Initial Interest Confusion in Trademark Case Against Amazon

Posted on Aug 26, 2015 in Articles

This article orginally appeared in The Legal Intelligencer on August 26, 2015.

Dan Aykroyd, Bill Murray and John Belushi are working in a restaurant. Jane Curtin walks in and orders two cheeseburgers. Belushi yells at the cook, “Cheezborger, cheezborger.” Curtin then orders a Coke. Belushi responds, “No Coke. Pepsi.”

The scene is one of the classics from “Saturday Night Live,” and it is also how Judge Barry Silverman begins his dissent in the U.S. Court of Appeals for the Ninth Circuit’s decision, Multi Time Machine v. Amazon.com, 2015 U.S. App. LEXIS 11554 (9th Cir. Cal. July 6, 2015). Multi Time Machine (MTM) is a high-end watch company that manufacturers the MTM Special Ops watch. Amazon sells many watches, but not the MTM Special Ops, nor, for that matter, any watch manufactured by MTM. The two parties are in court, litigating over what happens when a customer looks for “MTM Special Ops” on Amazon’s website, and finds a competitor’s product. Silverman is describing the “Saturday Night Live” skit because he is trying to make an analogy between “No Coke. Pepsi” and what happens when a customer is looking for one product that isn’t there in the first place, and is offered another instead. Judge Carlos Bea, however, who wrote the majority opinion, doesn’t think the analogy is quite right.

When I typed “MTM Special Ops” in Amazon’s search field and hit “enter,” Amazon responded with a Web page that included:

• “MTM Special Ops” in the search field.
• “1-16 of 29 results for ‘MTM Special Ops'” near the upper left-hand corner.
• “Related Searches: mtm, mtm special ops watch, mtm watch” several lines below.

Several watches were displayed with the option to make a purchase (several non-watch items appear as well). The watches on the Web page bear the mark “Luminox.” Amazon thus offered to sell Luminox watches in response to an Amazon customer looking for MTM watches.

MTM sued Amazon for trademark infringement under the Lanham Act. In particular, MTM alleged that a customer looking for its watches on Amazon’s website might purchase a Luminox watch rather than look for MTM’s watches elsewhere. Thus, MTM argued, “Amazon’s use of MTM’s trademarked name is likely to confuse buyers, who may ultimately buy a competitor’s goods.”

The Lanham Act provides a cause of action for trademark infringement when a defendant’s unauthorized use of a trademark creates a “likelihood of confusion” as to the source of the goods. When, however, must the likelihood of confusion occur? What if customers are “confused” when they are looking at a competitor’s product, but by the time they make the actual purchase, they understand that the product they are purchasing is coming from a different source?

Here enters the theory of initial interest confusion. In the words of the Multi Time Machine appeals court, “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,'” citing Playboy Enterprises v. Netscape Communications, 354 F. 3d 2010 (9th Cir. 2004). The question posed by the appeals court then became whether a jury could find a likelihood of confusion under an “initial interest confusion” theory.

Each federal circuit court has its own factors for determining whether use of a trademark creates a likelihood of confusion. For example, the Federal Circuit uses the so-called DuPont factors. The Second Circuit uses the so-called Polaroid factors. In the Ninth Circuit, where Multi Time Machine was decided, the Sleekcraft factors apply.

AMF v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979), sets forth up to eight different factors (with each factor afforded varying degrees of weight depending upon the factual situation that serves as the basis of the dispute) to determine whether likelihood of confusion exists. In Multi Time Machine, three of those factors were deemed to weigh in favor of likelihood of confusion, and a jury needed to determine how heavily those factors should weigh:

• Strength of the mark: “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 military style.”
• Similarity of goods: “Whether customers … will be confused is an open question.”
• Defendant’s intent: “A jury could infer that Amazon intended to confuse its customers.”

These are all issues for a jury to consider. Therefore, the lower court decision was reversed and the case was remanded for further proceedings.

The initial-interest confusion theory has a controversial past. As part of the Lanham Act (which was codified in 1946), infringing use of a mark was required to be “likely to cause confusion or mistake or to deceive purchasers” with regard to the source of goods or services. A 1962 amendment to the act deleted the “purchasers” language. Different courts subsequently struggled with whether the Lanham Act only applied to a likelihood of confusion at the time of sale. Many courts now find infringement based on a likelihood of confusion at any time, even if the likelihood of confusion no longer exists by the time that the sale occurs. In this manner, a competitor is prevented from gaining a competitive advantage by misappropriating a trademark owner’s goodwill. The Multi Time Machine appeals court ruled that the district court needed to consider not whether a likelihood of confusion had existed at the time of purchase, but “earlier in the shopping process … even if that confusion is dispelled before an actual sale occurs.” Hence the reversal and remand.

“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?” Silverman argued in his dissent. Yet, there is a difference between the way Belushi sells Curtin her Pepsi and Amazon sells its customers a Luminox watch. Belushi explicitly states there is “No Coke” before he offers the Pepsi. Does Amazon explicitly state that it does not sell MTM watches? Amazon could display such a message, but at the time this article was written, it did not. Compare Amazon’s website with, for example, Overstock.com’s website. Type “MTM Special Ops” into Overstock.com’s search engine and the phrase “Sorry, your search: ‘mtm special ops’ returned no results” appears. Silverman’s analogy is interesting, but the majority argues that it is not totally accurate: “A retailer who offers competitors’ products for sale, without mentioning that he does not carry a brand requested by a customer … is only sort of like the Belushi scenario, because unlike Belushi’s ‘No Coke,’ Amazon does not say ‘No MTM.'” In the present digital age, the subtleties of e-commerce can have a profound effect on consumer behavior. The Ninth Circuit has applied the initial-interest confusion theory in this realm. It will be interesting to see if other circuit courts follow suit.

– by Lawrence Ashery