Boy, did Toyota ever wake up with a New Year's headache.
All set to introduce Lexus, its ambitious new luxury car line, to the press and the world, and what happened? A federal judge told Toyota that it can't use the name Lexus.
With full-scale press previews for its 1990 Lexus LS 400 and ES 250 models just days away--and only nine months before the cars hit dealer showrooms--a federal judge in New York ruled Friday that the car maker should be immediately prohibited from using, displaying or advertising the Lexus name in any way.
The ruling grew out of a trademark infringement lawsuit brought by Dayton, Ohio-based Mead Corp., which markets Lexis, an information service that provides computerized data on legal cases for attorneys and other computer users.
On Monday, Toyota won a temporary delay in the order, giving the giant Japanese auto maker until Thursday to convince a three-judge panel in New York to give it enough time to mount a full-scale appeal of the ruling.
But if Toyota doesn't win that extension, it may find itself in something of a bind. Its press conferences to introduce its 1990 model Lexus models to the world are scheduled for auto shows in Detroit on Thursday and Los Angeles on Friday.
Toyota may thus be unable to go through with its Los Angeles press event. Toyota spokeswoman Deborah Sanchez says the firm has no alternative names in mind now, and is plowing ahead with its introduction plans. "We are still planning to have vehicles (at the shows) with Lexus badging," said Sanchez.
Although Lexus and Lexis are spelled differently and are products designed for completely different markets, U.S. District Judge David Edelstein ruled that Toyota's use of the Lexus name would "dilute" the distinctiveness of the Lexis trademark. Especially, the judge said, since Toyota plans a massive promotional push for Lexus this year. His court order said Toyota plans to spend up to $75 million on Lexus advertising in the first nine months of 1989.
The effect of such an ad blitz, said Edelstein, would be to "dwarf the Lexis mark."
But the court ruling now puts Toyota in a big hole, Edelstein conceded. With the Lexus cars scheduled to go on sale next fall, it is very late in the game for Toyota to come up with a new brand identity. Cars with the Lexus nameplate are already being built, and 89 dealers have already been signed up around the country.
In his ruling, Edelstein offered a way for the company to negotiate a settlement with Mead. But Sanchez said Toyota has rejected the settlement proposed by the judge, and instead plans to go ahead with its appeal.
Edelstein blamed Toyota for any disruptions his order might cause the auto maker, and admonished the company for apparently not taking the lawsuit seriously enough.
Got Early Warning
He said Toyota had known for more than a year that Mead considered Lexus to be a trademark infringement, but had failed to come up with any alternative plans in case it lost in court.
Indeed, the Lexus-Lexis legal tangle started long before the holidays. Toyota first announced in January, 1987, that it would call its newly created luxury car division Lexus, and Mead officials say they first warned Toyota in October, 1987, that they considered the Lexus name to be an infringement on their trademark. Mead then filed its suit last April in New York.
Toyota "has to a large extent placed itself in the precarious position in which it finds itself," Edelstein wrote. "It could have made alternative arrangements or adopted a backup plan. Litigation is always a risk, and Toyota has been aware of the prospect of litigation for over one year, and yet, it has apparently made no effort to prepare for the possibility of an adverse determination."