Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc. , 457 F.3d 1062 ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
AU-TOMOTIVE GOLD, INC., 
Plaintiff-Appellee,
No. 04-16174
v.
D.C. Nos.
VOLKSWAGEN OF AMERICA, INC.;  CV-01-00162-WDB
AUDI OF AMERICA, INC; CV-01-00508-WDB
VOLKSWAGEN AKTIENGESELLSCHAFT;
OPINION
AUDI AKTIENGESELLSCHAFT,
Defendants-Appellants.

Appeal from the United States District Court
for the District of Arizona
William D. Browning, District Judge, Presiding
Argued and Submitted
February 14, 2006—San Francisco, California
Filed August 11, 2006
Before: Arthur L. Alarcón and M. Margaret McKeown,
Circuit Judges, and H. Russel Holland,*
Senior District Judge.
Opinion by Judge McKeown
*The Honorable H. Russel Holland, Senior District Judge for the Dis-
trict of Alaska, sitting by designation.
9511
9514 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
COUNSEL
Gregory D. Phillips, Howard, Phillips & Anderson, Salt Lake
City, Utah; Scott R. Ryther, Howard, Phillips & Anderson,
Salt Lake City, Utah, for the defendant-appellant.
H. Kenneth Kudon, Kudon Law Firm, Potomac, Maryland,
for the plaintiff-appellee.
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9515
OPINION
McKEOWN, Circuit Judge:
This case centers on the trademarks of two well-known
automobile manufacturers—Volkswagen and Audi.1 The
question is whether the Lanham Act prevents a maker of auto-
mobile accessories from selling, without a license or other
authorization, products bearing exact replicas of the trade-
marks of these famous car companies. Au-Tomotive Gold,
Inc. (“Auto Gold”) argues that, as used on its key chains and
license plate covers, the logos and marks of Volkswagen and
Audi are aesthetic functional elements of the product—that is,
they are “the actual benefit that the consumer wishes to
purchase”—and are thus unprotected by the trademark laws.
Accepting Auto Gold’s position would be the death knell
for trademark protection. It would mean that simply because
a consumer likes a trademark, or finds it aesthetically pleas-
ing, a competitor could adopt and use the mark on its own
products. Thus, a competitor could adopt the distinctive Mer-
cedes circle and tri-point star or the well-known golden arches
of McDonald’s, all under the rubric of aesthetic functionality.
The doctrine of aesthetic functionality has a somewhat
checkered history. In broad strokes, purely aesthetic product
features may be protected as a trademark where they are
source identifying and are not functional. On the other hand,
where an aesthetic product feature serves a “significant non-
trademark function,” the doctrine may preclude protection as
a trademark where doing so would stifle legitimate competi-
tion. Qualitex Co. v. Jacobson Products Co., 514 U.S. 159,
170 (1995). Taken to its limits, as Auto Gold advocates, this
doctrine would permit a competitor to trade on any mark sim-
1
The actual parties are Volkswagen of America, Inc., Audi of America,
Inc., Volkswagen Aktiengesellschaft, and Audi Aktiengesellschaft (collec-
tively “Volkswagen and Audi”).
9516 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
ply because there is some “aesthetic” value to the mark that
consumers desire. This approach distorts both basic principles
of trademark law and the doctrine of functionality in particu-
lar.
Auto Gold’s incorporation of Volkswagen and Audi marks
in its key chains and license plates appears to be nothing more
than naked appropriation of the marks. The doctrine of aes-
thetic functionality does not provide a defense against actions
to enforce the trademarks against such poaching. Conse-
quently, we reverse the district court’s grant of summary
judgment in favor of Auto Gold on the basis of aesthetic func-
tionality. We also reverse the denial of Volkswagen and
Audi’s motion for summary judgment with respect to
infringement and dilution and remand for further proceedings.
BACKGROUND
Volkswagen and Audi are manufacturers of automobiles,
parts and accessories that bear well-known trademarks,
including the names Volkswagen and Audi, the encircled VW
logo, the interlocking circles of the Audi logo, and the names
of individual car models. The marks are registered in the
United States and have been in use since the 1950s.2
2
A registered mark is “prima facie evidence . . . of the registrant’s
exclusive right to use the registered mark in commerce on or in connection
with the goods or services specified in the registration.” 15 U.S.C. § 1115.
The Volkswagen marks were originally registered in the United States in
1965 for products ranging from automobiles and a host of automobile
accessories, to a long list of other goods such as medical spitoons, water-
skis, credit card services, and teddy bears. Volkswagen recently secured
registration for its trademarks with respect to some of the specific product
lines at issue in this case. These registrations were pending during the pro-
ceedings below; we take judicial notice of their issuance. See, e.g., Regis-
tration No. 2,849,974 (June 8, 2006); Registration No. 2,835,662 (April
27, 2004); Registration No. 2,987,620 (Aug. 23, 2005). Audi registered its
trademarks for automobiles and a host of other products, including key
fobs, in 1986. See Registration No. 1,416,583 (Nov. 11, 1986). Other than
the recently registered marks, the marks are incontestable. 15 U.S.C.
§ 1065.
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9517
Auto Gold produces and sells automobile accessories to
complement specific makes of cars, including Cadillac, Ford,
Honda, Lexus, Jeep, Toyota, and others. In 1994, Auto Gold
began selling license plates, license plate frames and key
chains bearing Volkswagen’s distinctive trademarks and, in
1997, began selling similar products bearing Audi’s distinc-
tive trademarks. The marks used are exact replicas of the reg-
istered trademarks or, in at least some cases, genuine
trademark medallions purchased from Volkswagen dealers;
Auto Gold states that it “applies authentic [Volkswagen and
Audi] logos to its marquee license plates.”
According to Auto Gold, its goods serve a unique market.
Consumers want these accessories “to match the chrome on
their cars; to put something on the empty space where the
front license tag would otherwise go; or because the car is a
[Volkswagen or Audi], they want a [Volkswagen or Audi]-
logo plate.” Both Auto Gold and Volkswagen and Audi serve
this market. Auto Gold sells its license plates, license plate
covers, and key rings with Volkswagen and Audi trademarks
to the wholesale market, including car dealers, auto accessory
dealers and other merchants. Volkswagen and Audi, for their
operations in the United States, license an independent mar-
keting firm to sell license plates, covers, and key chains
directly to consumers.
Auto Gold has license and marketing agreements with sev-
eral car manufacturers, authorizing sales of auto accessories
bearing those companies’ trademarks. Despite several
attempts to secure similar arrangements with Volkswagen and
Audi, Auto Gold is not authorized to sell products with their
trademarks. Instead, Auto Gold products are accompanied by
disclaimers that deny any connection to Volkswagen or Audi.
The disclaimers are not visible once the product is removed
from the packaging and in use, nor are the disclaimers always
clear. For example, some labels state that the product “may or
may not” be dealer approved, and Auto Gold’s website identi-
fies its goods as “Factory authorized licensed products.”
9518 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
In the mid-1990s, another car maker aggrieved by unautho-
rized sales of trademarked accessories sued Auto Gold for
trademark infringement and obtained an injunction prohibit-
ing Auto Gold from selling any products that incorporate rep-
licas of its registered marks. See BMW of North America, Inc.
v. Au-Tomotive Gold, Inc., 1996 WL 1609124 (M.D. Fla.,
June 19, 1996). Fearful that the decision would invite further
trademark claims, Auto Gold filed suit against Volkswagen
and Audi in the District of Arizona in 2001. Auto Gold’s
complaint sought a declaratory judgment that its activities did
not constitute trademark infringement or trademark counter-
feiting under 15 U.S.C. § 1114, unfair competition under 15
U.S.C. § 1125(a), or trademark dilution under 15 U.S.C.
§ 1125(c). Auto Gold also included claims for interference
with prospective economic advantage and trade libel.
Volkswagen and Audi filed counterclaims for trademark
infringement under 15 U.S.C. § 1114(1)(a); false designation
of origin under 15 U.S.C. § 1125(a); trademark dilution under
15 U.S.C. § 1125(c); consumer fraud under the Arizona Con-
sumer Fraud Act; tortious interference with contract; tortious
interference with business expectancy; trademark counterfeit-
ing under the Arizona Consumer Fraud Act; and a request for
declaratory judgment as to all claims.
From this point, the case became a maze of counterclaims,
stipulated dismissals, and new complaints. This procedural
morass was made all the more complicated when some of
Volkswagen and Audi’s complaints migrated from the origi-
nal counterclaim to a separate complaint that was later consol-
idated with the original action. After discovery, Auto Gold
filed a motion for partial summary judgment seeking a declar-
atory judgment that its products do not infringe or counterfeit
the Volkswagen and Audi trademarks and do not unfairly
compete. Auto Gold’s primary argument was that its products
were lawful under the “first sale” doctrine. In response,
Volkswagen and Audi filed a motion for summary judgment
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9519
on their trademark infringement, trademark dilution, and
unfair competition claims.
In ruling for Auto Gold, the district court found that “[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.” Concluding that the marks were “pro-
tected under the aesthetic functionality doctrine,” the district
court granted Auto Gold’s motion for partial summary judg-
ment, denied the motion for summary judgment filed by
Volkswagen and Audi, 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 counterfeit-
ing.”
After supplemental briefing identifying the remaining
claims, the district court held that the parties had stipulated to
dismiss the trademark dilution claim without prejudice.3
Volkswagen and Audi moved for leave to amend the com-
plaint to include a dilution claim, which the district court con-
strued as a request for leave to file a second amended
counterclaim. The district court denied the motion, holding
that amendment would be futile because Volkswagen and
Audi could not prevail on the merits of the claim. The court
declined to rule on Auto Gold’s “first sale” defense. All
remaining claims were dismissed with prejudice. On the basis
of its previous rulings, the district court enjoined Volkswagen
and Audi from enforcing their trademarks against Auto Gold
or its customers.
3
The record does not contain any record of a stipulation to dismiss the
dilution claim. Volkswagen and Audi argued to the district court that they
did not dismiss, but rather inadvertently forgot to include the claim in a
later pleading.
9520 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
On appeal, Volkswagen and Audi ask us to (1) reverse the
district court’s grant of summary judgment and declaratory
relief in favor of Auto Gold, (2) reverse the district court’s
dismissal of their counterclaims, (3) reverse the district
court’s denial of their motion for summary judgment, and
(4) remand for entry of summary judgment with respect to
trademark infringement and trademark dilution.
ANALYSIS
The central question before us, discussed in Part I, is the
scope of the doctrine of the “aesthetic functionality” and its
application to the Volkswagen and Audi trademarks as they
appear on Auto Gold’s products. Part II discusses Volkswa-
gen and Audi’s trademark infringement claims, and Part III
addresses the trademark dilution claim.
I. AESTHETIC FUNCTIONALITY
A. TRADEMARK LAW AND AESTHETIC FUNCTIONALITY
[1] A trademark is a “word, name, symbol, or device” that
is intended “to identify and distinguish [the mark holder’s]
goods, including a unique product, from those manufactured
or sold by others and to indicate the source of the goods.” 15
U.S.C. § 1127. A valid, registered trademark entitles the
holder to prevent others from using the mark where (1) “such
use is likely to cause confusion, or to cause mistake or
deceive,” 15 U.S.C. § 1114(1)(a) (so-called “trademark
infringement”), or (2) “such use . . . causes dilution of the dis-
tinctive quality of the mark,” 15 U.S.C. § 1125(c)(1) (so-
called “trademark dilution”).
The principal role of trademark law is to ensure that con-
sumers are able to identify the source of goods. Qualitex, 514
U.S. at 164. Protecting the source-identifying role of trade-
marks serves two goals. First, it quickly and easily assures a
potential customer that this item—the item with the mark—is
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9521
made by the same producer as other similarly marked prod-
ucts. At the same time, the law helps “assure a producer that
it (and not an imitating competitor) will reap the financial,
reputation-related rewards associated with a desirable prod-
uct.” Id.; see also Avery Dennison Corp. v. Sumpton, 189 F.3d
868, 873 (9th Cir. 1999).
[2] A functional product feature does not, however, enjoy
protection under trademark law. See Qualitex, 514 U.S. at
164. The Supreme Court has instructed that a feature is func-
tional if it is “essential to the use or purpose of the article [or]
affects [its] cost or quality.” Inwood Labs., Inc. v. Ives Labs.,
Inc., 456 U.S. 844, 851 n.10 (1982). The Inwood Laboratories
definition is often referred to as “utilitarian” functionality, as
it relates to the performance of the product in its intended pur-
pose. Thus, “[t]he functionality doctrine prevents trademark
law, which seeks to promote competition by protecting a
firm’s reputation, from instead inhibiting legitimate competi-
tion by allowing a producer to control a useful product fea-
ture.” Qualitex, 514 U.S. at 164.
Extending the functionality doctrine, which aims to protect
“useful” product features, to encompass unique logos and
insignia is not an easy transition. Famous trademarks have
assumed an exalted status of their own in today’s consumer
culture that cannot neatly be reduced to the historic function
of trademark to designate source. Consumers sometimes buy
products bearing marks such as the Nike Swoosh, the Playboy
bunny ears, the Mercedes tri-point star, the Ferrari stallion,
and countless sports franchise logos, for the appeal of the
mark itself, without regard to whether it signifies the origin or
sponsorship of the product. As demand for these marks has
risen, so has litigation over the rights to their use as claimed
“functional” aspects of products. See, e.g., Vuitton et Fils S.A.
v. J. Young Enters., Inc., 644 F.2d 769 (9th Cir. 1981) (revers-
ing and remanding for trial a district court determination that
the Louis Vuitton logo and trademarked purse material were
functional); Boston Prof. Hockey Ass’n, Inc. v. Dallas Cap &
9522 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
Emblem Mfg., Inc., 510 F.2d 1004 (5th Cir. 1975) (holding
that reproductions of professional hockey franchise’s logo
sold alone are not “functional” and can be protected); Ford
Motor Co. v. Lloyd Design Corp., 184 F. Supp. 2d 665 (E.D.
Mich. 2002) (holding that a car maker’s trademarks are not
functional aspects of defendant’s car accessories).
The results reached in these various aesthetic functionality
cases do not easily weave together to produce a coherent
jurisprudence, although as a general matter courts have been
loathe to declare unique, identifying logos and names as func-
tional. To understand how the concept of functionality applies
to the case before us, broad invocations of principle are not
particularly helpful. Instead, we find it useful to follow the
chronological development and refinement of the doctrine.
The doctrine of aesthetic functionality is often traced to a
comment in the 1938 Restatement of Torts:
When goods are bought largely for their aesthetic
value, their features may be functional because they
definitely contribute to that value and thus aid the
performance of an object for which the goods are
intended.
Restatement of Torts § 742, comment a (1938) (see Restate-
ment 3d of Unfair Competition, § 17 (1995)). Two examples
of products with aesthetic functional features were offered,
with very little comment—a heart-shaped candy box and a
distinctive printing typeface.
Nearly fifteen years later, the doctrine blossomed in
Pagliero v. Wallace China Co., an action by Wallace China,
a manufacturer of vitrified china, to prohibit a competitor
from using a series of decorative patterns and a corresponding
list of names. See 198 F.2d 339 (9th Cir. 1952). Neither the
patterns nor the names were covered by registered trademarks
or patents; instead, Wallace claimed secondary meaning, pri-
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9523
marily that customers associated the patterns with Wallace,
due to extensive advertising and a reputation for quality. Id.
at 342. In ruling on Wallace’s claim, we loosely echoed the
1938 Restatement in articulating the line between aesthetic
appeal and functionality:
[W]here the features are “functional” there is nor-
mally no right to relief. “Functional” in this sense
might be said to connote other than a trade-mark
purpose. If the particular feature is an important
ingredient in the commercial success of the product,
the interest in free competition permits its imitation
in the absence of a patent or copyright. On the other
hand, where the feature or, more aptly, design, is a
mere arbitrary embellishment, a form of dress for the
goods primarily adopted for purposes of identifica-
tion and individuality and hence, unrelated to basic
consumer demands in connection with the product,
imitation may be forbidden where the requisite
showing of secondary meaning is made. Under such
circumstances, since effective competition may be
undertaken without imitation, the law grants protec-
tion.
Id. at 343 (internal citations omitted).
Applying that test, the china patterns were deemed “func-
tional” because the “attractiveness and eye-appeal” of the
design is the primary benefit that consumers seek in purchas-
ing china. Id. at 343-44. Thus, Wallace’s designs were not
“mere arbitrary embellishment,” but were at the heart of basic
consumer demand for the product and could not be protected
as trademarks.
Almost thirty years later, Pagliero was revived in a Ninth
Circuit case involving an effort by the International Order of
Job’s Daughters to preclude a jewelry maker from selling
jewelry bearing the Job’s Daughters insignia. See Interna-
9524 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
tional Order of Job’s Daughters v. Lindeburg & Co., 633
F.2d 912 (9th Cir. 1980). Because the defendant’s products
bearing the Job’s Daughters mark were sold “on the basis of
their intrinsic value, not as a designation of origin or sponsor-
ship,” the defendant argued that they were functional under
Pagliero. Id. at 918.
The court acknowledged that a “name or emblem” could,
in some cases, “serve simultaneously as a functional compo-
nent of a product and a trademark,” and accordingly called for
a “close analysis of the way in which [the defendant] is using
the Job’s Daughters insignia.” Id. at 917-19. The court
observed that Job’s Daughters had submitted no evidence that
the defendant’s use of the mark either caused confusion as to
source or was likely to do so and suggested that the emblem
did not designate a source at all.4 Accordingly, the Job’s
Daughters insignia, as used by the defendant, was unpro-
tected. Id. at 920.
Job’s Daughters, with its collective mark, was a somewhat
unique case and its broad language was soon clarified and
narrowed. In Vuitton, we confronted bare counterfeiting of
Louis Vuitton handbags with minor alterations to the familiar
LV logo and fleur-de-lis insignia. 644 F.2d at 774. Not unlike
4
The marks at issue in Job’s Daughters were “collective marks,” which
are trademarks “used by the members of a cooperative, an association, or
other collective group or organization, . . . and include[ ] marks indicating
membership in a union, an association, or other organization.” 15 U.S.C.
§ 1127. This explains, in part, why there was no likelihood of confusion.
Because the Job’s Daughters insignia was sold by numerous unlicensed
jewelers, the possibility that consumers might think that it denoted source
was insubstantial. Accord Supreme Assembly, Order of Rainbow for Girls
v. J.H. Ray Jewelry Co., 676 F.2d 1079, 1083 (5th Cir. 1982) (“[T]here
is no historical custom or practice—either as to fraternal jewelry or Rain-
bow jewelry—that would provide a reasonable basis for buyers of Rain-
bow jewelry to assume that such jewelry can only be manufactured with
Rainbow’s sponsorship or approval . . . [and] most fraternal associations
exercise little control over the manufacture of jewelry bearing their frater-
nal emblems.”).
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9525
Auto Gold here, the defendant argued that, under Pagliero
and Job’s Daughters, its use of the Vuitton marks was func-
tional because the marks were “related to the reasons consum-
ers purchase [the] product” and that without using the marks,
it could not compete with Vuitton in selling Louis Vuitton-
marked purses. We rejected these arguments. Id. at 773. First,
the defendant’s use of the Vuitton marks was not functional
in a utilitarian sense. Id. at 776-77 (“Vuitton luggage without
the distinctive trademark would still be the same luggage. It
would carry the same number of items, last just as long, and
be just as serviceable.”). Significantly, in Vuitton, we emphat-
ically rejected the notion that “any feature of a product which
contributes to the consumer appeal and saleability of the prod-
uct is, as a matter of law, a functional element of that prod-
uct.” Id. at 773. Indeed, “a trademark which identifies the
source of goods and incidentally services another function
may still be entitled to protection.” Id. at 775. Under Vuitton,
the mere fact that the mark is the “benefit that the consumer
wishes to purchase” will not override trademark protection if
the mark is source-identifying. Id. at 774. With Vuitton, aes-
thetic functionality was dealt a limiting but not fatal blow; the
case was remanded for trial. Id. at 776.
Since Vuitton, the Ninth Circuit has not directly revisited
aesthetic functionality in the context of unique source-
identifying trademarks. Several oft-quoted cases involving
trade dress claims have criticized the doctrine. See Clicks Bil-
liards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1260 (9th Cir.
2001) (“Nor has this circuit adopted the ‘aesthetic function-
ality’ theory, that is, the notion that a purely aesthetic feature
can be functional.”); First Brands Corp. v. Fred Meyer, Inc.,
809 F.2d 1378, 1382 n.3 (9th Cir. 1987) (“In this circuit, the
‘aesthetic’ functionality test has been limited, if not rejected,
in favor of the ‘utilitarian’ functionality test.”) (citations omit-
ted).5 Although a leading commentator described Clicks Bil-
5
At least one earlier case explicitly excluded the application of Pagliero
in the trade dress context, without comment as to its application outside
9526 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
liards as “appear[ing] to mark the final end of the Ninth
Circuit’s fifty year flirtation with the aesthetic functionality
theory,” 1 McCarthy on Trademarks and Unfair Competition
§ 7:80 (4th ed.), the doctrine, albeit restricted over the years,
retains some limited vitality.
The Supreme Court has yet to address aesthetic function-
ality as it applies to logos and insignia, in contrast to product
features. The Court has, however, outlined the general con-
tours of functionality and aesthetic functionality. As noted
earlier, in Inwood Laboratories, the Court offered a simple
definition of functionality: “a product feature is functional if
it is essential to the use or purpose of the article or if it affects
the cost or quality of the article.” 456 U.S. at 850 n. 10 (citing
Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 122
(1938)).
More recently, in Qualitex, the Court considered whether a
color (a distinctive green-gold used on dry cleaning press
pads) could be protected as a trademark. Observing that color
alone can meet the basic legal requirement for a trademark,
namely that it acts “as a symbol that distinguishes a firm’s
goods and identifies their source,” the Court concluded that
the use of color as a trademark is not per se barred by the
functionality doctrine. Qualitex, 514 U.S. at 165-66 (“And,
this latter fact—the fact that sometimes color is not essential
to a product’s use or purpose and does not affect cost or
quality—indicates that the doctrine of ‘functionality’ does not
create an absolute bar to the use of color alone as a mark”).
The green-gold color of the dry cleaner pads served a trade-
mark (i.e., source-identifying) function. Additionally, the use
of some color on the pads served a non-trademark function—
namely, to “avoid noticeable stains.” Id. at 166. The Court
of trade dress. See Fabrica Inc. v. El Dorado Corp., 697 F.2d 890, 895
(9th Cir. 1983) (noting “this court has specifically limited application of
the Pagliero functionality test to product features and has refused to apply
the test to cases involving trade dress and packaging”).
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9527
underscored, however, that functionality protects against a
competitive disadvantage “unrelated to recognition or reputa-
tion.” Id. at 169. Accordingly, because “the [district] court
found ‘no competitive need in the press pad industry for the
green-gold color, since other colors are equally usable,’ ”
functionality did not defeat protection. Id. at 166.6
The Court’s most recent explication of aesthetic function-
ality is found in a case surprisingly not cited by the parties—
TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23
(2001). In TrafFix, a company that held an expired patent for
a dual-spring road sign design argued that the visible appear-
ance of the design constituted protectable trade dress. In con-
sidering whether the dual spring mechanism was a functional
aspect of the product, the Court clarified Qualitex’s emphasis
on competitive necessity and the overall test for functionality.
Rather than paraphrase the decision, and to be absolutely
clear, we quote extensively from the passages that set out the
appropriate inquiry for functionality.
The Supreme Court emphasized that Qualitex did not dis-
place the traditional Inwood Laboratories utilitarian definition
of functionality. “ ‘[I]n general terms, a product feature is
functional,’ and cannot serve as a trademark, ‘if it is essential
to the use or purpose of the article or if it affects the cost or
quality of the article.’ ” TrafFix, 532 U.S. at 32 (quoting
Qualitex, 514 U.S. at 165); see also Inwood Labs., 456 U.S.
at 850 n.10. The Court noted that Qualitex “expand[ed] upon”
the Inwood Laboratories definition, by observing that “a
functional feature is one the ‘exclusive use of [which] would
put competitors at a significant non-reputation-related disad-
vantage.’ ” TrafFix, 532 U.S. at 32 (quoting Qualitex, 514
U.S. at 165) (alteration in original).
6
In contrast, an example of an aesthetic product feature the protection
of which would hinder legitimate competition is the use of color to signify
the type of medication in pills—the question addressed in Inwood Labora-
tories. See 456 U.S. at 853 (noting that “[s]ome patients commingle medi-
cations in a container and rely on color to differentiate one from another”).
9528 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
The Court explained the interplay between these two state-
ments of functionality. If a feature is functional under Inwood
Laboratories, the inquiry ends and the feature cannot be pro-
tected under trademark law. Id. As the Court elaborated,
“there is no need to proceed further to consider if there is a
competitive necessity for the feature.” Id. at 33. Thus, in Traf-
Fix, once the dual-spring mechanism met the traditional func-
tionality test by making the signs more wind resistant, “there
[was] no need to proceed further to consider if there is com-
petitive necessity for the feature” and likewise no need “to
engage . . . in speculation about other design possibilities.” Id.
at 33.
By contrast, the Court went on to suggest that “[i]t is proper
to inquire into a ‘significant non-reputation-related disadvan-
tage’ in cases of aesthetic functionality, the question involved
in Qualitex.” Id. The Court described aesthetic functionality
as “the central question [in Qualitex], there having been no
indication that the green-gold color of the laundry press pad
had any bearing on the use or purpose of the product or its
cost or quality.” Id.7
As to functionality, we read the Court’s decision to mean
that consideration of competitive necessity may be an appro-
priate but not necessary element of the functionality analysis.
If a design is determined to be functional under the traditional
test of Inwood Laboratories there is no need to go further to
consider indicia of competitive necessity, such as the avail-
ability of alternative designs. Accord Valu Eng’g, Inc. v. Rex-
7
The Court’s treatment of Qualitex in TrafFix has caused some conster-
nation among commentators. See, e.g., 1 McCarthy on Trademark and
Unfair Competition § 7.80 (4th ed.) (describing as “amazing and incom-
prehensible” the statement in TrafFix “that in the 1995 Qualitex case, ‘aes-
thetic functionality was the central question.’ ”); Jerome Gilson,
Trademark Protection and Practice § 2A.04[5][b] (2006) (“The Supreme
Court was incorrect in TrafFix to declare that aesthetic functionality was
the ‘central question’ in the Qualitex case. The central question in Qual-
itex was whether color alone could serve as a valid trademark.”).
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9529
nord Corp., 278 F.3d 1268, 1275-76 (Fed. Cir. 2002).
However, in the context of aesthetic functionality, such con-
siderations may come into play because a “functional feature
is one the ‘exclusive use of [which] would put competitors at
a significant non-reputation related disadvantage.’ ” TrafFix,
532 U.S. at 32 (quoting Qualitex, 514 U.S. at 165); see also
Dippin’ Dots, Inc. v. Frosty Bites Distrib., L.L.C., 369 F.3d
1197, 1203 (11th Cir. 2004); Eppendorf-Netheler-Hinz
GMBH v. Ritter GMBH, 289 F.3d 351, 356 (5th Cir. 2002).
B. AESTHETIC FUNCTIONALITY AND AUTO GOLD’S USE OF
VOLKSWAGEN AND AUDI’S PRODUCTS
[3] So where do we stand in the wake of forty years of
trademark law scattered with references to aesthetic function-
ality? After Qualitex and TrafFix, the test for functionality
proceeds in two steps. In the first step, courts inquire whether
the alleged “significant non-trademark function” satisfies the
Inwood Laboratories definition of functionality—“essential to
the use or purpose of the article [or] affects [its] cost or quali-
ty.” TrafFix, 532 U.S. at 32-33 (citing Inwood Laboratories,
456 U.S. at 850, n.10). If this is the case, the inquiry is over
—the feature is functional and not protected.8 TrafFix, 532
U.S. at 33. In the case of a claim of aesthetic functionality, an
8
Our long-standing test for functionality largely excluded aesthetic con-
siderations, instead asking: (1) whether the feature delivers any utilitarian
advantage, (2) whether alternative designs are possible, (3) whether adver-
tising touts utilitarian benefits of the feature, and (4) whether the feature
results in economies in manufacture or use. See Disc Golf Ass’n v. Cham-
pion Discs, Inc., 158 F.3d 1002, 1006-09 (9th Cir. 1998) (applying the
four factors to conclude that the design of disc golf holes was utilitarian).
Following TrafFix, we reiterated the Disc Golf factors as legitimate con-
siderations in determining whether a product feature is functional. Talking
Rain Beverage Co. v. South Beach Beverage Co., 349 F.3d 601, 603-04
(9th Cir. 2003) (applying the four factors to conclude that a bottle design
was utilitarian). We noted that “the existence of alternative designs cannot
negate a trademark’s functionality,” but “may indicate whether the trade-
mark itself embodies functional or merely ornamental aspects of the prod-
uct.” Id. at 603.
9530 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
alternative test inquires whether protection of the feature as a
trademark would impose a significant non-reputation-related
competitive disadvantage. Id.; and see also Qualitex, 514 U.S.
at 165.
[4] We now address the marks at issue in this case. Volks-
wagen and Audi’s trademarks are registered and incontest-
able, and are thus presumed to be valid, distinctive and non-
functional. Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863,
868-69 (8th Cir. 1994). Auto Gold, thus, must show that the
marks are functional under the test set forth above. To satisfy
this requirement, Auto Gold argues that Volkswagen and
Audi trademarks are functional features of its products
because “the trademark is the feature of the product which
constitutes the actual benefit the consumer wishes to pur-
chase.” While that may be so, the fact that a trademark is
desirable does not, and should not, render it unprotectable.
Auto Gold has not shown that Volkswagen and Audi’s marks
are functional features of Auto Gold’s products. The marks
are thus entitled to trademark protection.
[5] At the first step, there is no evidence on the record, and
Auto Gold does not argue, that Volkswagen and Audi’s trade-
marks are functional under the utilitarian definition in Inwood
Laboratories as applied in the Ninth Circuit in Talking Rain.
See 349 F.3d at 603-04. That is to say, Auto Gold’s products
would still frame license plates and hold keys just as well
without the famed marks. Similarly, use of the marks does not
alter the cost structure or add to the quality of the products.
[6] We next ask whether Volkswagen and Audi’s marks, as
they appear on Auto Gold’s products, perform some function
such that the “ ‘exclusive use of [the marks] would put com-
petitors at a significant non-reputation-related disadvan-
tage.’ ” TrafFix, 532 U.S. at 32 (quoting Qualitex, 532 U.S.
at 165). As an initial matter, Auto Gold’s proffered rational—
that the trademarks “constitute[ ] the actual benefit the con-
sumer wishes to purchase”—flies in the face of existing
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9531
caselaw. We have squarely rejected the notion that “any fea-
ture of a product which contributes to the consumer appeal
and saleability of the product is, as a matter of law, a func-
tional element of that product.” Vuitton, 644 F.2d at 773. Such
a rule would eviscerate the very competitive policies that
functionality seeks to protect. This approach is consistent with
the view of our sister circuits. See e.g., Pebble Beach Co. v.
Tour 18 I Ltd., 155 F.3d 526, 539 (5th Cir. 1998) (“To define
functionality based upon commercial success . . . does not
promote innovation, nor does it promote competition.”)
superceded on other grounds as recognized in Eppendorf-
Netheler-Hinz, 289 F.3d at 356; W.T. Rogers Co. v. Keene,
778 F.2d 334, 341-43 (7th Cir. 1985); Keene Corp. v. Para-
flex Indus., Inc., 653 F.2d 822, 825 (3d Cir. 1981) (“The diffi-
culty with accepting such a broad view of aesthetic
functionality, which relates the doctrine to the commercial
desirability of the feature at issue without consideration of its
utilitarian function, is that it provides a disincentive for devel-
opment of imaginative and attractive design. The more
appealing the design, the less protection it would receive.”).
[7] Even viewing Auto Gold’s position generously, the rule
it advocates injects unwarranted breadth into our caselaw.
Pagliero, Job’s Daughters, and their progeny were careful to
prevent “the use of a trademark to monopolize a design fea-
ture which, in itself and apart from its identification of
source, improves the usefulness or appeal of the object it
adorns.” Vuitton, 644 F.2d at 774 (discussing Pagliero, 198
F.2d 339) (emphasis added). The concept of an “aesthetic”
function that is non-trademark-related has enjoyed only lim-
ited application. In practice, aesthetic functionality has been
limited to product features that serve an aesthetic purpose
wholly independent of any source-identifying function. See
Qualitex, 514 U.S. at 166 (coloring dry cleaning pads served
nontrademark purpose by avoiding visible stains); Publica-
tions Int’l, Ltd. v. Landoll, Inc., 164 F.3d 337, 342 (7th Cir.
1998) (coloring edges of cookbook pages served nontrade-
mark purpose by avoiding color “bleeding” between pages);
9532 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
Brunswick Corp. v. British Seagull Ltd., 35 F.3d 1527, 1532
(Fed. Cir. 1994) (color black served nontrademark purpose by
reducing the apparent size of outboard boat engine); Pagliero,
198 F.2d at 343 (china patterns at issue were attractive and
served nontrademark purpose because “one of the essential
selling features of hotel china, if, indeed, not the primary, is
the design”).
It is difficult to extrapolate from cases involving a true aes-
thetically functional feature, like a box shape or certain uses
of color, to cases involving well-known registered logos and
company names, which generally have no function apart from
their association with the trademark holder. The present case
illustrates the point well, as the use of Volkswagen and
Audi’s marks is neither aesthetic nor independent of source
identification. That is to say, there is no evidence that con-
sumers buy Auto Gold’s products solely because of their “in-
trinsic” aesthetic appeal. Instead, the alleged aesthetic
function is indistinguishable from and tied to the mark’s
source-identifying nature.
By Auto Gold’s strident admission, consumers want
“Audi” and “Volkswagen” accessories, not beautiful accesso-
ries. This consumer demand is difficult to quarantine from the
source identification and reputation-enhancing value of the
trademarks themselves. See Playboy Enters., Inc. v. Netscape
Commc’ns Corp., 354 F.3d 1020, 1030-31 (9th Cir. 2004)
(“Nothing about the marks used to identify [the trademark
holder’s] products is a functional part of the design of those
products. . . . The fact that the marks make [the junior user’s
product] more functional is irrelevant.”). The demand for
Auto Gold’s products is inextricably tied to the trademarks
themselves. See Qualitex, 514 U.S. at 170 (identifying “legiti-
mate (nontrademark-related) competition” as the relevant
focus in determining functionality) (emphasis added).9 Any
9
Auto Gold complains that if precluded from using the famous marks,
it would be unable to compete in the market for auto accessories bearing
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9533
disadvantage Auto Gold claims in not being able to sell
Volkswagen or Audi marked goods is tied to the reputation
and association with Volkswagen and Audi.
In the end, we take comfort that the doctrine of aesthetic
functionality, as we apply it in this case, has simply returned
from whence it came. The 1938 Restatement of Torts includes
this reminder of the difference between an aesthetic function
and a trademark function:
A feature which merely associates goods with a par-
ticular source may be, like a trade-mark or trade
name, a substantial factor in increasing the market-
ability of the goods. But if that is the entire signifi-
cance of the feature, it is non-functional; for its value
then lies only in the demand for goods associated
with a particular source rather than for goods of a
particular design.
Restatement of Torts § 742, comment a (1938). Volkswagen
and Audi’s trademarks undoubtedly increase the marketability
of Auto Gold’s products. But their “entire significance” lies
in the demand for goods bearing those non-functional marks.
Today, as in 1938, such poaching is not countenanced by the
trademark laws.
[8] We hold that Volkswagen and Audi’s marks are not
functional aspects of Auto Gold’s products. These marks,
which are registered and have achieved incontestable status,
are properly protected under the Lanham Act against infringe-
ment, dilution, false designation of source and other misap-
propriations.
Volkswagen and Audi’s marks. This argument is just another way of say-
ing “If I can’t trade on your trademark, I can’t compete.” But this argu-
ment has no traction here because the mark is not a functional feature that
places a competitor at a “significant non-reputation-related advantage.”
TrafFix, 532 U.S. at 33.
9534 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
II. VOLKSWAGEN AND AUDI’S INFRINGEMENT CLAIM
Although we conclude that Volkswagen and Audi’s regis-
tered trademarks are not “functional,” and thus are protect-
able, it remains to be determined whether Auto Gold is
infringing those marks. Cf. KP Permanent Make-Up, Inc. v.
Lasting Impression I, Inc., 543 U.S. 111, 117 (2004)
(although mark was protected, “the [markholder]’s success is
still subject to ‘proof of infringement’ ”). The district court
concluded that “[w]hile [Volkswagen and Audi] have
attempted to make a prima facie case of trademark infringe-
ment and dilution of their mark, this situation does not rise to
that level.” Operating on the premise that the Volkswagen and
Audi marks were unprotectable under the doctrine of aesthetic
functionality, the district court erroneously concluded Volks-
wagen and Audi “offered insufficient evidence to show that
there is a question of material fact that might lead a fact-
finder to conclude that infringement of their trademarks
occurred.” In particular, the district court resolved that Volks-
wagen and Audi “failed to offer any evidence that would have
a tendency to show that there is a likelihood of or any actual
confusion in the minds of consumers.”
The court then granted Auto Gold’s motion for partial sum-
mary judgment and denied Volkswagen and Audi’s motion
for summary judgment which included a claim for infringe-
ment. The court declared that Auto Gold’s use of the marks
on its products was neither trademark infringement nor trade-
mark counterfeiting, and enjoined Volkswagen and Audi from
asserting any trademark rights against Auto Gold. In doing so,
the district court appeared to merge the aesthetic functionality
analysis and the likelihood of confusion analysis as to
infringement, but nonetheless based its judgment on both
issues. These are distinct inquiries and thus we consider
infringement on appeal.
Volkswagen and Audi seek protection under § 1114(1)(a),
which provides civil penalties against:
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9535
Any person who shall, without consent of the [regis-
tered owner] . . . use in commerce any reproduction,
counterfeit, copy, or colorable imitation of a regis-
tered mark in connection with the sale, offering for
sale, distribution, or advertising of any goods or ser-
vices on or in connection with which such use is
likely to cause confusion, or to cause mistake, or to
deceive.
It is undisputed that Volkswagen and Audi own the registered
trademarks at issue, and that Auto Gold uses those trademarks
in commerce, without their consent, and in connection with
the sale of goods. Thus, as with many infringement claims,
the central issue is whether Auto Gold’s use of the marks is
“likely to cause confusion” within the meaning of the Lanham
Act.
Before us on appeal are the parties’ cross-motions for sum-
mary judgment on the issue of trademark infringement, and in
particular, the district court’s determination that Volkswagen
and Audi had not offered any evidence showing a likelihood
of confusion. We review de novo the district court’s decision
on summary judgment. Clicks Billiards, 251 F.3d at 1257.
Because the likelihood of confusion is often a fact-intensive
inquiry, courts are generally reluctant to decide this issue at
the summary judgment stage. Thane Int’l, Inc. v. Trek Bicycle
Corp., 305 F.3d 894, 901-02 (9th Cir. 2002). However, in
cases where the evidence is clear and tilts heavily in favor of
a likelihood of confusion, we have not hesitated to affirm
summary judgment on this point. See, e.g., Nissan Motor Co.
v. Nissan Computer Corp., 378 F.3d 1002, 1019 (9th Cir.
2004) (affirming summary judgment where the marks were
“legally identical,” the goods at issue were related, and the
marketing channels overlapped). As part of our de novo
review, we conclude as a matter of law that likelihood of con-
fusion is clear cut here and that Volkswagen and Audi have
made out a prima facie case of infringement. We do not direct
9536 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
judgment on this issue, however, because the district court
reserved judgment on Auto Gold’s defense of “first sale.” The
case must be remanded for consideration of Auto Gold’s
defenses.
[9] A “[l]ikelihood of confusion ‘exists when customers
viewing [a] mark would probably assume that the product or
service it represents is associated with the source of a differ-
ent product or service identified by a similar mark.’ ” Fud-
druckers, Inc. v. Doc’s B.R. Others, Inc., 826 F.2d 837, 845
(9th Cir. 1987) (quoting Lindy Pen Co. v. Bic Pen Corp., 725
F.2d 1240, 1243 (9th Cir. 1984)). The Ninth Circuit employs
an eight-factor test (the “Sleekcraft” factors) to determine the
likelihood of confusion: (1) strength of the mark(s);
(2) relatedness of the goods; (3) similarity of the marks;
(4) evidence of actual confusion; (5) marketing channels;
(6) degree of consumer care; (7) defendant’s intent;
(8) likelihood of expansion. Surfvivor Media, Inc. v. Survivor
Productions, 406 F.3d 625, 631 (9th Cir. 2005); see also AMF
Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979).
These elements are not applied mechanically; courts may
examine some or all of the factors, depending on their rele-
vance and importance. See Surfvivor, 406 F.3d at 631; Thane
Int’l, 305 F.3d at 901 (“The list of factors is not a score-card
—whether a party wins a majority of the factors is not the
point. Nor should the factors be rigidly weighed; we do not
count beans.”) (internal punctuation and citations omitted).
This case presents an easy analysis in terms of likelihood
of confusion. The Volkswagen and Audi marks, which are
registered and have been in use for more than fifty years, are
strong, distinctive marks, the first factor in the Sleekcraft
analysis. Auto Gold’s products, which incorporate exact cop-
ies of those marks, compete with accessories sold by Volks-
wagen and Audi through their licensed marketers, and are
related10 to Volkswagen and Audi’s primary goods—cars.
10
“Related goods are ‘products which would be reasonably thought by
the buying public to come from the same source if sold under the same
mark.’ ” Sleekcraft, 599 F.2d at 348 n.10 (quoting Standard Brands, Inc.
v. Smidler, 151 F.2d 34, 37 (2d Cir. 1945)).
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9537
Although Volkswagen and Audi license their marks to third
parties, and Auto Gold sells its products to the wholesale mar-
ket, the ultimate consumers are the same. In fact, according
to Auto Gold, it is a very specific sub-group of consumers that
wants either Auto Gold’s or Volkswagen and Audi’s
accessories—Audi or Volkswagen car owners who want
accessories to match their cars. Thus, in addition to being
related products bearing identical marks, the products at issue
are destined for the same buyers.
We turn next to the degree of consumer care. Confusion is
less likely where buyers exercise care and precision in their
purchases, such as for expensive or sophisticated items. In
evaluating this factor, we consider “the typical buyer exercis-
ing ordinary caution.” Sleekcraft, 599 F.2d at 353. The class
of products Auto Gold sells are relatively inexpensive and
unsophisticated, and do not require a great deal of precision
or care to fulfill their purpose. This factor favors Volkswagen
and Audi.
Evaluation of Auto Gold’s intent in using the mark is the
seventh factor. “When the alleged infringer knowingly adopts
a mark similar to another’s, reviewing courts presume that the
defendant can accomplish his purpose: that is, that the public
will be deceived.” Id. at 354. Auto Gold knowingly and inten-
tionally appropriated the exact trademarks of Volkswagen and
Audi. Auto Gold argues, however, that it does not “intend” to
deceive the public as to the source of the goods, but merely
sought to fill a market demand for auto accessories bearing
the marks. This argument is simply a recasting of aesthetic
functionality. Even if we credit Auto Gold’s proffered lack of
intent, the direct counterfeiting undermines this argument.
This factor tips against Auto Gold.
Finally, we examine the factor that is hotly contested by the
parties—evidence of actual confusion. Despite the debate,
there is no material issue of fact. The district court correctly
noted that Volkswagen and Audi offered no evidence of
9538 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
actual confusion. The question, then, is what is the legal sig-
nificance of this uncontested fact?
As we noted in Brookfield Communications, Inc. v. West
Coast Entertainment Corp., “[t]he failure to prove instances
of actual confusion is not dispositive against a trademark
plaintiff, because actual confusion is hard to prove; difficul-
ties in gathering evidence of actual confusion make its
absence generally unnoteworthy.” 174 F.3d 1036, 1050 (9th
Cir. 1999). In this case, which involves a national market and
a low degree of consumer care, nothing suggests that the lack
of evidence of confusion should be particularly noteworthy.
Compare Cohn v. Petsmart, Inc., 281 F.3d 837, 842-43 (9th
Cir. 2002) (ascribing some significance to the lack of evi-
dence of confusion where “the parties used the same trade-
mark in the same city for six years,” and the product at issue,
veterinary services, was one for which consumers are “partic-
ularly attentive.”).
Auto Gold suggests that the disclaimers on its packaging
dispel any potential for confusion. Courts have been justifi-
ably skeptical of such devices—particularly when exact copy-
ing is involved. See, e.g., Pebble Beach, 155 F.3d at 543
(upholding lower court determination that disclaimers were
“inadequate where present and . . . absent from the majority
of advertisements and promotional materials”), superseded on
other grounds as recognized in Eppendorf-Netheler-Hinz, 289
F.3d at 356; Int’l Kennel Club of Chicago, Inc. v. Mighty Star,
Inc., 846 F.2d 1079, 1093 (7th Cir. 1988) (“[W]here the
infringement in issue is a verbatim copying . . . plaintiff’s rep-
utation and goodwill should not be rendered forever depen-
dent on the effectiveness of fineprint disclaimers often
ignored by consumers.”).
Even if disclaimers may in some cases limit the potential
for confusion, here they do not. Auto Gold’s disclaimers were
neither consistent nor comprehensive. We note, preliminarily,
that the effectiveness of these disclaimers is undercut by their
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9539
sometimes contradictory messages. For example, some labels
placed on the cardboard inner lining of the license plate cov-
ers state that the product “may or may not” be dealer
approved. Visible through the clear cellophane outer wrap-
ping, these disclaimers are sometimes next to disclaimers stat-
ing “[t]his product is not endorsed, manufactured, or licensed
by the vehicle manufacturer.” There are also messages on
Auto Gold’s website that identify their products generally as
“Factory authorized licensed products.”
More importantly, “[t]he law in the Ninth Circuit is clear
that ‘post-purchase confusion,’ i.e., confusion on the part of
someone other than the purchaser who, for example, simply
sees the item after it has been purchased, can establish the
required likelihood of confusion under the Lanham Act.” Karl
Storz Endoscopy-Am., Inc. v. Surgical Techs., Inc., 285 F.3d
848, 854 (9th Cir. 2002); Levi Strauss & Co. v. Blue Bell,
Inc., 632 F.2d 817, 822 (9th Cir. 1980) (affirming a finding
of infringement against a jeans maker, and noting that “point
of sale materials [such as disclaimers] are removed by the
purchaser and have no confusion-obviating effect when the
pants are worn”).11 Shorn of their disclaimer-covered packag-
ing, Auto Gold’s products display no indication visible to the
general public that the items are not associated with Audi or
Volkswagen. The disclaimers do nothing to dispel post-
purchase confusion.
In sum, Volkswagen and Audi do not present evidence of
actual confusion. Neither, however, does Auto Gold present
evidence that the disclaimers have any effect. At best, the
confusion factor is in equipoise.
11
This definition of confusion reflects the 1962 amendments to § 1114
that broadened the definition of actionable confusion to include non-
purchasers (such as those seeing an item of clothing on the street), through
deletion of language that limited such confusion to “purchasers as to the
source or origin of such goods or services.” Pub. L. 87-772 (1962). See
Karl Storz, 285 F.3d at 854.
9540 AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA
[10] In the final analysis, we must consider the Sleekcraft
factors as a whole to determine whether a likelihood of confu-
sion results from Auto Gold’s use of the marks. Although we
do not bean count, it is significant that six of the eight Sleek-
craft factors support a likelihood of confusion; the remaining
two are either neutral or irrelevant.12 Most importantly, the
strength of Volkswagen and Audi’s marks, Auto Gold’s inten-
tional and exact copying of the marks, and the direct competi-
tion for a specific and limited consumer group, all weigh
heavily in favor of a likelihood of confusion. Our Sleekcraft
analysis benefits from a record developed through lengthy
discovery, and the key facts are undisputed. Volkswagen and
Audi have established a prima facie “exclusive right to use the
. . . mark in commerce.” 15 U.S.C. § 1115(b). Accordingly,
we reverse the district court’s denial of summary judgment in
favor of Volkswagen and Audi on the issue of infringement
and remand for consideration of the “first sale” defense and
any other related claims or defenses.
III. OTHER CLAIMS
[11] The district court dismissed various of Volkswagen
and Audi’s counterclaims with prejudice, some because the
parties stipulated to their dismissal. Among the counterclaims
dismissed was the dilution claim. The procedural history sur-
rounding this claim is murky. The district court found that
Volkswagen and Audi had agreed not to litigate the claim
even though the parties briefed and argued the issue on sum-
mary judgment. Nonetheless, the court denied Volkswagen
and Audi’s motion for leave to amend because the amend-
ment would be futile. Because the denial of this motion was
12
The final factor, “[a] likelihood of expansion in product lines,” war-
rants no discussion as it is “relatively unimportant where two companies
already compete to a significant extent.” Brookfield Commc’ns, 174 F.3d
at 1060. The record reflects that Volkswagen and Audi compete through
their licensees with Auto Gold with respect to the products at issue in this
suit.
AU-TOMOTIVE GOLD v. VOLKSWAGEN OF AMERICA 9541
predicated in large part on the court’s misapprehension of the
application of aesthetic functionality, we reverse the dismissal
of the dilution claim.
We reverse the district court’s April 7, 2003 order granting
Auto Gold’s Motion for Partial Summary Judgment and deny-
ing Volkswagen and Audi’s Motion for Summary Judgment,
vacate the May 17, 2003 Order Granting Declaratory and
Injunctive Relief, reverse the June 11, 2003 Order Denying
Volkswagen and Audi’s Motion for Clarification and for
Leave to Amend with respect to the dilution claim, vacate all
other aspects of the June 11, 2003 Order, and reverse judg-
ment in favor of Auto Gold.
REVERSED, VACATED and REMANDED for further
proceedings consistent with this opinion, including our deter-
mination that Volkswagen and Audi have established a prima
facie case with respect to infringement.