Ninth Circuit: PerfumeBay confusingly similar to eBay, but Perfume Bay is notNovember 6, 2007

In a decision yesterday, the Ninth Circuit affirmed a district court's finding that the mark "Perfumebay" was likely to be confused with eBay, and affirmed an injunction barring the use of the domains perfumebay.com and perfume-bay.com (as of today, both these domains are still functional). The court also affirmed the finding that the use of "Perfume Bay" was not likely to cause confusion, in part because "PerfumeBay" incorporates the full "eBay" trademark, whereas "Perfume Bay," with the addition of the space between the words, no longer incorporates the whole eBay trademark.

The Ninth Circuit reversed the district court's finding of no likely dilution under California law, stating that "it does not appear that the district court fully considered the highly distinctive qualities of eBay's famous mark." Perfumebay's use of the suffix "Bay" may cause consumers to "no longer associate the usage of the 'Bay' suffix with eBay's unique services," causing the "uniqueness" of eBay's mark to be "diluted in direct proportion to the extent consumers, particularly internet users, disassociate the eBay mark with eBay's services."

In the late 1990s, Jacquelyn Tran decided to sell perfume on the internet. From 1999 until October, 2004, she sold perfume on eBay's website using various user names. In October, 2004, she decided she no longer wanted to use eBay because of its auction approach to sales. At this time, Tran shifted her online sales away from eBay to several websites, including perfumebay.com, perfume-bay.com, beautifulperfumes.com, scentguru.com, and others that she had registered previously. She also purchased keyword advertisements on Google and Yahoo!, such that when a user searched for the word "perfume," a sponsored link to perfumebay.com would appear. This was the case even when the search included other terms, such as "perfume eBay." In 2004, Perfumebay.com's sales were $6.6 million, and the total sales from all of Tran's websites totaled about $9 million. Other eBay users also sell perfume products, and between January 2002 and September 1, 2004, the total gross sales of products in eBay's "fragrances" category was about $6 million.

In February 2004, eBay sued Perfumebay.com for trademark infringement and dilution. The district court determined that Perfumebay.com's use of the conjoined forms of "Perfumebay" (with or without a capital "B") was likely to cause consumer confusion, but that use of the terms separately was not. Based on this, the court enjoined Perfumebay.com from using the domains perfumebay.com and perfume-bay.com. The court rejected eBay's contention that there was likely dilution under California law. Both parties appealed.

The Ninth Circuit, in a near total victory for eBay, affirmed the finding of likely confusion and the injunction, and reversed the finding of no likely dilution. For the likelihood of confusion analysis, the court noted that the Ninth Circuit applies the Sleekcraft factors to determine likely confusion. Those factors are:

(1) strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchaser; (7) defendant’s intent in selecting the mark; and (8) likelihood of expansion of the product lines.

However, when the asserted infringement is online, the court looks to the "internet trinity" of Sleekcraft factors, namely "(1) the similarity of the marks, (2) the relatedness of the goods and services, and (3) the parties' simultaneous use of the Web as a marketing channel." If these three factors support a finding of likely confusion, the other factors must weigh "strongly against a likelihood of confusion to avoid the finding of infringement." However, if these three factors do not "clearly indicate a likelihood of consumer confusion, a district court can conclude the infringement analysis only by balancing all the Sleekcraft factors within the unique context of each case."

Here, the Ninth Circuit found the district court did not clearly err in finding the "internet trinity" supported a finding of likelihood of confusion. The marks were similar, as "perfumebay" incorporates the "eBay" mark in its entirety, particularly when the "B" is capitalized. Also, the domain names fully incorporate the eBay mark. The court also noted that the evidence of overlapping sponsored links indicated the similarity of the marks, although this evidence is arguably somewhat weak given that it appears that the sponsored links were tied to a generic term, "perfume." In the end, although there are differences between the marks, the strength of eBay's mark caused this factor to weigh against Perfumebay.

The other two factors likewise weighed against Perfumebay. Both eBay and Perfumebay sell similar products, namely perfume, over the same medium, the internet. Both use the internet for marketing and advertising. As a result, all three factors in the "internet trinity" weighed in favor of a finding of likelihood of confusion.

The court then found that the remaining factors did not weigh "strongly" against a finding of infringement. Because of this, the court affirmed the finding of infringement regarding the "conjoined" use of Perfumebay. The court also affirmed the injunction against use of the perfumebay.com and perfume-bay.com domains based on this finding of likely confusion.

Interestingly, the court also affirmed the finding of no likely confusion with regard to the separated form of "Perfume Bay." The addition of the space resulted in the mark no longer incorporating eBay's entire mark, and as a result the two "do not resemble one another in the same manner." Based on this, the "similarity of the marks" factor did not weigh in favor of infringement, and the finding of no infringement for the separated "Perfume Bay" mark was affirmed.

The court reversed the district court's finding of no dilution under California law, essentially relying on the fame of eBay's mark. The court applied pre-Moseley pre-TDRA federal dilution law to eBay's claim arising under California law. This standard requires the plaintiff to show:

(1) its mark is famous; (2) the defendant is making commercial use of the mark in commerce; (3) the defendant’s use began after the plaintiff’s mark became famous; and (4) the defendant’s use presents a likelihood of dilution of the distinctive value of the mark.

In addition, the allegedly diluting mark must be "identical, or nearly identical" to the famous mark, meaning that "they must be similar enough that a significant segment of the target group of customers sees the two marks as essentially the same." However, the similarity requirement may be applied less stringently when "the senior mark is highly distinctive and the junior mark is being used for a closely related product."

Applying this standard, the court held that likely dilution existed in this case. Specifically, the court stated the "district court erred in not fully considering the strength of eBay's mark in making its dilution finding." The court held that there was "strong recognition and association of eBay's mark with its services," and that "[w]ith Perfumebay’s marks, consumers may no longer associate the usage of the 'Bay' suffix with eBay’s unique services, specifically the sale of products on an internet-based marketplace." As a result, the court held that there was likely dilution, and reversed the district court's