The opinion of the court was delivered by: Keep, U.S. District Judge
ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT,
OR IN THE ALTERNATIVE, FOR SUMMARY ADJUDICATION
On February 27, 1998, Plaintiff Playboy Enterprises, Inc. (PEI) filed a
Complaint against Defendant Terri Welles.*fn1 The Complaint consists of
five causes of action: 1) Count I, trademark infringement pursuant to
15 U.S.C. § 1114(1); 2) Count II, false designation of origin and
unfair competition under 15 U.S.C. § 1125(a); 3) Count III, dilution
of trademarks pursuant to 15 U.S.C. § 1125(c); 4) Count IV, trademark
infringement and unfair competition under California common law; and 5)
Count V, unfair competition in violation of Cal. Bus. & Prof.Code §
17200, et seq. On December 21, 1998, Plaintiff filed a first amended
complaint adding Defendants Terri Welles, Inc., the current business
corporation owned and operated by Ms. Welles, whose internet on-line
service comprises Ms. Welles' business, and Stephen Huntington, the
former webmaster of Ms. Welles' website who was responsible for
developing and maintaining Ms. Welles' website prior to Defendant
Mihalko's succession to the job as webmaster. On April 1, 1999, Plaintiff
filed a Second Amended Complaint, supplementing the Complaint with three
additional causes of action: 1) Count VI, a claim of trademark
counterfeiting pursuant to 15 U.S.C. § 1114(1); 2) Count VII, a claim
of dilution of trademark in violation of Cal. Bus. & Prof.Code §
14335; 3) Count VIII, a claim of breach of contract based on a document
involving business relations between PEI, Pippi, Inc., and Tern Welles.
In its Second Amended Complaint, Plaintiff also added two defendants: 1)
Pippi, Inc., a defunct California corporation which allegedly contracted
with PEI and Terri Welles; and 2)
Michael Mihalko, the current webmaster of Ms. Welles' website.
On October 18, 1999, Defendant Terri Welles, Terri Welles, Inc., and
Pippi, Inc. (hereafter, "Defendant Welles" or "Welles") filed a motion
for summary judgment or, in the alternative, for summary adjudication, of
all eight of Plaintiff's claims against Defendants. Also on October 18,
1999, Defendant Michael Mihalko filed a motion for partial summary
judgment, arguing that the "innocent infringer" defense under
15 U.S.C. § 1114(2) barred all Plaintiff's claims against him.
Defendant Mihalko also filed a joinder in Defendant Welles' summary
judgment motion. On October 18, 1999, Defendant Stephen Huntington filed
a joinder in both Defendant Welles' and Defendant Mihalko's motions. On
November 1, 1999, Plaintiff filed an opposition to Welles' motion for
summary judgment or, in the alternative, for summary adjudication. In
addition, Plaintiff filed an opposition to Defendant Mihalko's motion for
partial summary judgment, objections to Defendant Mihalko's and Defendant
Huntington's joinders, and evidentiary objections. On November 8, 1999,
Defendant Welles filed a reply, and Defendant Mihalko filed a separate
reply. Defendant Huntington did not file a reply.
The following background facts are taken in large part from the court's
April 22, 1998 order denying Plaintiff's motion for preliminary
Plaintiff Playboy Enterprises, Inc. (PEI) is an international
publishing and entertainment company. Since 1953, PEI has published
Playboy magazine, a widely popular magazine with approximately ten (10)
million readers each month. PEI also publishes numerous specialty
magazines such as Playboy's Playmate Review, Playboy's Playmates of the
Year, and Playboy's Calendar Playmates among other publications. In
addition to its publishing ventures, PEI produces television programming
for cable and direct-to-home satellite transmission and sells and
licenses various goods and services including videos.
PEI has established two websites. According to Plaintiff, its free
website, http://www.playboy.com, has become one of the most popular sites
on the Web and is used to promote its magazine, goods, and services. Its
other website, called the "Playboy Cyber Club,"
http://www.cyber.playboy.com, is devoted to promoting current and former
PEI owns federally registered trademarks for the terms Playboy,
Playmate, Playmate of the Month, and Playmate of the Year. The term
Playmate of the Year is sometimes abbreviated "PMOY." PEI does not have a
federally registered trademark in the abbreviation "PMOY," although PEI
argues that "PMOY" is worthy of trademark protection because it is a
well-known abbreviation for the trademark Playmate of the Year.
Defendant Terri Welles is a self-employed model and spokesperson, who
began her modeling career with Playboy magazine in 1980. In May of 1980,
Ms. Welles appeared on the cover of Playboy magazine and was subsequently
featured as the "Playmate of the Month" in the December 1980 issue. Ms.
Welles received the "Playmate of the Year" award in June of 1981. Since
1980, Ms. Welles has appeared in no less than thirteen (13) issues of
Playboy magazine and eighteen (18) newsstand specials published by PEI.
Ms. Welles claims that since 1980 she has always referred to herself as a
"Playmate" or "Playmate of the Year" with the knowledge of PEI.
On June 29, 1997, Ms. Welles opened a website,
http://www.terriwelles.com, which includes photographs of herself and
others (both nude and clothed), a fan club posting board, an
autobiography section, and a listing of current events and personal
appearances. The domain name for Defendant Welles' site is "terriwelles,"
the heading for the website is "Terri Welles — Playmate of the Year
1981," and the title of the link page is "Terri Welles — Playboy
Playmate of the Year 1981." Each of the pages uses "PMOY `81" as a
watermark in the background. According to Defendant, eleven (11) of the
fifteen (15) free web pages include a disclaimer at the bottom of the
pages, in varying font sizes depending on the page, which indicates that
the website is not endorsed by PEI; the disclaimer reads as follows:
"This site is neither endorsed, nor sponsored by, nor affiliated with
Playboy Enterprises, Inc. PLAYBOY, PLAYMATE OF THE YEAR and PLAYMATE OF
THE MONTH are registered trademarks of Playboy Enterprises, Inc."
Defendant Welles uses the terms Playboy and Playmate along with other
terms within the keywords section of the meta tags, which constitutes the
internal index of the website used by some search engines. The site
contains link pages to other erotic, adult-oriented websites. It also
contains advertising "banners" for some of those websites.
Since May of 1997, Ms. Welles has been in contact with Plaintiff about
the design and creation of her website. Defendant claims that Plaintiff,
through Marcia Terrones, the director of the "Rights and Permission"
department at PEI, informed her that she could identify herself as the
"Playmate of the Year 1981" but that she could not reproduce the rabbit
head logo on her proposed website. Various communications between
Defendant and Plaintiff ensued. According to Defendant, PEI, through Hugh
Hefner, initially complimented her website and encouraged her use of the
title "Playmate of the Year 1981." However, Mr. Hefner later informed
Defendant that use of PEI's trademarks were restricted; instead, he
invited Defendant to join PEI's new Cyber Club. Defendant refused this
invitation, and PEI continued to demand that Defendant remove the
"Playmate of the Year" title from the home page as well as remove the
PMOY watermark from the background.
Federal Rule of Civil Procedure 56(c) provides that summary judgment is
appropriate if there is no genuine issue as to any material fact, and the
moving party is entitled to a judgment as a matter of law. Where the
plaintiff bears the burden of proof at trial, summary judgment for
defendant is appropriate if the defendant shows that there is an absence
of evidence to support the plaintiffs claims. See Celotex Corp. v.
Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see
also Garneau v. City of Seattle, 147 F.3d 802, 807 (9th Cir. 1998). The
movant has the initial burden of demonstrating that summary judgment is
proper. Adickes v. S.H. Kress and Co., 398 U.S. 144, 157, 90 S.Ct. 1598,
26 L.Ed.2d 142 (1970). The burden then shifts to the nonmovant to show
that summary judgment is not appropriate. Celotex Corp. v. Catrett,
477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To make such a
showing, the nonmovant must go beyond the pleadings to designate specific
facts showing that there is a genuine issue for trial. See id. However,
in considering this motion, the evidence of the nonmovant is to be
believed and all justifiable inferences are to be drawn in his or her
favor. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255, 106 S.Ct.
2505, 91 L.Ed.2d 202 (1986). Courts should be careful not to let a motion
for summary judgment become a "trial on affidavits." Id. Determinations
regarding credibility, the weighing of evidence, and the drawing of
legitimate inferences are jury functions, not appropriate for resolution
by the court in a motion for summary judgment. See id. at 255, 106 S.Ct.
Although the Ninth Circuit has stated that summary judgment is
generally disfavored in trademark cases because of the inherently factual
nature of most trademark disputes, see Levi Strauss & Co. v. Blue Bell
Inc., 778 F.2d 1352, 1356 n. 5 (9th Cir. 1985), summary judgment is
nonetheless appropriate "where the party opposing the motion fails to
demonstrate the existence of any material issues of fact for trial."
Lockheed Martin Corp. v. Network Solutions, Inc., 985 F. Supp. 949, 956
(C.D.Cal. 1997), aff'd, 194 F.3d 980 (9th Cir. 1999) (affirming order
granting defendant's motion for summary judgment).
The Ninth Circuit has recognized that Levi Strauss does not preclude the
district court from determining likelihood of confusion as a matter of
law, either through dismissal or summary judgment. See Murray v. Cable
National Broadcasting Co., 86 F.3d 858, 860-61 (9th Cir. 1996).
Rule 56(a) and (b) provide for "summary adjudication of claims," also
called "partial summary judgment." Partial summary judgment is
appropriate when, using the standards outlined above, there is no genuine
issue of material fact as to a particular claim. When there is no such
issue of fact, the court may grant summary judgment in the party's favor
"upon all or any part" of a claim. Rule 56(a), (b).
A. DEFENDANT TERRI WELLES, TERRI WELLES, INC., AND PIPPI, INC.
1. Counts I Through VII:
Fair Use Defense
Plaintiff alleges seven distinct trademark-related claims: 1) trademark
infringement pursuant to 15 U.S.C. § 1114(1); 2) false designation of
origin and unfair competition under 15 U.S.C. § 1125(a); 3) dilution
of trademarks pursuant to 15 U.S.C. § 1125(c); 4) trademark
infringement and unfair competition under California common law; 5)
unfair competition in violation of Cal. Bus. & Prof.Code § 17200, et
seq.; 6) trademark counterfeiting pursuant to 15 U.S.C. § 1114(1);
and 7) dilution of trademark in violation of Cal. Bus. & Prof.Code §
14335. Defendant Welles asserts that she should be granted summary
judgment on all seven claims*fn2 because there is no dispute of material
fact that Ms. Welles uses the terms "Playboy" and "Playmate" in a
non-trademark manner to describe her status as a recipient of titles
bestowed upon her by Plaintiff and to describe the content of her
website. In other words, Defendant Welles argues that because her use of
the terms "Playboy" and "Playmate" on her website is a "fair use" as a
matter of law, she should be entitled to summary judgment as to all of
Plaintiff's trademark-related claims against her.
A trademark is a "limited property right in a particular word, phrase,
or symbol." New Kids on the Block v. News America Publishing, Inc.,
971 F.2d 302, 306 (9th Cir. 1992). The purpose of a trademark is limited
to the identification of the source of a good or service. See id. at
305. The "wrong protected against . . . [has been] traditionally equally
limited: [p]reventing producers from free-riding on their rivals' marks"
and capitalizing on their rivals' investment of time, money, and
resources. Id. Where a trademark also describes a person, place, or an
attribute of a product, however, the "policies of free competition and
free use of language dictate that trademark law cannot forbid the
commercial use of terms in their descriptive sense." 1 J. MCCARTHY,
TRADEMARKS AND UNFMR COMPETITION, § 11.45, at 82 (1999). Thus,
trademark law, as embodied in the Lanham Act, recognizes a "fair use"
defense — the concept that a trademark registrant or holder cannot
"appropriate a descriptive term for his exclusive use and so prevent
others from accurately describing a characteristic of their goods." New
Kids, 971 F.2d at 306 (quoting Soweco, Inc. v. Shell Oil Co.,
617 F.2d 1178, 1185 (5th Cir. 1980)).
Fair use is a defense to liability under the Lanham Act. See
15 U.S.C. § 1115(b)(4) and 1125(c)(4) (1999). The assertion by an
alleged infringer that it is only using the contested term, mark, or
designation at issue in a non-trademark, descriptive sense has become
known as the "fair use" doctrine or defense. See 1 J. MCCARTHY,
TRADEMARKS AND UNFAIR COMPETITION, § 11.45, at 80 (1999). Section
33(b)(4) of the Lanham Act codifies the fair use defense and states that
to use the registered mark . . . shall be subject to the . . . defenses
. . . [t]hat the use of the name, term, or device charged to be an
infringement is a use, otherwise than as a mark . . . of a term or device
which is descriptive of and used fairly and in good faith only to
describe the goods or services of such party." 15 U.S.C. § 1115(b)
and (b)(4) (1999). A common law fair use defense incorporates the
statutory elements of the Lanham Act § 33(b)(4) so that if the
defendant's use is a fair use as against an assertion of a registered
trademark, then it is also fair use as against a state statutory or
common law count. See 1 J. MCCARTHY, TRADEMARKS AND UNFAIR COMPETITION,
§ 11.49, at 93-94 (1999) (citing Sierra On-Line, Inc. v. Phoenix
Software, Inc., 739 F.2d 1415, 1423 (9th Cir. 1984) and Zatarains, Inc.
v. Oak Grove Smokehouse, Inc., 698 F.2d 786, 789 (5th Cir. 1983)).
Section 33(b)(4) requires a defendant to prove three elements in order
to establish a fair use defense:
1. Defendant's use of the term is not as a trademark
or service mark.
2. Defendant uses the term "fairly and in good
3. Defendant uses the term "[o]nly to describe" its
goods or services.
1 J. MCCARTHY, TRADEMARKS AND UNFAIR COMPETITION,
§ 11.49, at 94.1 (1999) (quoting 15 U.S.C. §
Under element one, the only type of use which suffices as a "fair use" is
use by a defendant of a term, mark, or symbol in a non-trademark sense.
Under element two, a lack of good faith use may be inferred from: (1) a
defendant's intentional breach of an agreement not to use the disputed
mark; or (2) a defendant's use with the intent to "trade upon and dilute
the good will" of a plaintiff's mark. See 1 J. MCCARTHY, TRADEMARKS AND
UNFAIR COMPETITION, § 11.49, at 94.1 (1999) (citing Institute for
Scientific Information, Inc. v. Gordon & Breach, Science Publishers,
Inc., 931 F.2d 1002 (3d. Cir. 1991), cert. denied, 502 U.S. 909, 112
S.Ct. 302, 116 L.Ed.2d 245 (1991)). Finally, under element three, the
statutory phrase "to describe the goods" is not restricted to words that
describe a characteristic of the goods but rather the phrase can be
applied to words that are descriptive in the broader sense. See id.
Although Section 33(b)(4) makes no mention of a requirement that there
be an absence of likelihood of confusion, the majority of courts,
including the Ninth Circuit, have espoused the view that it is
inconsistent to find both a likelihood of confusion and fair use. See
id. at § 11.47, at 85-86. According to this reasoning, because the
primary purpose of trademark law is to prevent likely confusion as to the
origin, sponsor, or source of a mark, a showing of likely confusion bars
a defendant's reliance on the fair use defense. See Lindy Pen Co. v. Bic
Pen Corp., 725 F.2d 1240 (9th Cir. 1984), cert. denied, 469 U.S. 1188,
105 S.Ct. 955, 83 L.Ed.2d 962 (1985). Thus, in order to comply with the
statutory requirement of § 33(b)(4) of the Lanham Act that
"Defendant's use of the term is not as a trademark or service mark,"
15 U.S.C. § 1115(b)(4) (1999), the Ninth Circuit has held that a
defendant invoking the fair use defense must also establish that its fair
use is not likely to cause confusion or did not "lead to customer
confusion as to the source of the goods or services." Transgo, Inc. v.
Ajac Transmission Parts Corp., 911 F.2d 363, 366 (9th Cir. 1990) (citing
Zatarains, Inc. v. Oak Grove Smokehouse, Inc., 698 F.2d 786, 791 (5th
Cir. 1983)). The Ninth Circuit has articulated an eight-factor test,
known as the Sleekeraft test, which the court may consider in determining
the likelihood of confusion: 1) the strength of the mark; 2) proximity or
relatedness of the goods; 3) similarity in appearance, sound, and meaning
of the marks; 4) evidence of actual confusion; 5) degree to which the
marketing channels converge; 6) type of good and degree of care customers
are likely to exercise in purchasing them; 7) evidence of the intention
of defendant in selecting and using the alleged infringing name; and 8)
likelihood that the parties will expand their product lines.
See AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 351 (9th Cir. 1979).
Notwithstanding the Ninth Circuit's clear adoption of the view that a
fair use cannot simultaneously be a confusing use, it recently decided in
1991 in the case of New Kids on the Block v. News America Publishing,
Inc. that there is a different type of fair use that "lies outside the
strictures of trademark law" because it "does not implicate the
source-identification function." New Kids on the Block v. News America
Publishing, Inc., 971 F.2d 302, 308 (9th Cir. 1992). The court in New
Kids described this type of fair use as a "nominative use of a mark
— where the only word reasonably available to describe a particular
thing is pressed into service." Id. Under the New Kids standard, a court
does not conduct the traditional analysis of likelihood of confusion
promulgated in AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 351 (9th Cir.
1979) that is used in the "classic fair use case" but rather conducts a
special three-pronged analysis for the new type of fair use defense
entitled "a nominative fair use defense." Id. The court in New Kids was
clear in asserting that the New Kids analysis only governs in special,
atypical cases and that it did not "purport to alter the test applicable
in the paradigmatic fair use case." Id. In deciding whether Defendant
Welles is entitled to summary judgment on Plaintiff's trademark claims,
the court will consider whether this case falls under the classic fair
use case or the non-paradigmatic nominative fair use case; the court's
analysis of this question and the issue of likelihood of confusion will
be discussed infra, in section III(A)(1)(a)(1)(iii), of this order.
Plaintiff alleges that Ms. Welles cannot invoke the fair use defense
because her use of Plaintiff's trademarks on her website (1) is a
trademark use; (2) which creates a likelihood of confusion; and (3) which
"goes farther than, or is out of proportion to, a fair description of PEI
or Ms. Welles on the website." Plaintiff's Opposition, at 15. Plaintiff
makes these allegations in regards to four specific uses by Defendant
Welles on her website: (i) use of the Playmate term in the visual title
or masthead for the website; (ii) use of the abbreviation, "PMOY `81,"*fn3
as a repetitive, decorative watermark on pages throughout her site; (iii)
use of the Playboy and Playmate terms in advertising banners on her site
and in other websites to attract customers to click through to Welles'
site; and (iv) use of the Playboy and Playmate terms in the HTML source
code, including the HTML title, meta code description, and meta tag
keywords. The HTML source code is the coding that is used for
construction of a website's pages.
The court will address in turn each of these specific uses by Ms.
Welles with respect to her invocation of the fair use defense.*fn4
Because Plaintiff's analyses in its opposition papers regarding the uses
specified in (I), (ii), and (iii) in the above paragraph are intimately
interconnected, the court will group together for discussion in the first
section, section (a), the visible uses of PEI trademarked terms in the
title or masthead, in the repeating watermarks, and in the advertising
banners. In the
second section, section (b), the court will address the issue of the use
of PEI trademarked terms in the HTML source code, including the source
title and the metatags.
(a) Visible Use of PEI Trademarked Terms: Title or Masthead,
Watermarks, and Advertising Banners
(1) Overview of Plaintiff's Allegations
This section summarizes Plaintiff's allegations. In support of its
allegations, Plaintiff relies solely on the appearance of the website or
on its expert witness' (James Sterne's) opinions regarding the website.
Following this summary, in section (2), is an analysis of the sufficiency
of Plaintiff's allegations in light of Defendant's summary judgment
The visual title at the top of Ms. Welles' website reads, "Terri Welles
Playmate of the Year, 1981."*fn5 See Decl. of Cynthia Johnston, PEI
Legal Department Staff, Ex. J. The name "Terri Welles" is in large,
filled-in block letters, overlapping and dwarfing the designation,
"Playmate of the Year, 1981." See id. The words, "Playmate of the Year,
1981," are in slender, cursive script letters. See id. From the court's
color copy of the exhibit, it appears that all the words in "Terri Welles
Playmate of the Year, 1981" are of similar coloring, but that the words,
"Playmate of the Year, 1981," appear of a slightly lighter shade than the
words "Terri Welles" so that they are visible under the overlapping block
letters of the name "Terri Welles." See id. Plaintiff argues that Ms.
Welles' "prominent, stylized and memorable use of PEI's trademarks
operates to . . . attract the attention of consumers to defendant's
website," "borrow[s] from the cachet of the PEI marks," and "trade[s] off
of the good will of those marks." Plaintiff further contends that
Defendant Welles' trademark uses of the PEI marks are like "placing the
marks on a sign above the entrance to a store, on the front of an
advertising brochure, or on a product. They create source identification
due to their context, prominence, location and stylization." Opposition,
at 10 (citing Decl. of James Sterne ("Sterne Decl."), PEI Expert
Witness, ¶¶ 7-9). Specifically, Plaintiff asserts, through its expert
witness James Sterne and in its opposition briefs, that (1) Ms. Welles'
site is a predominantly commercial site; (2) The visible title banner on
the homepage is a prominent commercial use of the Playboy term; (3) The
commercial theme is "Playboy Playmate of the Year"; (4) The visible use
of the terms in the title banner and the subject headings*fn6 along the
left-hand side of the homepage (along with the repeating PMOY*fn7
background watermark and the references in the HTML code and metatags)
create a repetitive use of the Playboy and Playmate
terms; (5) Title banners or mastheads at the top of a commercial website
do not serve the same function as book titles, but rather serve to
identify the "source" of the website and its products; (6) This "source
identification effect" is a result of the context of the use
(commercial), prominence of the use (repetition and size), the location
of the use (in title banner, source code, advertising banner, and
wallpaper), and the stylization of the use (in script letters as product
name and repetition of PMOY). See Sterne Decl., ¶¶ 8-11, at 4-5.
Plaintiff alleges that Defendant Welles' repeating background
watermark, "PMOY `81" is a trademark use. PMOY is an abbreviation for
Plaintiff's federally registered trademark, "Playmate of the Year." It is
undisputed that the abbreviation PMOY is not a registered trademark under
state or federal law, although Plaintiff's application for registration
of the PMOY trademark, filed on April 5, 1999, is currently pending in
the United States Trademark and Patent Office. However, since "[i]t is
not necessary that a trademark be registered in order for it to qualify
for protection under the Lanham Act," Metro Publishing v. San Jose
Mercury News, 987 F.2d 637 (9th Cir. 1993), and since Section 33(b)(4)
also allows the elements of a fair use defense to be asserted against an
allegation of infringement of an unregistered mark brought into federal
court under § 43(a) of the Lanham Act, see 1 J. MCCARTHY, TRADEMARKS
AND UNFAIR COMPETITION, § 11.49, at 93-94 (1999) (emphasis added)
(citations omitted), the court shall treat its discussion of Welles' fair
use of PEI's unregistered trademarked term "PMOY" in the watermarks in
the same manner as its discussion of PEI's registered terms "Playboy,"
"Playmate," and "Playmate of the Year" in other areas of Ms. Welles'
The "PMOY" abbreviation is used as a watermark on the homepage as well
as on the other pages throughout the website. Specifically, Plaintiff
contends that "PMOY" appears on the web pages on which Ms. Welles
solicits paid subscriptions to the "Members Only" portion of her
website, sells pictures of herself, and solicits paid promotional
appearances. See Opposition, at 7. According to Plaintiff, rather than
being related to any editorial comment or description of Ms. Welles or
PEI, these watermarks are ...