Sixth Circuit Remands Question of Whether Part of Knockoff Bearing GM Mark Visible and If Such Visibility Enough to Create Likelihood of Confusion

Case: General Motors Corp. v. Keystone Auto. Indus., Inc., Case No. 02-74587 (6th Cir. 6/30/2006)

The One Sentence Summary: While the Court's application of the eight-factor test for determining likelihood of confusion favored a finding that the aftermarket replacement grilles manufactured by Defendant Tong Yang Industry Company, Limited ("Tong Yang") bearing trademarks owned by Plaintiff General Motors Corporation ("GM") created a likelihood of confusion among the general public about the origin of the grilles and potential harm to GM's reputation, the existence of a genuine dispute of material fact regarding the visibility of the allegedly infringing portion of Tong Yang's counterfeit grilles rendered summary judgment in favor of defendants inappropriate.

What They Were Fighting About: GM owns registered trademarks in the Chevrolet "bow tie" design and "GMC" design. GM manufactures and sells aftermarket replacement parts for its vehicles bearing its marks. Tong Yang also produces and sells aftermarket replacement parts, including replacement grilles for GM cars. GM sued defendants Tong Yang and Keystone Automotive Industries, Inc. ("Keystone"), a distributor of Tong Yang's automobile grilles, for trademark infringement and unfair competition for Tong Yang's manufacturing and Keystone's distribution of replacement grilles with "placeholders" bearing GM's "bow tie" and "GMC" designs. The sole issue on appeal was whether the district court erred in granting summary judgment to defendants on the issue of likelihood of confusion.

Sixth Circuit Holdings:

• Upon de novo review, the 6th Circuit agreed with the district court that there was no likelihood of confusion at the "point of sale", but disagreed with the district court and reversed on the issue of likelihood of "downstream" consumer confusion because there was a genuine dispute of material fact regarding the visibility of the allegedly infringing part of the grilles (the "placeholder" of the grilles in the shape of GM's marks wherein an emblem, a separate part always purchased from GM, is secured). See Appendix at pg. 9 of opinion for pictures of the grilles manufactured by GM and Tong Yang.
• The issue of likelihood of confusion was at the heart of GM's trademark infringement and unfair competition claims. The panel explained that likelihood of confusion at the "point of sale" involves a purchaser's confusion as to a product's origin or sponsorship occurring at the time of purchase. An eight-factor test is applied for determining likelihood of confusion: (1) strength of the plaintiff's mark; (2) relatedness of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) likely degree of purchaser care; (7) defendant's intent in selecting the mark; and (8) likelihood of expansion of the product lines. The Court noted that there was no need to exhaustively apply the eight-factor test to evaluate the likelihood of confusion at the point of sale given that it was obvious there was no confusion among buyers of Tong Yang's grilles (collision repair shops and individuals placing internet orders that sought out the parts as a cheaper alternative to purchasing original GM parts) because they were aware that they were purchasing GM knockoff replacement parts. Moreover, point of sale purchasers were expressly informed in marketing and packaging materials that they were not purchasing original GM replacement parts.
• The Court explained that in addition to "point of sale" confusion, the 6th Circuit recognizes likelihood of "downstream" confusion as actionable. Having determined that there was no likelihood of confusion at the point of sale, the Court next applied the same eight-factor test to determine whether Tong Yang's replacement parts caused a likelihood of "downstream" confusion. Downstream confusion occurs "post sale" -- the focus of this inquiry is whether the introduction of knockoffs into the stream of commerce leads to a likelihood of confusion among the general public (e.g. subsequent purchasers) and the potential harm to the reputation of the original manufacturer.
• The Court found that the strength of GM's marks, the relatedness of the goods, the similarity of the marks, and Tong Yang's intent in selecting GM's mark for use in its aftermarket grilles favored a finding of likelihood of downstream confusion among the general public. The Court observed that the harm of injecting knockoffs into the stream of commerce further supported its finding of likelihood of confusion because knockoffs harm the public and the original manufacturer in various ways, including: (1) the general public, as well as subsequent purchasers, may be deceived if expertise is required to distinguish the original from the knockoff; (2) the purchaser of an original may be harmed if knockoffs decrease the original's value in the marketplace; (3) consumers may be harmed if the original manufacturer decreases its investment in quality in order to compete with less expensive fakes; and (4) the original manufacturer's reputation for quality may be put into question if consumers mistake an inferior counterfeit for the original. Because unsuspecting downstream purchasers could mistake a Tong Yang grille for an original GM part, such confusion could thus damage GM's reputation for manufacturing quality parts.
• The question then was whether the underlying placeholder of the grilles manufactured by Tong Yang was visible once the original emblem was affixed to the grille given that a "wholly hidden placeholder cannot cause downstream confusion as to origin or sponsorship." (As noted above, the emblem was a separate part always purchased from GM and affixed on the placeholder of both knockoff and original grilles.) The parties naturally disputed whether the placeholder was visible after the GM emblem was secured. Because there was a genuine dispute of material fact on the visibility issue, the Court held that summary judgment was inappropriate and reversed the grant of summary judgment in favor of defendants. The case was remanded to the district court for further proceedings.