Friday, December 28, 2007

Ninth Circuit Upholds Ebay’s Victory Over Use of “Smart Search” on Website

The Ninth Circuit today upheld a lower court’s decision finding that eBay, Inc’s (“eBay’s”) use of the name “Smart Search” on its Internet auction website did not infringe on the registered trademark SMARTSEARCH held by Applied Information Sciences Corp. (“AIS”). See Applied Information Sciences Corp. v. eBay, Inc., Nos. 05-56123 (9th Cir. December 28, 2007). A copy of the decision can be downloaded here. In rendering its decision, the court clarified what an owner of a federally registered trademark must establish in order to maintain an infringement action against a person using the registered trademark on goods or services that are not the same as those specified in the owner’s trademark registration.

On April 28, 1994, AIS, a specialized software vendor, applied to register the mark SMARTSEARCH (for computer software and instruction manuals sold together which allow the user to retrieve information from on-line services via phone line in the fields of agriculture and nutrition, books, chemistry, computers and electronics, education, law, medicine and biosciences, news, science and technology, social sciences and humanities). The mark was registered on January 20, 1998. AIS claims to have sold SmartSearch products from 1995 to 2004.

AIS alleged that in 2002, eBay began infringing on AIS’s registered trademark SMARTSEARCH by displaying the words “Smart Search” as a link on its homepage which led to a search page with advanced options. In 2001, AIS demanded that eBay cease using the mark or pay a license fee. After eBay refused, AIS filed its trademark infringement complaint. See Applied Information Sciences Corp. v. eBay, Inc., Case No. 04-CV-00274 (C.D. Cal.)

On cross motions for summary judgment, the district court granted eBay’s motion on the ground that AIS does not have a valid, protected interest in the mark. The district court awarded eBay costs, but denied eBay’s motion for attorney’s fees concluding that the case was not exceptional. Both parties filed appeals of the district court's decisions.

The court, reviewing de novo the district court’s grant of summary judgment, concluded that while AIS discharged its burden of establishing that it had a valid, protectable interest in its SMARTSEARCH mark, it nonetheless failed to produce any admissible evidence tending to show a likelihood of confusion. As such, the court affirmed the district court’s grant of summary judgment in favor of eBay.

Valid Protectable Interest
The court started its analysis with what AIS must show to prevail on its trademark infringement claim: (1) that AIS has a valid, protectable trademark, and (2) that eBay’s use of the mark is likely to cause confusion. See Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1047, 1053 (9th Cir. 1999).

Regarding the first element (establishing a valid, protectable trademark), AIS could establish this protectable interest by showing (1) it has a federally registered mark in goods or services; (2) its mark is descriptive but has acquired a secondary meaning in the market; or (3) it has a suggestive mark, which is inherently distinctive and protectable.

The court agreed with AIS that solely on the basis of its federal registration of the SMARTSEARCH mark, AIS had a valid, protectable interest: “[B]y demonstrating that it held a federal registration, AIS made a prima facie showing that it held a valid, protectable interest in the use of the SmartSearch mark in connection with the goods listed in its registration.” Slip op. at 16875.

Scope of the Protectable Interest
The next part of the court’s analysis involved the scope of the trademark holder’s protectable interest. The court started with the general rule that a registered trademark holder’s protectable interest is limited to those goods or services described in its registration (citing 15 U.S.C. § 1057(b) and 15 U.S.C. § 1115(a)).

However, the court noted that the scope of validity and the scope of relief for infringement are not coextensive: “Although the validity of a registered mark extends only to the listed goods or services, an owner’s remedies against confusion with its valid mark are not so circumscribed.” Slip op. at 16875 (italics in original). The court also noted that the language of 15 U.S.C. § 1114 (infringement of a registered mark) does not limit remedies for allegedly infringing uses to those goods within the ambit of registration.

As such, a trademark owner may sue for infringement if another’s person’s use of the mark on different goods or services is likely to cause confusion with the owner’s use of the mark in connection with its registered goods. See Interstellar Starship Services, Ltd. v. Epix Inc., 184 F.3d 1107 (9th Cir. 1999) (trademark holder’s rights to protect its interest in a registered mark were not limited to infringement actions against those using the mark in connection with the goods or services specified in the registration; plaintiff not required to show that its interest extended to defendant’s use of the mark). “Having established a protectable interest by proving it is the owner of a registered trademark, the owner does not additionally have to show that the defendant’s allegedly confusing use involves the same goods or services listed in the registration.” Slip op. at 16878 (italics in original).

In this case, however, the district court concluded that because AIS’s federal registration did not include eBay’s use of the mark (as a hyperlink for a web-based trading service), AIS did not have a protectable interest, and thus could not bring an infringement action. In arriving at this conclusion, the district court accepted eBay’s argument that the Ninth Circuit’s decision in Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1354 (9th Cir. 1985) (en banc) required AIS to prove that eBay used the SMARTSEARCH mark on goods described in AIS’s registration in order to establish a protectable interest.

The Ninth Circuit called the district court’s interpretation of the Levi Strauss case “questionable” saying that its refusal to allow Levi Strauss to rely on its federal registration stemmed from the way in which Strauss pled its case. Specifically, Strauss was trying to extend its own use of its registered mark to goods not specified in its federal registration, which is different than a plaintiff arguing infringement of goods specified in its own federal registration: “Where, however, a plaintiff bases its trademark infringement claim upon the confusion the defendant’s use will create for the plaintiff’s use of its mark in connection with its own registered goods or services, that claim comes within the scope of its protectable interest.” Slip op. at 16880 (italics in original). In this case, AIS had alleged infringement of its mark in connection with the products specified in its federal registration. “Whether or not eBay ever used the SmartSearch mark in connection with goods specified in AIS’s registration is irrelevant to the question of whether AIS established a valid, protectable interest.” Id.

Likelihood of Confusion
Having found that AIS had satisfied its burden of establishing a valid, protected interest by virtue of its federal registration of the SMARTSEARCH mark in connection with the goods listed in the registration, the court next addressed whether eBay’s use of the mark was likely to cause confusion.

The court found that AIS, in opposing eBay’s motion for summary judgment, had failed to produce any admissible evidence tending to show a likelihood of confusion or addressing any of the Sleekcraft factors required for a likelihood of confusion analysis.

Thus, the court affirmed the district court’s grant of summary judgment in favor of eBay without specifically addressing whether the district court had erred in its interpretation of the Levi Strauss case.

Attorney’s Fees
After the district court entered judgment in eBay's favor, eBay filed a motion for attorney’s fees pursuant to 15 U.S.C. § 1117(a) (allowing a court to award reasonable attorney fees to the prevailing party in “exceptional cases”). Exceptional cases are those where a plaintiff’s case is groundless, unreasonable, vexatious, or pursued in bad faith. See Stephen W. Boney, Inc. v.Boney Servs., 127 F.3d 821, 827 (9th Cir. 1997)

The district court denied eBay’s motion for attorney’s fees, finding no compelling evidence that AIS’s case was exceptional. eBay appealed the district court’s denial, which the court reviewed for abuse of discretion.

The court, agreeing with the district court that AIS’s case was not frivolous and did raise debatable issues, held that the district court did not abuse its discretion in denying eBay’s motion for attorney’s fees.

1 comment:

Michael Rice said...

Wow! This is a very detailed analysis. I just did a quick one on Coderights, but I'll link here for sure. Thanks for the hard work.