The Ninth Circuit in Perfumebay.com Inc. v. EBay Inc, Case No. 05-56794 (9th Cir. Nov. 5th, 2007) was asked to decide which versions of the mark "Perfumebay" infringed upon the trademark "eBay", both being web-based shopping sites selling perfume. The Court affirmed the District Court's ruling that the version "perfumebay" as a conjoined term is confusingly similar to "eBay," but rejected eBay's contention of infringement against non-conjoined versions of the Defendant's name in which the two terms are merely separated by a space – like "Perfume Bay." In this case the Ninth Circuit upheld the District Court's refusal to enjoin non-conjoined terms, on the basis that they were not likely to confuse or to dilute.

The Court concluded that the marks were sufficiently similar in the conjoined versions utilized by Perfumebay, in "Perfumebay" and "PerfumeBay," completely encompassed the eBay trademark. Additionally, the Court held that confusion was likely as Perfumebay and eBay both sell perfume on the Internet and heavily utilize the Web as a marketing and advertising tool. According to the Ninth Circuit, the Internet is a particularly dangerous medium for confusion as it allows "for competing marks to be encountered at the same time, on the same screen." In its defense, Perfumebay, argued that "Perfumebay" and "eBay" are pronounced differently and have different meanings. The Court agreed about the different pronunciations, but countered that the terms are typed rather than pronounced. The Court also granted Perfumebay's contention that "bay" may convey various meanings but concluded that those different impressions are in other contexts irrelevant to a finding of likelihood of confusion. In this context of Internet shopping, the Court upheld the holding that "Perfumebay" and "PerfumeBay" were confusingly similar to eBay's trademark.

The Ninth Circuit, however, also upheld the conclusion that "Perfume Bay" as two separated terms did not infringe upon eBay's mark. As separated, the terms did not include eBay's entire mark and also could not be used as a domain name without an added connector. As such, the Ninth Circuit concluded that in allowing Perfume Bay this use, the District Court had properly acted to prevent infringement.

In its analysis of likely confusion, the Ninth Circuit relied heavily upon the "internet troika" where 1) similarity of the marks, 2) relatedness of good/services and 3) the parties' reliance on the Web as a marketing tool are the three most important factors in the eight factor Sleekcraft likelihood of confusion analysis. AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir.1979). A finding to confusion with respect to these three factors requires an extremely strong showing against confusion on the remaining five factors to overcome an overall finding of confusion. Interstellar Starship Services, Inc. v. Epix, Inc. 304 F.3d 936 (9th Cir. 2002).

In its dilution analysis, the Ninth Circuit reversed the District Court's ruling that the conjoined term "Perfumebay" did not create a likelihood of dilution with eBay's mark. According to the Ninth Circuit, the district court failed to fully consider the strength of eBay's mark in considering whether dilution was possible. To succeed on a claim of dilution, the mark used by the alleged diluter must be identical or nearly identical to the protected mark. However, according to Thane Int'l Inc. v. Trek Bicycle Corp., 305 F.3d 894 (9th Cir. 2002), the similarity requirement may be less stringent in situations where 1) the senior mark is highly distinctive and 2) the junior mark is being used for a closely related product. Under this standard, because the eBay mark was incredibly famous and because both parties sold perfume, the Court concluded that consumers were likely to view "Perfumebay" as essentially the same as "eBay." Thus, dilution was likely on the conjoined version of the Defendant's mark.

The Ninth Circuit, however, disagreed with eBay that use of "Perfume Bay," as two separated terms, should also be enjoined. As "Perfume Bay" (as separated) does not wholly include eBay's trademark, the district court had held that the two marks were distinct enough to coexist. The Ninth Circuit agreed, holding that the district court committed no clear error in its decision to decline to enjoin "Perfume Bay." In a subsequent footnote, the Court stated that non-conjoined terms forms of marks may nevertheless have a dilutive effect. The Ninth Circuit's holding failed to connect this dilutive effect directly to "Perfume Bay".

This decision raises practical questions regarding likelihood of confusion as well as dilution. First, the district court was upheld in finding that the addition of a space by a junior user successfully insulated the junior user from a finding of likelihood of confusion. This distinction seems to split hairs. Both the spaced and conjoined versions of Perfumebay's mark had appeared on the perfumebay.com website. Since Perfumebay treated the two variants as essentially equivalent and interchangeable on its webpages, why did the courts fail to treat them the same way? The Court seems to have relied on the premise that domain names cannot have spaces, so consumers would not be called on to type in other than conjoined terms. That doesn't mean that consumers would see Perfume Bay as significantly different from PerfumeBay. It also disregards that consumers often navigate the web using search engines where don't have to precisely type in the domain name, and they can be attracted to search engine ads/sponsored links employing minor variants of terms inexactly featured in domain names. It disregards the mistaken assumptions of association, affiliation, sponsorship or line extensions, that can likely be taken from use of the non-conjoined mark. This level of exactitude focusing on the presence or absence of a space seems incompatible with the usual consumer who purchases perfume over the Internet.

Second, is a finding of likelihood of dilution under the Trademark Dilution Revision Act of 2006 (TDRA) as difficult as the Court's application of its here? The Ninth Circuit applied its standard that the presence of a highly distinctive senior mark softens the need for "identical similarity" and/or "nearly identical similarity", but then found the presence of a space determinative in denying injunctive relief against non-conjoined forms such as "Perume Bay". The Court essentially states that one can have a nearly identical mark despite the fact that the junior user includes a generic element not found in the famous mark. The Ninth Circuit cited the HERBROZAC case decided by the Seventh Circuit (Eli Lilly & Co. v. Natural Answers, Inc. 233 F.3d 456 (7th Cir. 2000)) as support. And without significant discussion, the "E" prefix in eBay's mark was disregarded, perhaps under the assumption that it is generic in the electronic communication/internet context. In so doing the Court holds that Perfumebay is nearly identical to eBay. It would be easier and more candid to avoid trying to force these marks into a "nearly identical" category, by recognizing that using significant portions of a strong mark can also result in likely dilution.

Perhaps decisions such as Perfumebay.com Inc. v. Ebay Inc. are the to-be-expected growing pains in defining the scope and applicability of the TDRA in modern trademark dilution analysis. Perhaps decisions such as Perfumebay.com Inc. v. eBay Inc. also prove the old adage that "hard cases make bad law". Allowing an infringer to use the same wording as an infringing mark, with only a space inserted between the component wording, on its face smacks of inadequate relief allowing an infringer to continue its benefit from the owner's mark. Since the determination is from the viewpoint of the average consumer, the Ninth Circuit's holding of no confusion and dilution in the non-conjoined terms at the very least is a dubious result.

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