Au-Tomotive Gold Inc. v. Volkswagen of America, Inc.
Filed May 6, 2010
Cite as 08-16005, Ninth District Court of Appeals

Appellate Court Held First Sale Doctrine Irrelevant in Trademark Infringement Case

The case deals with two issues: one, on whether the sale of marquee license plates bearing Volkswagen badges by Au-tomotive Gold Inc had violated trademark infringement laws, and another, on whether the sale of the plates can be protected by the “first sale” doctrine.

Court records show that Au-tomotive Gold Inc. produces and sells automobile accessories, including marquee license plates with the Volkswagen VW symbol. The company bought the VW symbols from an authorized Volkswagen distributor but the marquees were sold with packaging that “disclosed no relationship between Auto Gold and Volkswagen”.

Auto Gold claimed that since their packaging had labels that explained that the plates were not produced or sponsored by Volkswagen, there was no trademark infringement based on the First Sale doctrine.

However, in September and October 1999, Volkswagen hand sent a letter to Auto gold asking the company to “cease using the trademarks” but Auto gold refused to stop their activities.

In April 2001, Auto gold filed a lawsuit asking the court for a declaratory judgment that its activities do not constitute trademark infringement. The company also sought dilution of Volkswagen or Audi trademarks.

Both parties filed counterclaims with the following allegations:

• Federal trademark counterfeiting and infringement under section 32 of the Lanham Act
• False designation under section 43 of the Lanham Act
• Trademark dilution
• Other related state law claims

Both parties also moved for summary judgment.

After hearing, the district court granted summary judgment to Auto Gold on all claims. The court held that under the doctrine of “aesthetic functionality “, the trademarks were functional and therefore, not protected by trademark law.

Volkswagen argued and filed for an appeal.

During appeal, the Ninth District Court of Appeals reversed the decision of the district court and held that the “First Sale” doctrine cannot provide a defense since the marquee plates caused confusion regarding its origin.

The appellate court further stated this: “We do not base our holding on a likelihood of confusion among purchasers of the plates. Rather, we base it on the likelihood of post-purchase confusion among observers who see the plates on purchasers' cars”.