On February 28, 2012, The Navajo Nation (Navajo Nation) sued Urban Outfitters, Inc. and its subsidiaries (Urban Outfitters) in the US District Court for the District of New Mexico for trademark infringement, dilution, unfair competition, false advertising, unfair practices and state trademark infringement, and violation of the Indian Arts and Crafts Act (IACA). Urban Outfitters filed a motion to dismiss the complaint, and on March 26, 2013, the court granted and denied the motion in part.

The Navajo Nation, a sovereign nation with over 300,000 members, alleges that it has been identified by the name “Navajo” since 1849 and has used the mark NAVAJO in connection with numerous products such as clothing, accessories, jewelry, home goods, decorations, and crafts since that time. The Navajo Nation owns 86 federal trademark registrations for marks incorporating the word NAVAJO, some of which are incontestable, providing the Navajo Nation with conclusive evidence of validity in its marks. In its complaint, the Navajo Nation claims that due to the long use and advertising of its marks, resulting in over $500 million in sales, the NAVAJO mark has become famous and is an inherently distinctive indicator of source in the Navajo Nation.

Urban Outfitters is an international retail company with over 200 stores worldwide. In its complaint, the Navajo Nation alleges that in early 2011, Urban Outfitters launched a product line featuring the names “Navajo” and “Navaho,” which “evok[ed] the Navajo Nation’s tribal patterns, including geometric prints and designs fashioned to mimic and resemble[d]” the Navajo Nation’s products. The Navajo Nation also alleges that Urban Outfitters’ use of the NAVAJO mark to sell hip flasks is derogatory in light of the Navajo Nation’s prohibition on alcohol within its borders. Furthermore, the Navajo Nation asserts that Urban Outfitters’ use of the misspelled word “Navaho” violates its laws and is therefore scandalous and derogatory. As a result of these activities, the Navajo Nation argues that Urban Outfitters’ use of the NAVAJO mark and tribal patterned products is likely to cause consumers to believe that Urban Outfitters’ products are authentic products, thereby damaging the goodwill of the NAVAJO mark.

In response to the Navajo Nation’s complaint, Urban Outfitters filed a motion to dismiss, arguing that the complaint was deficient for several reasons. First, with respect to the Navajo Nation’s federal and state trademark infringement and unfair competition claims, Urban Outfitters argued that the Navajo Nation failed to allege sufficient facts showing that Urban Outfitters had used the term “Navajo” as a trademark as required by the Lanham Act. Urban Outfitters further stated that its use of the term “Navajo” was merely a reference to a design style and therefore the term was generic and subject to the fair descriptive use defense. Because the Navajo Nation alleged that Urban Outfitters was using the NAVAJO mark on similar goods and in similar channels of trade, the court held that such use clearly conveyed information about the potential source of Urban Outfitters’ products, and therefore upheld the claims. Moreover, due to the Navajo Nation’s extensive use of the NAVAJO mark and ownership of numerous federal registrations, the court held that the complaint alleged sufficient facts to demonstrate that the term was not generic.

Third, and turning to the Navajo Nation’s dilution claim, the court concluded that the Navajo Nation had made sufficient allegations to support its claim for dilution by blurring. However, the court took issue with the Navajo Nation’s dilution by tarnishment claim based on Urban Outfitters’ sale of flasks. Because the Navajo Nation allows for some alcohol consumption and sells shot glasses, the court found that dilution by tarnishment could not exist and dismissed the claim with respect to flasks. Moreover, since the evidence indicated that the terms “Navajo” and “Navaho” are used interchangeably, the court found that the Navajo Nation’s claim of dilution by tarnishment based on Urban Outfitters’ misspelling could not stand.

Finally, the court considered the Navajo Nation’s claim under the IACA, which prevents the sale of products that falsely suggest that they are “Indian made” due to advertising, labeling, and place of sale. Although Urban Outfitters contended that use of the term “Navajo” referred to a design style, the court agreed with the Navajo Nation that Urban Outfitters’ manner of selling goods with traditional Indian styles, motifs, and design supported the IACA claim to withstand a motion to dismiss. Since factual questions remained regarding the Navajo Nation’s standing under New Mexico's unfair practices law, the court requested supplemental briefs from the parties.

This case highlights a unique area of trademark law involving the rights of sovereign nations. Moreover, it also emphasizes the potential intellectual property rights contained in apparel, accessories, and textiles. Fashion designers should be mindful of possible copyright, trademark, or design patent rights in patterns and designs, as well as the cultural implications of using tribal patterns and cultural symbols.