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Australian Gold Inc. v. Hatfield

Case:
Australian Gold, Inc. v. Hatfield, 436 F.3d 1228 (10th Cir. 2006)

Facts of the case:
The plaintiffs are three related businesses that manufacture and distribute indoor tanning lotions consisting of the brands Australian Gold, Caribbean Gold, and Swedish Beauty indoor tanning lotions and related products. The products that were manufactured were mainly distributed to indoor tanning salons, but these plaintiff’s were not the ones to deliver the product to the tanning salons. These companies contract with independent distributors who then sell the tanning products to tanning salons. In order for an independent distributor to contract with ETS, the independent distributors must agree to market, distribute, or sell the tanning products only to “a tanning salon or hair and beauty care salon” that “offers indoor tanning and instruction of the use of Products as an on-premises service.” The defendant in this case is a family that resells tanning products online without the permission of the plaintiffs. In some situations, the defendants pretended to be actual tanning salons to obtain the tanning products. In other situations, the defendants simply received the products from an independent distributor that broke his contract. The defendants used as many as seven websites to sell the plaintiff’s products. On these websites, pictures and descriptions of the tanning products were displayed and also the plaintiff’s trademarks were used in the metatags of the defendant’s website. Further, the defendants paid a company called Overture.com for an “Overture Premium Listing” for “Australian Gold” and “Swedish Beauty.” This would guarantee that one of the defendants' websites would be among the first three listed in the search results if any of the plaintiffs' trademarks were used in an internet search query. Once the customers got to any of the defendant’s sites, the customer could buy other tanning products, not just plaintiff’s.

Procedural Posture:
After the plaintiff’s discovered the defendant’s actions in January 2001, the plaintiff’s notified the defendants that they objected to their sale of their products online and plaintiffs filed a suit against the defendants in an Indiana state court. The defendant’s failed to answer the complaint, therefore, the Court entered a default judgment against the defendants. In December of 2001, the plaintiffs brought the current suit in the Oklahoma state court. Subsequently, the defendants removed the case to federal court. In this complaint, plaintiffs allege that defendants infringed on their trademarks. The case went to trial on the issue of trademark infringement. At trial, the defendants moved for judgment as a matter of law on all of the claims after the plaintiff rested at the close of evidence. The federal district court granted part of the defendant’s motion, but the issue of trademark infringement went to the jury. The jury returned a verdict for the plaintiffs and the plaintiffs were awarded $450,000 collectively on the issue of trademark infringement. Also, the jury enjoined the defendants from selling tanning products over the internet, displaying plaintiffs' trademarks on the internet, or using plaintiffs' trademarks in the metatags or html code for their websites. The defendants appeal asserting that the district court erred in denying defendants' motion for judgment as a matter of law on plaintiffs' claims. Defendants also challenge the district court's jurisdiction to enter an injunction barring the defendants from selling plaintiffs' products over the internet or using plaintiffs' trademarks in connection with defendants' websites.

Holding:
The Tenth Circuit found that the district court did have jurisdiction under 14 U.S.C. § 1441. Then the Circuit Court went on to find that the district court did not err when it denied the defendant’s motion for judgment as a matter of law on plaintiff’s claims. The defendants claimed that the plaintiffs did not present evidence of a likelihood of consumer confusion. The Tenth Circuit found that for the issue of consumer confusion, the court would analyze this under initial interest confusion. The Court found that the factors of initial interest confusion leaned more towards the plaintiffs, therefore, the defendants were found liable for consumer confusion under initial interest confusion.

Critical Analysis:
This case stands for the proposition that using someone else’s trademarks in your website simply to lure that customer to your website is not allowed and is a violation of the Lanham Act. Even though once a consumer gets to your website they realize it is not the site they were originally looking for, if this other website offers the same type of products, that consumer may choose to purchase from the infringing website instead, since they are already on that website. A company cannot profit from the reputation and goodwill of another company that has worked hard to build that reputation.


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