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Perfumebay.com, Inc. v. eBay Inc.

No. 05-56794 (9th Cir. November 5, 2007).

Perfumebay Held To Infringe And Dilute Famous Ebay Mark

Ninth Circuit holds that plaintiff Perfumebay.com, Inc.’s use of the trademark “PerfumeBay” as a cojoined term infringes defendant eBay’s famous trademark, and is likely to cause consumer confusion.  The Ninth Circuit rested this determination on the similarity of the parties’ marks – PerfumeBay contains the entire eBay mark – the similarity of the products and services offered by the parties to the public – each facilitate the public’s purchase of perfume – and the fact that both parties use the Internet to market their products.

The Court further held that plaintiff’s use of PerfumeBay as a cojoined term diluted defendant eBay’s famous mark.  Due to the strength and highly distinctive nature of eBay’s mark, plaintiff’s mark did not need to be ‘identical or nearly identical’ to eBay to sustain a dilution claim.  Instead, given the fame of the eBay mark, eBay could prevail even if plaintiff’s mark was ‘a bit different’ provided consumers would view it as essentially the same as eBay’s mark, as was the case here. 
As a result, the Ninth Circuit enjoined plaintiff from continuing to use PerfumeBay as a cojoined mark, either in the domain name of its site, on its website, or in Internet advertising.

The Ninth Circuit held that plaintiff’s use of the mark “Perfume Bay” as separate words, however, did not infringe eBay’s mark.  When separated, “Perfume Bay” did not contain defendant eBay’s entire mark, nor was it likely to cause consumer confusion.  As a result, the Ninth Circuit allowed plaintiff to continue its use of “Perfume Bay” on its website, or otherwise, so long as the words were not cojoined.

Finally, the Ninth Circuit affirmed the District Court’s denial of plaintiff’s application for attorneys’ fees, holding it was not the prevailing party in this litigation.

Perfumebay Uses Trademark To Market Perfume To Public

Plaintiff PerfumeBay.com is a retailer of perfumes.  It operates a number of websites at which it offers the public perfumes manufactured and bearing the brands of third parties.  Among these websites is a site it operates at the domain perfumebay.com.  In 2004, PerfumeBay’s sales at this site totaled $6.6 million.  Total sales for all its sites in 2004 were approximately $9 million.

According to plaintiff’s President, she did not select the Perfume Bay mark to capitalize on eBay’s popularity, or confuse the public.  Rather, she testified she selected the mark because she pictured her site as “a bay filled with ships importing perfumes from all parts of the world … [which] would be the place where perfume lovers could go to locate … fragrances …”.  While no bay or waves were depicted on her website, her Perfume Bay logo featured a star fish between the words Perfume and Bay.  It was accompanied by the phrase “Where perfume lovers go.”

eBay provides “a marketplace” to the public, at which buyers and sellers of merchandise can engage in commerce.  It has neither inventory nor warehouses, and accordingly does not sell goods to the public.  Third parties do use eBay’s site to market fragrances.  Between January 2002, and September 2004, the sale price of all fragrances sold on the site amounted to approximately $6 million.

Plaintiff filed a trademark application for its PerfumeBay mark.  When this application was opposed by eBay, plaintiff commenced this action, seeking a declaratory judgment that its use of the mark did not infringe eBay’s famous mark.

Use Of Perfumebay As Single Cojoined Trademark Held To Infringe eBay Mark

On appeal, the Ninth Circuit held that plaintiff’s use of the cojoined mark PerfumeBay was likely to cause consumer confusion, and infringed eBay’s mark.  It further held that plaintiff’s use of the cojoined PerfumeBay mark diluted eBay’s famous mark.  The Ninth Circuit accordingly enjoined plaintiff both from using the cojoined mark, or Peefume-Bay,com, as a domain name or otherwise.  It also enjoined use of the domain Perfume-Bay.com.  The Ninth Circuit further held, however, that plaintiff’s use of the non-joined mark “Perfume Bay” did not infringe eBay’s mark.

In support of its claim that plaintiff’s use of its PerfumeBay mark was likely to cause consumer confusion, eBay submitted survey evidence that approximately 70% of consumers “believe that eBay comes to mind when they hear the word ‘bay’ used in connection with a website, or as part of the name of a web site.”  eBay was unable, however, despite plaintiff’s use of its mark for over 5 years, to produce any evidence of actual consumer confusion.

“The core element of trademark infringement is whether customers are likely to be confused about the source or sponsorship of the products” at issue.  Traditionally, courts of the Ninth Circuit analyze eight factors – known as the Sleekcraft factors – to determine if consumers are likely to be confused by an allegedly infringing mark.  In the Internet context, however, the Ninth Circuit focuses its analysis on three of these eight factors – “(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.”  When these factors suggest confusion, the remaining five factors must “weigh strongly against a likelihood of confusion to avoid a finding of infringement.”

The Court found each of these three factors present.  Because the remaining Sleekcraft factors did not “weigh strongly” against a likelihood of confusion, the Ninth Circuit affirmed so much of the District Court’s determination that plaintiff’s use of its mark was likely to confuse the public, and hence infringed eBay’s mark.  Said the Court:

The record in this case reflects the requisite similarity between the two marks.  “PerfumeBay” incorporates the eBay trademark in its entirety, especially when PerfumeBay utilizes the spelling as “PerfumeBay.” … Although differences exist between the two marks, the fact that eBay’s mark is a strong one weighs against PerfumeBay. The remaining two factors of the internet trilogy weigh equally against PerfumeBay.  PerfumeBay and eBay sell similar products on the internet – perfume.  Although they may differ slightly in that eBay offers the additional auction component of its website, “even services that are not identical are capable of confusing the public.” … PerfumeBay and eBay both utilize the internet ‘as a marketing and advertising facility, a factor that courts have consistently recognized as exacerbating the likelihood of confusion.

The Ninth Circuit held that a “broad injunction” was especially appropriate given “eBay and PerfumeBay’s services are similar, as they both sell perfume on internet websites and utilize search engines extensively for attracting customers.”

In reaching this result, the Court rejected plaintiff’s emphasis on the lack of evidence of actual consumer confusion produced by eBay during the 5 years of plaintiff’s use of its mark.  While evidence of actual confusion is one of the eight Sleekcraft factors used in measuring consumer confusion, “the failure to prove instances of actual confusion is not dispositive against a trademark plaintiff, because actual confusion is hard to prove; difficulties in gathering evidence of actual confusion make its absence generally unnoteworthy.”

PerfumeBay Held To Dilute eBay’s Famous Trademark

The Ninth Circuit held that plaintiff’s use of the PerfumeBay mark also diluted eBay’s strong mark in violation of California’s dilution statute.  As noted by the Court, the dilution analysis under the California statute is the same as under the federal statute.  The Court noted that “dilution is a cause of action … reserved for a select class of marks – those marks with such powerful consumer associations that even non-competing uses can impinge their value.”  To establish a dilution claim, a plaintiff must demonstrate that “(1) its mark is famous; (2) the defendant is making commercial use of the mark in commerce; (3) the defendants 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.” 

A holder of a famous mark can pursue a claim if the mark used by the alleged diluter is “identical or nearly identical” to the protected mark.  The Ninth Circuit further held that the degree of identity of the marks at issue necessary to prevail on a dilution claim is reduced as the strength of the famous mark increases.  Said the Court:  “the Court must consider whether the plaintiff’s mark ‘is so highly distinctive that consumers are likely to view a junior mark that is a bit different as essentially the same as the senior one.  …  The stronger the mark – meaning the more likely it is to be remembered and associated in the public mind with the mark’s owner – the greater the protection that it is accorded by the trademark law.”

Applying this test, the Court, reversing the court below, held that plaintiff’s use of its PerfumeBay mark diluted the famous eBay mark.  The strength of eBay’s mark made plaintiff’s use of its Perfumebay mark actionable.  Said the Court:

With 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.  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.

As a result, the Ninth Circuit enjoined the plaintiff from continuing the use of its cojoined Perfumebay mark, either as a domain name, on its website, or in internet advertising.  The Court further enjoined plaintiff from using the domain Perfume-bay.com

‘Perfume Bay’ As Two Separate Words Held Not To Infringe Ebay Trademark 

The Ninth Circuit did affirm so much of the District Court’s decision that held that plaintiff’s use of the mark “Perfume Bay” as two separate words did not infringe eBay’s mark.  “The district court also did not clearly err in finding that the non-cojoined forms of Perfumebay’s mark, such as Perfume Bay, did not create a likelihood of confusion.”  As such, the Ninth Circuit permitted plaintiff to continue its use of that mark on its website.

Finally, the Ninth Circuit rejected eBay’s cross-appeal from the denial of its breach of contract claim.  eBay asserted that, when the dispute over plaintiff’s use of its mark arose, the parties entered into a settlement agreement which plaintiff’s subsequently breached by its continued use of its cojoined mark.  The Court found that no such settlement agreement had been reached, and, as such, that eBay’s breach of contract claim was appropriately denied.

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