Volkswagen AG, the parent of the automaker Audi AG, has registered the Audi name for a bank it plans to open in Utah, even though Audis long-running feud with a bank with a similar name is far from settled.
Barring any last-minute snags, the Federal Deposit Insurance Corp. is expected to approve the German carmakers application to charter an online bank any day now. The bank, which would offer financial services to Volkswagen and Audi customers, would operate as Volkswagen Bank USA, but the charter would also allow it to do business as Audi Bank.
Volkswagen registered the Audi name even though Audi AG is locked in a legal battle with Bank Audi USA in New York over the use of the name in banking. The carmaker contends that it should have sole use of its Audi brand.
Bank Audi USA, which has $711 million of assets, was founded in 1983 as a state-chartered commercial bank in New York. Audi AG sued it in U.S. District Court for the Southern District of Florida in Miami in 1997. Arguments in the trademark infringement trial ended more than 18 months ago, but a final ruling has not been handed down, so the companies are in legal limbo.
The Audi names have very different histories.
Joseph G. Audi, the president and chief executive officer of Bank Audi USA, says his family began banking in Lebanon in the 19th century. By the 1970s the familys banking interests had expanded overseas with the founding of independent banks in Switzerland, France, Luxembourg, and the United States that carry the Audi name, and in which the family retains an ownership stake.
Ironically, the carmakers name stems from a naming dispute. August Horch founded a car company in 1899 but left in a quarrel with backers. Barred from putting his own last name which means listen! on his new company too, he used the Latin translation, audi.
Volkswagen is the largest manufacturer of passenger cars in Europe and the fourth-largest in the world. The automaker, which developed its financial services activities in the credit industry, registered the name of Audi Bank in Germany in 1990 and has since claimed exclusive rights to the Audi name, one of its major upscale brands much to the dismay of the Lebanese family.
Its pure aggression from a major company who decides to come and attack an existing business, Mr. Audi said. (Richard Burns, the president and CEO of Thomson Financial Media, the parent company of American Banker, is a Bank Audi board director).
Bank Audi USA has one branch, in New York, and clients throughout North and South America, Europe, and the Middle East. It has been defending the use of the family name since the early 1990s in several courts throughout Europe. The company said it has obtained some favorable rulings in those cases.
In an interview in his New York office, Mr. Audi said his company has spent in the millions defending itself, and has even tried to settle with the automaker. But it was very difficult to negotiate with Audi AG, he said.
Basically their idea of negotiations is, You die and you leave me alone.
Volkswagen executives refused to discuss the case, and attorneys for Audi AG said the company does not discuss pending litigation. However, Konrad Klimek, an attorney for Audi AG in Ingolstadt, Germany, responded very generally in writing to questions about the case.
Audi AG is requesting [Bank Audi] to use its name in a manner that ensures that consumers are not confused any longer by [Bank Audis] use of the word Audi, Mr. Klimek stated.
John E. Tardera of Winston & Strawn in New York is one of the lawyers defending Bank Audi USA. He said the Miami case hinges on the Federal Trademark Dilution Act of 1997, which was meant to prevent other companies from using the countrys most famous trademarks, like Coca Colas Coke.
Audi AG argues that the Audi name is a most famous trademark, and that the company is entitled to have a monopoly on the name, Mr. Tardera said. The automaker is arguing that the banks use of the trademark dilutes the Audi name as an identifier of Audi AGs products, he said.
Though Mr. Klimek did not discuss the antidilution act, he said that the main issue is that people are confused by [Bank Audi] using the word Audi, which has a famous meaning for Audi AG.
Attorneys for Bank Audi USA said they do not consider Audi a brand worthy of protection under the antidilution law. We certainly dont agree its a sufficiently famous trademark that is entitled to this protection, Mr. Tadera said. And second, even if it is sufficiently famous, that our use has not in essence diluted their ability to have their customers identify Audi with their products.
Because the antidilution act is relatively new, there have been few court decisions about it, and none have reached the Supreme Court.
Defense attorneys say that it is very unusual for a judge to take so long to issue a decision, and that they do not know when they can expect a judgment. Whats more, when a decision is reached, it may not strictly favor either side, the attorneys say.
The judge can decide that we have the right to continue to use the name, but perhaps not in a particular narrow area of financing, for example car loans or something like that, Mr. Tardera said. At this point the options available to the judge are varied. Its not all or nothing. It may be something in between.
Meanwhile, Utah state officials have approved the application by VW Credit Inc., a Volkswagen subsidiary, for a bank charter to operate as Audi Bank. Like BMW, which last year created BMW Bank of North America, a branchless bank in Salt Lake City, Volkswagen hopes to set up an industrial loan corporation in Utah, which has less restrictive laws on these types of charters than other states.
The fact that Volkswagen Bank USA, which would be headquartered in Salt Lake City, is so close to operating as Audi Bank further rankles Mr. Audi, who says he is upset that Volkswagen intends to use a slight variation of Bank Audi USAs name.
I dont care if they do business as Volkswagen Bank, he said. Its their right. I have no reason to object to that. But Audi Bank USA is something I strongly object to, and I dont think it should be permitted, because it is exactly our name by changing the order of the words.
Mr. Audi also said he is investigating his legal options in Utah.
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