Tag: Retail Law

On October 21, 2015, the Ninth Circuit ruled that online retailer Amazon does not violate the Lanham Act when, in response to a search for a brand it doesn’t sell, it returns a results page that fails to disclose that fact and simply offers competing products sold under different brands. The decision in MultiTime Machine, Inc. v. Amazon.com, Inc. weakens the “initial interest confusion” doctrine in the Ninth Circuit and will likely be perceived as a significant victory for online retailers.

Plaintiff MultiTime Machine (MTM) sells an expensive military-style watch known as the “MTM Special Ops,” but doesn’t sell it through Amazon. When an Amazon customer types “mtm special ops” into the Amazon search box, the result is a list of other brands of military-style watches that Amazon sells. Meanwhile, “MTM Special Ops” remains visible within the search box and also in smaller type at the top of the page. Nothing on the page indicates that Amazon does not sell MTM products. MTM sued Amazon for trademark infringement, claiming that Amazon’s use of its trademark in this way created a likelihood of confusion.

The district court dismissed the case on summary judgment. MTM appealed. In a 2-1 decision issued July 6, 2015, the Ninth Circuit remanded the case, holding that there were issues of fact as to consumer confusion that precluded summary judgment. MTM then petitioned for a rehearing en banc.

On Wednesday, while that petition was pending, the same panel reversed itself and held in a 2-1 decision that “no rational trier of fact could find that a reasonably prudent consumer accustomed to shopping online would likely be confused by the Amazon search results.” Summary judgment in favor of Amazon was affirmed.

Judge Silverman (the dissenter in the July opinion, now writing for the majority) wrote that Amazon is doing no more that “responding to a customer’s inquiry about a brand it does not carry by … stating clearly (and showing pictures of) what brands it does carry.” In the majority’s view, this is “not unlike when someone walks into a diner, asks for a Coke, and is told ‘No Coke, Pepsi’.”

The Court held that the Ninth Circuit’s traditional eight-factor Sleekcraft test for assessing likelihood of confusion is not appropriate for this case. Sleekcraft is designed for cases analyzing similarity of the marks of competing brands. Here, said the Court, there is no issue as to the other marks involved; the only issue is Amazon’s use of MTM’s mark in displaying search results. In cases involving trademarks in the Internet search context, the more appropriate test is “(1) Who is the relevant reasonable consumer; and (2) What would he reasonably believe based on what he saw on the screen?”

Adopting the standard set forth in Toyota Motor Sales, U.S.A. Inc. v. Tabari, 610 F.3d 1171 (9th Cir. 2010), the Court held that the relevant consumer here is a “reasonably prudent consumer shopping online … Unreasonable, imprudent and inexperienced web-shoppers are not relevant.” The Court also noted that the watches at issue are relatively expensive and that consumers are therefore likely to be even more vigilant than usual.

As for what is seen on the screen, the Court focused on the “clear labeling” of all of the competing products returned in the search. MTM argued that “initial interest confusion” might occur because the phrase “mtm special ops” appears three times at the top of the search results page. It also argued that Amazon should change its results page to explain to consumers that it does not offer MTM watches. The Court brushed off both contentions. “The search results page makes clear to anyone who can read English that Amazon carries only the brands that are clearly and explicitly listed on the web page.”

As a result, in the Court’s view, no jury trial is necessary because there are no material issues of disputed fact. The contents of the web page showing “clear labeling,” and the expensive price of the watches, is undisputed. The Court needs no more to conclude that “no reasonably prudent consumer accustomed to shopping online” could be deceived, even initially.

Judge Bea, who had written the majority opinion in the July decision, wrote a sharp dissent. In his view, a jury is entitled to decide whether shoppers would believe that there is a relationship between MTM and the products listed in the Amazon search results. MTM had argued that this could arise from a belief that MTM had acquired those brands, or because they are other brands from the same parent company (much as Honda and Acura automobiles come from the same company). Determining whether or not MTM is correct, said Judge Bea, is a question for a jury, not appellate judges. This is especially true in a case involving brands whose relationships to each other may not be so obvious to consumers – unlike the relationship between Coke and Pepsi.

Judge Bea claims that, by “usurping the jury function,” the majority effectively overrules the “initial interest confusion” basis for infringement. In his view, the question of whether the defendant’s labeling is clear enough to prevent customers from initially believing that the products are connected with those of plaintiff is a fact-intensive inquiry, and prior Ninth Circuit cases have not applied the doctrine as a matter of law, as the Court does here.

Apart from the technical legal issues, the two opinions reflect differing views of how the public interacts with online commerce. The majority appears to believe that online buying is now so common that consumers are conditioned to understand that entering a trademark as a search term will not necessarily return results pointing only to that brand. Its apparent desire to create a bright-line rule on “clear labeling” may make it easier for e-retailers to move to dismiss, without a trial, infringement claims from brand owners concerned about use of their marks to search for competing products. The dissent is more skeptical about consumer sophistication; its approach would create a greater burden on online retailers to defend against infringement claims.

It is unclear whether the majority intends its holding to be applied only in cases where, as here, the goods are relatively expensive and the brands are not well known. Given this uncertainty, the fact that it was a split decision, the prior petition for rehearing en banc, and the participation by multiple amici curiae, it is possible that there will be an en banc rehearing in this case. If the decision stands, however, it may diminish the doctrine of “initial interest confusion” in the Ninth Circuit and allow a freer hand to online retailers in using trademarks to generate searches for broad classes of competitive products.