IP Law Daily, TOP STORY—9th Cir.: Amazon’s use of watchmaker’s trademark in search results could cause confusion, (Jul 6, 2015)

By Peter Reap, J.D., LL.M.

A jury could reasonably determine that online retailer Amazon infringed watch manufacturer Multi Time Machine’s “MTM Special Ops” trademark by creating a likelihood of confusion under a theory of “initial interest confusion” by responding to a shopper’s search request for those watches with a page showing “MTM Special Ops” three times above a search result displaying similar watches manufactured by MTM’s competitors, the U.S. Court of Appeals in San Francisco has decided (Multi Time Machine, Inc. v. Amazon.com, Inc., July 6, 2015, Bea, C.). Thus, the federal district court in Los Angeles’ grant of summary judgment to Amazon in the manufacturer’s trademark infringement suit was reversed and the dispute remanded.

Background

MTM Special Ops watches are high-end, military style watches manufactured by Multi-Time Machines, Inc. (“MTM”). Online retailer Amazon.com (“Amazon”) does not carry MTM watches, the court observed.

If a shopper were to enter “MTM Special Ops” as a search request on the Amazon website, Amazon would respond with a page showing: (1) MTM Special Ops in the search field; (2) “MTM Specials Ops” again—in quotation marks—immediately below the search field; and (3) yet again in the phrase “Related Searches: MTM special ops watch,” all before stating “Showing 10 Results.” What the website’s response will not state is that Amazon does not carry MTM products. Rather, below the search field, and below the second and third mentions of “MTM Special Ops” noted above, the site will display aesthetically similar, multi-function watches manufactured by MTM’s competitors. The shopper will see that Luminox and Chase-Durer watches are offered for sale, in response to the MTM query.

The same is not true with the websites of Amazon’s competitors Buy.com and Overstock.com, the court noted. They clearly announce that no search results match the “MTM Special Ops” query and those websites do not route the visitor to a page with both MTM’s trademark “MTM Specials Ops” repeatedly at the top and competitors’ watches below. Their pages show the search query playback but then forthrightly state that no results for the “MTM Special Ops” search query were found, and then list competitors’ products.

MTM’s competitors’ products appear in the Amazon search query response in part because Amazon’s search algorithm responds to its customers’ behavior using a Behavior Based Search technology (“BBS”), which uses data about what customers view and purchase after searching certain terms. Amazon does not program the terms; the function responds solely to customer behavior. If enough customers search for a certain keyword, “X,” and then look at or purchase another product “Y,” even if X and Y are not obviously related, future customers who search for X may receive search results including Y. But the BBS function is not solely responsible for the search results. The results list also includes matches based on a search of terms on Amazon’s pages—for instance, streaming video of a show called Special Ops Mission may be called up. Whether a particular result appears because of BBS or a traditional search of matching terms is not evident from the matches.

MTM filed suit, asserting that Amazon had infringed MTM’s trademarks in violation of the Lanham Act because a shopper might be confused into thinking that a relationship exists between Luminox and MTM. As a result of this initial confusion, MTM asserts that the shopper might look into buying a Luminox watch, rather than junk the quest altogether and seek to buy an MTM watch elsewhere. MTM asserts that Amazon’s use of MTM’s trademarked name is likely to confuse buyers, who may ultimately buy a competitor’s goods. MTM sought injunctive relief and damages. On Amazon’s motion, the district court granted summary judgment to Amazon. MTM timely appealed.

Likelihood of Confusion

Under the Lanham Act, a defendant infringes a trademark when the defendant uses the mark in commerce in a manner likely to cause confusion as to a good’s source. Trademark infringement also occurs when the trademark’s use in commerce is likely to cause confusion as to the affiliation, association, or approval of the trademark holder with the trademark user. Put another way, a defendant who creates likelihood of confusion by using another’s mark has infringed the mark. Playboy Enterprises, Inc. v. Netscape Commc’ns Corp., 354 F.3d 1020, 1024 (9th Cir. 2004).

A defendant can create likelihood of confusion, and thereby infringe the trademark, through a type of confusion referred to as “initial interest confusion.” Initial interest confusion occurs not where a customer is confused about the source of a product at the time of purchase, but earlier in the shopping process, if “customer confusion . . . creates initial interest in a competitor’s product.” Id. at 1025. Even if that confusion is dispelled before an actual sale occurs, initial interest confusion still constitutes trademark infringement because it “impermissibly capitalizes on the goodwill associated with a mark and is therefore actionable trademark infringement.” Id.

The Ninth Circuit looks to eight non-exhaustive factors, known as the Sleekcraft factors, to determine whether a trademark use gives rise to a likelihood of confusion: (1) strength of the mark(s); (2) proximity or relatedness of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels; (6) degree of consumer care; (7) the defendants’ intent; and (8) likelihood of expansion. Network Automation, Inc., v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1145 (9th Cir. 2011).

Network Automation and Playboy addressed the unauthorized use of a trademark to sell advertising keywords to search engines, not the use of a trademark to sell competitors’ products, the court explained. However, in the sale context, just as the “labeling and appearance of the advertisements as they appear on the result page includes more than the text of the advertisement, and must be considered as a whole,” here the labeling of search results which feature competitors’ products is important. Network Automation, 638 F.3d at 1154. Because of its importance, the appellate court would first address labeling—which gives rise to a genuine issue of fact—and then turn to the traditional Sleekcraft factors.

Labeling. MTM submitted an expert report that stated that the search results on Amazon are “ambiguous, misleading, and confusing.” The district court found that the expert analysis showed only that customers could be confused about why they receive certain search results, but that there was no evidence that Amazon users were likely to be confused as to the source who manufactured the competing goods.

The Ninth Circuit disagreed. A jury could infer that users who are confused by the search results are confused as to why MTM products are not listed. Unlike its competitors Buy.com and Overstock.com, Amazon does not forestall any confusion by informing customers who are searching “MTM Special Ops” that Amazon does not carry any such products.

A jury could infer that users who are confused by the search result will wonder whether a competitor has acquired MTM or is otherwise affiliated with or approved by MTM. This was especially true as to a brand like MTM, as many luxury brands with distinct marks are produced by manufacturers of lower-priced, better-known brands.

A jury could infer that the labeling of the search results, and Amazon’s failure to notify customers that it does not have results that match MTM’s mark, give rise to initial interest confusion. If so, a jury might find that Amazon customers searching for MTM products are subject to more than mere diversion, since MTM is not required to show that customers are likely to be confused at the point of sale.

Strength of the mark. Neither MTM nor Amazon presented evidence of MTM’s commercial strength—how widely the mark is recognized in the marketplace—and the court would not consider it. It turned to consideration of conceptual strength.

Conceptual strength is considered along a continuum, and in the Ninth Circuit, marks may be classified as falling into one of five categories, from conceptually weak to conceptually strong: generic, descriptive, suggestive, arbitrary, or fanciful. Here, the district court found that “Amazon’s evidence is persuasive in showing that the marks are not strong; they are at best suggestive, and more likely descriptive.”

The phrase “MTM Special Ops” requires a mental leap from the mark to the product, because the phrase does not expressly refer to watches, the appellate court said. A jury could find that the mark is suggestive and conceptually strong because it does not obviously refer to watches, or that it is merely descriptive because the watches are made in a military style. Either way, the weight of the evidence is a question of fact, and there is a genuine issue of fact as to the conceptual strength of the mark, the court held.

Similarity of the goods. Like MTM, Amazon sells specialized, military-style watches. The similarity of the goods Amazon is selling weighed in favor of a finding of infringement, the court ruled.

MTM watches are not displayed at all on the Amazon website. Whether customers will believe the options on Amazon’s page, which do not include MTM products, are clearly marked as having no association with, or approval by, MTM, and whether they will be confused, is an open question, and its answer did not render the identity of the goods here moot. Rather, a jury could find that it weighs in favor of finding likelihood of confusion.

Here, the competitors’ products are not clearly labeled as being BBS results rather than keyword searches. The similarity of the goods meant that an Amazon customer who searches for “MTM Special Ops” and then investigates watches manufactured by Luminox or Chase-Durer, even if he later purchases such a watch without any confusion as to its source, will have been subject to “confusion, not mere diversion.” Network Automation, 638 F.3d at 1149. Therefore, the similarity of goods weighed in favor of MTM, and a jury should determine just how much it weighs in favor of MTM, the court reasoned.

Defendant’s intent. “A defendant’s intent to confuse constitutes probative evidence of likely confusion.” Playboy, 354 F.3d at 1028. MTM submitted evidence that Amazon vendors and customers had complained to Amazon because they did not understand why they received certain non-responsive search results when they searched for products that are not carried by Amazon. The evidence showed that Amazon employees did not take action to address the complaints by explaining to the public how the BBS function works.

As in Playboy, this evidence suggested, “at a minimum, that defendants do nothing to alleviate confusion. . . .Although not definitive, this factor provides some evidence of an intent to confuse on the part of defendants.” Playboy, 354 F.3d at 1029. From evidence that “Earth’s most customer-centric company” took no action on these complaints, a jury could infer that Amazon intended to confuse its customers, the appellate court decided.

Evidence of actual confusion. MTM did not submit colorable evidence of actual confusion. MTM offered its president’s testimony that he had knowledge of actual confusion. The district court found this testimony was too vague to constitute evidence.

Amazon submitted evidence that purported to show that no customers were confused, because customers who searched for “Luminox” were 21 times as likely to purchase a Luminox watch as were customers who searched for “MTM Special Ops.” It was not surprising that customers who search for an item (Luminox watches) are more likely to buy that item than customers who did not search for it but searched for another product (MTM watches), the court observed. But in the absence of evidence of actual confusion, the factor weighed in favor of Amazon. However, the court was not persuaded that a jury could not view this purported evidence of no actual confusion as flawed because a user researching watches might initially be confused about the availability of MTM watches online and so not purchase a Luminox the same day. Further, some users did search for “MTM Special Ops” and purchase a competitor’s watch the same day, which a jury could find probative of some confusion.

Degree of care. The district court did not err in finding that consumers could be presumed to use a high degree of care in purchasing such watches. However, in light of the court’s determination that other factors give rise to genuine issues of fact, a jury could find that Amazon presented evidence that “same day sales” are high for Luminox, the court noted. This could be interpreted, by a jury, as proof that at least some persons who seek military watches are impulse buyers who do not spend as much time comparing products as careful buyers might. If so, the jury could accord the price of the watches little weight compared to the other factors.

Use in Commerce

The Ninth Circuit has held that use of a trademark as a search engine keyword that triggers the display of a competitor’s advertisement is a “use in commerce” under the Lanham Act. Network Automation, 638 F.3d at 1144–45. Amazon contended that the user-generated search term “MTM Special Ops” is not a use in commerce within the meaning of the Lanham Act.

The customer-generated use of a trademark in the retail search context is a use in commerce, the court held. As the district court correctly observed, though Network Automation was distinguishable because the search engines were selling the use of competitor’s trademarks, Amazon’s purpose was not less commercial just because it is selling wares, not advertising space. Therefore, the court declined to affirm the district court on the alternative ground that Amazon’s use is not a use in commerce.

Conclusion

Three of the five relevant Sleekcraft factors weighed in favor of a finding of a likelihood of confusion. Though it was by no means certain that MTM would be able to prove likelihood of confusion under an initial interest confusion theory, the matter could be determined only by resolving genuine issues of material fact, according to the court.

Dissent

In a colorful dissent, Judge Silverman compared the case at bar to a famous comedy skit:

Live! From New York! It’s Saturday Night! . . . and the scene is the Olympia Restaurant, Chicago, January, 1978. Dan Aykroyd is manning the grill, Bill Murray is working prep, and John Belushi is up front taking orders. A customer, Jane Curtin, walks in and orders two cheeseburgers. Belushi yells to the grill: “Cheezborger, cheezborger.” Curtin then orders a Coke. Without looking up, Belushi replies: “No Coke. Pepsi.”

Pause it right there.

Would anyone seriously contend that the diner violated Coke’s trademark by responding to the customer’s order that it doesn’t carry Coke, only Pepsi?

Judge Silverman contended that that because Amazon’s search result clearly labeled the name and manufacturer of each product offered for sale and even included photographs of the items, no reasonably prudent shopper accustomed to shopping online would likely be confused as to the source of the products.

The case is No. 13-55575.

Attorneys: Eric Levingrad (Wolf, Rifkin, Shapiro, Schulman, & Rabkin, LLP) for Multi Time Machine, Inc. Marc C. Levy (Faegre Baker Daniels LLP) for Amazon.com, Inc.

Companies: Multi Time Machine, Inc.; Amazon.com, Inc.

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