Audi AG and Volkswagen of America Inc. vs. Bob D’Amato

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In this case, the defendant is Bob D’Amato while the plaintiff is Audi. Bob D’Amato is not associated with Audi in any way. On February 11, 1999, the defendant registered the domain name www.audisport.com, and began posting content to the site from June 4, 1999. Two years later, an Audi dealer by the name Champion Audi saw the webpage and approached D’Amato seeking to link D’Amato’s site to an online store that would sell merchandise with the ‘Audi Sport’ logo. These items would include hats and shirts. The online store was later established and run on a different page at www.audisport.com/boutique. The store also offered personalized email addresses @audisport.com. D’Amato was to be given a percentage of profits generated through this venture. However, it was not clear whether D’Amato sold the products personally since he maintained that “his website merely had links to goods (hats and shirts) and email hosting services offered by Champion Audi” (Samson, para. 2) Again, it is not known whether the defendant received benefited financially from this undertaking.

D’Amato engaged a graphic designer to make two logos integrating Audi trademarks to be used on www.audisport.com. The designer questioned whether D’Amato was allowed to use these marks and reminded him that Audi already had a website through which it sold similar products. D’Amato alleged he had been authorized by the Audi dealer to use the marks and continued to use them on his website. However, Audi’s agreement with the dealer barred him from permitting D’Amato to use any of the company’s trademarks.

Apart from placing the logos on his website, D’Amato’s site also misleadingly stated, “Who are we? We are a cooperative with Audi of America and will be providing the latest products for your Audi’s and information on AudiSport North America” (Samson, para. 6).

In May 2003, the Audi dealer opted to end his dealings with D’Amato since the business was not generating adequate profits. Consequently, in late 2003, and early 2004, Audi contacted D’Amato asking him to cease his activities using the website. D’Amato responded by taking down the Audi marks from his site. Besides, he added a disclaimer, renouncing any affiliations with Audi, saying “this page is not associated with Audi AG or Audi USA in any way” (Samson, para. 2). However, he still offered advertising services on his site (Berkman Center for Internet & Society, para. 6).

Audi then began legal proceedings, accusing the defendant of infringing and diluting its trademarks in breach of the Lanham Act, in addition to breaching the Anti-cybersquatting Consumer Protection Act (ACPA). The District Court ruled in favor of the plaintiff and commanded D’Amato to permanently cease further infringement into any of Audi’s marks. The District Court also awarded Audi’s legal fees under 15 U.S.C. § 1117(a) and instructed D’Amato to transfer www.audisport.com to the plaintiff. On appeal, the Sixth Circuit affirmed the ruling.

To succeed on claims of unfair use of trademarks, under the Lanham Act, the plaintiff has to prove a likelihood of confusion between the two marks in question. In the Sixth Circuit, the likelihood of confusion is determined by assessing eight topics:

“(1) strength of plaintiff’s mark; (2) relatedness of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing of channels used; (6) degree of purchaser care; (7) defendant’s intent in selecting the mark; and (8) likelihood of expansion in selecting the mark” (Samson, para. 6).

By assessing these eight factors, the Sixth Circuit found out that there was a significant likelihood that customers would be confused by the defendant’s use of the plaintiff’s trademark.

In reaching this final decision, the court considered the fact that the defendant had used the globally recognized marks that belong to Audi to market products that were similar to those that Audi was marketing, such as shirts and hats with Audi’s trademark symbols.

The resemblance between the plaintiff’s marks and the defendant’s Audi Sports mark and the domain name also sustained the idea of likely customer confusion. As potential client confusion would not be lessened by the inclusion of the generic term ‘Sport’ to the plaintiff’s mark, the court said that clients could not distinguish the two entities and confusion was highly probable.

The fact that both the plaintiff and defendant had used similar media for marketing, consumers were less likely to be cautious because the products cost less money. This gave weight to the court’s determination of likely consumer confusion. The outcome was also sustained by proof of factual confusion, exhibited in the graphic designer’s email, which enquired the nature of D’Amato’s association with Audi, considering that they were dealing in similar merchandise.

Finally, the District Court discovered that the defendant has used the plaintiff’s trademark with an aim of copying, and gaining from the activity, which also added weight to its determination of likely public confusion. This was confirmed by the fact that D’Amato had previously requested consent to use Volkswagen’s mark while registering the domain name (at which he did not receive any reply). D’Amato also used Audi’s mark throughout the site.

Consequently, the Sixth Circuit maintained that the defendant, through his actions, breached the plaintiff’s marks and contravened the Lanham Act.

In reaching this verdict, the Sixth Circuit threw out the defendant’s claims that his use of Audi’s marks was permitted by Champion Audi since the dealer had no authority to grant usage of the marks in question. The court also threw out D’Amato’s defense of unfair delay of the case (laches). The defendant registered the domain name in February 1999 and the suit only began in February 2004. According to the Sixth Circuit, in establishing whether suits are time-barred by laches, the court should look into the following:

“(1) whether the owner of the mark knew of the infringing use; (2) whether the owner’s delay in challenging the infringement of the mark was inexcusable or unreasonable; and (3) whether the infringing user was unduly prejudiced by the owner’s delay” (Samson, para. 8).

In this case, there was no evidence submitted to prove that the plaintiff had unjustifiably delayed prosecution of the suit after they had known of the defendant’s violation activities, nor that the defendant had been unfairly biased by any delay.

Lastly, the Court disallowed the defendant’s argument that any public confusion was prevented by his site’s disclaimer. The Court mentioned that an infringing domain can mislead customers as they search for websites associated with the owner of the trademark. A disclaimer as was used in the defendant’s website comes too late. Confusion had already occurred, and this was considered a violation of trademark under the Lanham Act. The Court also observed that D’Amato diluted Audi’s trademarks hence violating the ACPA. Dilution was based on the fact that the defendant used the trademarks for commercial purposes after the mark became famous (Cyber Telecom, para. 4). Since the defendant used marks similar to those of Audi, no evidence of dilution was required. The Court ruled:

“Direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can reliably be proven through circumstantial evidence – the obvious case is one where the junior and senior marks are identical” (United States Congress Senate Committee, pp. 16).

Violation of the ACPA was further hinged on the fact that the defendant had no right to use the Audi marks for commercial purposes. The Court also found out that the defendant aimed to divert the public away from the plaintiff’s online site to his own by describing his relationship with Audi as “a cooperative with Audi of America” (FindLaw, para. 5). Interestingly, in finding the defendant guilty of breaching the ACPA, the District Court rejected the defendant’s allegations that his actions were justified under the ‘reasonable belief exception’ outlined in 15 U.S.C. §1125(d)(1)(B)(ii). This section states that a defendant who has a ‘reasonable belief’ that using the domain name is justifiable will not have breached the ACPA (FindLaw, para. 7). However, this defense should be used scarcely and only in odd cases, therefore, the Court held it unusable in this case, even though Champion Audi had permitted the defendant to use the mark.

The Sixth Circuit instructed the district court to pay the plaintiff’s legal fees. Under 15 U.S.C. § 1117(a), courts may award the main entity the legal fees in special cases. The Court maintained that this was a special case. A case is not special unless the “infringement was malicious, fraudulent, willful, or deliberate.” The Court ruled that the defendant did not limit his site to protected speech, for instance, information for Audi’s fans. Instead, he used Audi’s marks on the site and in various merchandise intending to get profit. D’Amato knew that permission was required to use the marks, and this was proven by the fact that he had earlier attempted to obtain consent from the plaintiff and persons associated with it. Consequently, the Court was right in finding D’Amato at fault for acting in bad faith under the ACPA. This finding did not require a court to find damaging, deceitful, willful, or intentional acts (FindLaw, para. 6). The Court asserted an award of the legal fees despite the alterations that the defendant had made in his website after receiving Audi’s letters.

To prevent legal action, D’Amato should have taken the following measures:

The Anticybersquatting Consumer Protection Act (ACPA) holds that if a domain name consists of a trademark or other intellectual property owned by another party, then the domain name owner has acted in bad faith and is guilty (American Bar Association and American Bar Association, pp. 12). To prevent legal action, D’Amato should have refrained from using the name Audi (which is a famous name) in the domain name of his website. It would have also been possible to add additional names to the word Audi so that it would be easily distinguishable from the prevailing party, Volkswagen of America (Ginsberg, pp. 54). Failure to adhere to this requirement would amount to dilution of Audi’s mark and result in legal action.

A second measure that D’Amato would have taken to prevent legal action would be to seek written permission from the company. Volkswagen of America, or through its authorized dealers. D’Amato had tried to seek consent from the company to use the company’s name in his domain name but did not receive success, he went on and opened his website without any authorization. Once a company offers authorization for use of its domain name, it also dictates the terms of use such as restrictions and disclaimers. Although D’Amato later included disclaimers in his website after receiving cease and desist letters from Audi, this was a late intervention and damage had already occurred (Manz, pp. 27).

Another measure would have been to prevent undertaking commercial activities on the website under question. The ACPA rules that a person is deemed to have acted in bad faith if prior use of the domain name concerning offering goods and services. D’Amato used the website to offer services such as advertising. D’Amato also used the domain name to link to a page operated by Audi Champion, which sold goods that included hats and shirts that had Audi’s logos and marks. Section VI of the ACPI states that using a trademark in bad faith occurs when:

“…the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct” (FindLaw, para. 8).

D’Amato’s use of the website for commercial reasons either personally or by linking it to Audi Champion’s page was in direct breach of the ACPA.

The Audi AG and Volkswagen of America Inc. v. Bob D’Amato (2006) case had significant and noteworthy implications now and in the future in most countries, including Australia. In Australia, any person registering a.com or.au domain name must have a legal right to use that domain (AUDA, para. 2). The domain name must be registered, and the owner issued with an Australian Business Number (ABN). Despite the strict regulations, the law has failed to protect Australians from cybersquatting acts. The weakness lies in the fact that any Australian national above 16 years can be issued with an ABN and use it to open as many domain names as possible, some of which may have a close and substantial resemblance to the name of a more recognized mark.

Despite this leeway, the case discussed above illustrates the importance of choosing a domain name carefully. Before registering a domain name, a person must be cautious so that the name does not breach any trademarks (AUDA, para. 4). This would reduce future legal proceedings than would lead to substantial financial and non-financial losses such as those suffered by D’Amato. D’Amato had to transfer the ownership of a website he had operated for almost seven years to Audi.

Works Cited

American Bar Association and American Bar Association. What Is a Trademark? Illinois: ABA Publishing, 2009.

AUDA. Domain Name Registrations. 2011. Web.

AUDA. Mandatory Terms and Conditions Applying to.au Domain Name Licences (2008-07). 2011. Web.

Audi AG and Volkswagen of America Inc. v. Bob D’Amato. 469 F.3d 534, No. 05-2359 (6th Cir., 2006).

Berkman Center for Internet & Society. Frequently Asked Questions (and Answers) about Domain Names and Trademarks. 2011. Web.

Cyber Telecom. AntiCybersquatting Consumer Protection Act. 2011. Web.

FindLaw. UDI AG v. AMATO: AUDI AG and Volkswagen of America, Inc., Plaintiffs-Appellees, v. Bob D’AMATO, d/b/a Quattro Enthusiasts, Defendant-Appellant. 2006. Web.

Ginsberg, Jane C. Trademark and Unfair Competition Law 748 (Robert C. Clark et al. eds., NJ: Foundation Press 4th ed., 2007.

Manz, William H. Anticybersquatting Consumer Protection Act: a legislative history of Public Law no. 106-113: appendix I, 113 Stat. 1501A-545, Volume 2, 2002.

Samson, Martin.Audi AG and Volkswagen of America Inc. v. Bob D’Amato. Internet Library of Law and Court Decisions, 2011. Web.

United States Congress Senate Committee. The Anticybersquatting Consumer Protection ACT. Washington DC: Bibliogov, 2010.

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Audi AG and Volkswagen of America Inc. vs. Bob D’Amato

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