## Facts

- Au-Tomotive Gold, Inc. (Auto Gold) manufactured and sold automobile accessories tailored to particular car makes, including license-plate frames/covers and key chains.
- Auto Gold placed exact replicas of famous automaker trademarks on its products to appeal to owners and fans of those car brands.
- Auto Gold had licensing agreements with some automobile manufacturers, but not all.
- Auto Gold sold accessories bearing Volkswagen and Audi trademarks (including the familiar VW logo and Audi marks) without authorization from Volkswagen of America, Inc. and Audi (collectively, Volkswagen and Audi).
- Auto Gold sued Volkswagen and Audi in federal district court seeking declaratory judgment that its products did not infringe Volkswagen’s and Audi’s trademarks and raised, among other arguments, the doctrine of aesthetic functionality.
- Volkswagen and Audi counterclaimed under the Lanham Act for trademark infringement and related violations.
- The district court granted summary judgment for Auto Gold, issued declaratory relief that Auto Gold’s products did not infringe, and enjoined Volkswagen and Audi from enforcing their trademarks against Auto Gold.
- Volkswagen and Audi appealed.

## Issues

1. Whether the Lanham Act bars Auto Gold from selling, without authorization, automobile accessories bearing exact replicas of Volkswagen’s and Audi’s trademarks.
2. Whether Volkswagen’s and Audi’s trademarks, as used on Auto Gold’s accessories, were aesthetically functional and therefore not protectable as trademarks.
3. Whether Auto Gold’s use of the Volkswagen and Audi marks on these accessories created a likelihood of confusion as to source, sponsorship, or affiliation.

## Decision

- The Ninth Circuit reversed the district court’s summary judgment for Auto Gold.
- The court held that Auto Gold’s use of Volkswagen’s and Audi’s marks was not protected by the doctrine of aesthetic functionality.
- The court held that Auto Gold’s unlicensed sale of accessories bearing exact replicas of the Volkswagen and Audi marks created a sufficient likelihood of confusion to support Lanham Act liability.
- The case was remanded for further proceedings consistent with the Ninth Circuit’s opinion.

## Legal Principles

- Trademarks that identify source are generally protectable even if consumers also find them visually appealing.
- Aesthetic functionality is limited: a feature is “aesthetically functional” only if exclusive trademark rights in that feature would place competitors at a significant non-reputation-related disadvantage.
- Consumer desire to display a famous logo (because of the logo’s meaning, status, or goodwill) does not make the logo “functional” in the trademark sense.
- Using an identical, famous mark on closely related goods can create a likelihood of confusion, including confusion about sponsorship, approval, or affiliation, not just point-of-sale source confusion.
- When a seller copies a well-known mark and places it prominently on goods sold in channels associated with the mark owner, confusion is more likely, particularly where the seller’s aim is to capture the mark’s goodwill.

## Conclusion

In Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., the Ninth Circuit held that Auto Gold could not rely on aesthetic functionality to justify selling unlicensed automobile accessories bearing exact replicas of Volkswagen and Audi trademarks. Because the marks remained source-identifying and Auto Gold’s use was likely to confuse consumers about sponsorship or affiliation, the court reversed the district court’s judgment for Auto Gold and sent the case back for further proceedings.


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