Strategies and Pitfalls in Brand Development: Lessons Learned from Hyundai’s “Luxury” Commercial

Commentary · April 26, 2012

Brand development is an ancient concept for businesses, and one that continues to evolve. Advances in the Internet and technology, and the resulting changes in consumer habits, create an environment to which businesses must adapt as they strive to maintain brand identities. The availability of content produced by other businesses and individuals adds to the pool of marketing resources, but also to the potential for legal risks.

Not immune to this phenomenon are the likes of high-end retailer Louis Vuitton, and Hyundai, a company attempting to break into the luxury car market. Louis Vuitton recently tested the boundaries of trademark law protection — and in the process, revealed some lessons for businesses both small and large about brand protection and content use.

In a recent decision, the influential U.S. Court of Appeals for the 2nd Circuit ruled that Hyundai diluted Louis Vuitton’s famous trademark (the so-called “Toile Monogram”) by airing a commercial
containing a one-second clip of a basketball bearing marks similar to Louis Vuitton’s. The decision may seem unlikely at first glance: the basketball is visible for a mere second, and would viewers really be confused, in the context of the purposefully absurd scenes depicted in the commercial, as to whether the basketball was a legitimate Louis Vuitton product?  A closer look reveals, however, that Hyundai’s actions leading up to its use of the contentious marks may have not only instigated Louis Vuitton’s lawsuit, but also had significant impact on the court’s decision.

The Commercial
In a 30-second television commercial, first aired during the 2010 Super Bowl, Hyundai attempted to challenge the notion of luxury and marketed its Sonata as an affordable “luxury” vehicle. The commercial consists of a series of scenes juxtaposing everyday activities with easily recognizable “symbols of luxury”: a yacht parked in a modest suburban neighborhood, policemen eating caviar in a patrol car, lobster served in a working-class cafeteria . . . and the troublesome shot of basketball players playing on a marble court with a basketball adorned with marks similar to those trademarked by Louis Vuitton. The idea, Hyundai explained, was to present a “humorous social commentary on the need to redefine luxury during a recession” and to convey to consumers that the Sonata is one luxurious item that is available to everyone.

Seeking Content for the Commercial
Hyundai initially sought the permission of 13 high fashion brands to display their trademarked designs in the commercial. Six brands denied Hyundai’s request, while the others (Louis Vuitton among them) did not respond. Unable to secure consent, Hyundai went with what it thought was its next best alternative: it altered the Louis Vuitton marks to make them more generic, such that they still evoked – but were no longer exact copies of – the original Toile Monogram.  Crucially, Hyundai admitted that it wanted to create a quick association with luxury by creating an association with the Louis Vuitton brand. In other words, Hyundai sought to build the prestige of its own brand by capitalizing on consumers’ impressions of Louis Vuitton. To make matters worse, Hyundai continued to run the commercial after receiving a cease-and-desist letter from Louis Vuitton, and even after Louis Vuitton commenced the lawsuit.

Trademark Dilution
The court agreed with Louis Vuitton that Hyundai diluted the Louis Vuitton mark because, by using a mark similar to the famous Toile Monogram, it created an association with the Toile Monogram and impaired its distinctiveness. In its defense, Hyundai asserted that its use of the mark fell under the fair use provision of the Trademark Dilution Revision Act, which applies to uses such as criticism of, or commentary on, a famous mark.  Hyundai’s fair use defense failed on somewhat of a technicality: rather than criticizing or commenting specifically on the Louis Vuitton brand, Hyundai offered a view of luxury products in general, and therefore was not addressing a particular famous mark as required by the fair use provision. The court also found that Hyundai diluted the mark willfully, thereby exposing Hyundai to the possibility of multiple damages. While Louis Vuitton’s evidence demonstrating its (limited) presence in the sports and car markets – buttressed by its survey results indicating that some people associated the basketball with the Louis Vuitton brand – certainly helped its case, the most striking evidence was that which Hyundai brought upon itself.

The court saw Hyundai’s failed attempt to secure permission to use the Toile Monogram or other luxury marks as an indication that Hyundai knew that it could not legally use the mark without consent, and the court did not look favorably on Hyundai’s decision to simply use an altered form of the mark when it was unable get permission. Interestingly, the fact that Hyundai featured the
basketball for such a short period of time did not help Hyundai’s case; the court reasoned that the short time period made it more difficult for viewers to discern that the marks on the ball differed from the Toile Monogram.

So What?
The decision to display another brand’s trademark, whether in its original or altered form, will almost always carry some degree of risk, so the steps leading to the incorporation of another’s trademark into a website or other marketing materials warrant careful attention. Hyundai’s effort to secure permission to use a trademark was an appropriate first step, but the company faltered in its decision-making when the trademark owners refused to cooperate.  By using a slightly altered form of the Toile Monogram, Hyundai at once limited itself from asserting a fair use argument (it could not assert that it was commenting on the Louis Vuitton brand while using a knock-off Louis Vuitton basketball) and exposed itself to Louis Vuitton’s claim that the altered marks took away from the Toile Monogram’s distinctive qualities.  Had Hyundai not shied away from using the original Toile Monogram, it might have had greater success arguing that its use of the mark was protected as a fair commentary on Louis Vuitton’s frivolously luxurious brand. It would have been using the mark to refer to Louis Vuitton, and thus might not have been liable for dilution.

The case also bears testament to the strength of the Toile Monogram mark, which is a result, in part, of the diligence with which Louis Vuitton polices it.  Because Louis Vuitton’s marks have achieved the status of “famous marks,” they are afforded a great deal of legal protection. Thanks to decades of careful monitoring, Louis Vuitton, known primarily for its contributions to the fashion industry, managed to demonstrate that its mark had been diluted by the brief use of a similar mark in an unexpected setting: on a basketball featured in a car commercial.

If you have questions about the information presented here, please contact Asya Calixto, an associate in the Intellectual Property and Internet Law Practice Group and the author of this alert. You can reach Asya at 617 456 8110 or acalixto@princelobel.com. If you would like to learn more about the legal services Prince Lobel’s IP and Internet Law Practice Group can provide to your organization, please contact Group Chair Robert A. Bertsche at 617 456 8018 or rbertsche@princelobel.com.