Appeals Court Clarifies Test for Trademark Dilution; Holds “PerfumeBay” Dilutes eBay Trademark
The United States Court of Appeals for the Ninth Circuit issued an important ruling on November 5, 2007 on how similar trademarks must be for there to be trademark dilution, in a victory for eBay Inc. against online perfume seller PerfumeBay.com, Inc.
Federal and California law protects owners of famous trademarks against “dilution by blurring”—an association arising from a similarity between a trademark or name and a famous mark that impairs the distinctiveness of the famous mark, regardless of whether the products compete or consumers would be confused. Classic hypothetical examples of dilution are “Kodak bicycles” and “Buick aspirin.”
At trial eBay had offered evidence that a number of online sellers had tried to name themselves by combining the generic word for what they sold with the arbitrary suffix “Bay,” and argued that names like CarBay, JewelryBay, EventsBay, and PerfumeBay diluted the eBay mark and threatened to make the “bay” suffix a mere synonym for “online marketplace.”
PerfumeBay’s founder got her start selling perfume on the Internet through eBay. Four months later she started her own web site with the similar name “PerfumeBay.” PerfumeBay operated five similar sites under names such as “ScentGuru” and “BeautifulPerfumes.com,” but the PerfumeBay.com site accounted for over two thirds of the company’s sales. The founder admitted that “people were calling Perfumebay asking if it was associated with eBay.”
Courts have held that marks must be “nearly identical” for the dilution law to apply. In the PerfumeBay case, the trial court held that although eBay was a famous mark, it was not “nearly identical” to “PerfumeBay,” and denied eBay’s trademark dilution claim (although it did find PerfumeBay liable for trademark infringement).
In its decision, the Ninth Circuit held that the trial court applied the “nearly identical” standard too narrowly. It reiterated a holding of a prior case that “the similarity requirement may be less stringent in circumstances in which the senior mark is highly distinctive and the junior mark is used for a closely related product.”
As such, the appellate court found that because of the “distinctiveness and fame” of the eBay mark, the “strong recognition and association of eBay’s mark with its services,” the fact that the PerfumeBay marks “contain either the entire eBay trademark or the dominant suffix ‘Bay,’” and the fact that the parties used the Internet to sell the same kinds of products, the PerfumeBay mark created a likelihood of dilution of the eBay mark.
For those reasons, the Ninth Circuit found that the trial court erred in not fully considering the “highly distinctive qualities of eBay’s famous mark” in determining whether the marks met the “nearly identical” test, and ruled in favor of eBay.
As the appellate court noted, “With Perfumebay’s marks, consumers may no longer associate the usage of the ‘Bay’ suffix with eBay’s unique services.” “The uniqueness of eBay’s mark is diluted in direct proportion to the extent consumers, particularly internet users, disassociate the eBay mark with eBay’s services.”
The Ninth Circuit also indicated that “non conjoined” versions of the PerfumeBay mark (i.e., separated by a space) would dilute the eBay mark just as well as “conjoined” versions, even though it declined to upset the district court’s conclusion that the former did not infringe. “Because dilution and likelihood of confusion tests are directed at different actions, it does not make sense to import the relatively subjective similarity of the marks test from the likelihood of confusion context into the dilution context,” the court wrote.
Although eBay’s claim was brought under a California statute, the appellate court said that its decision was “bolstered” by the new Federal Trademark Dilution Revision Act of 2006, which provided a multi-factor test for dilution, including similarity of the marks and distinctiveness and consumer recognition of the famous mark.
This decision, PerfumeBay.com, Inc. v. eBay Inc., No. 05-56794 (9th Cir., Nov. 5, 2007), will help owners of highly distinctive and famous brands to protect their marks from imitators. Members of Cooley’s trademark litigation practice tried the case and argued the appeal on behalf of eBay.
If you have any questions about this Alert and how it may affect your company’s strategy, please contact one of the attorneys listed below.
|John Crittenden||San Francisco, CA|
|Janet Cullum||New York, NY|
|Andrew Hartman||Broomfield, CO|
|Anne Peck||Palo Alto, CA|
|Kent Walker||San Diego, CA|
|Peter Willsey||Reston, VA|