trademark use" and does not establish trademark rights. The district court relied on these "aesthetic funcionality" cases to hold that Auto Gold's decorative use of the AUDI and VOLKSWAGEN trademarks is functional and, therefore, not unlawful. The 9th Circuit reversed, correctly holding that the unauthorized use of someone else's source-identifying trademark to decorate one's product constitutes trademark infringement and counterfeiting.