Amazon’s Merchandising of Its Search Results Doesn’t Violate Trademark Law (Forbes Cross-Post)

By Eric Goldman

Multi Time Machine, Inc. v. Amazon.com, 2013 WL 638888 (C.D. Cal. Feb. 20, 2013).  The complaint.

No retailer does a better job of cross-selling to its customers than Amazon.com ($AMZN).  Amazon is quite effective at exposing customers to complementary—and competitive—goods along with the products a customer initially considers.  Many of us have had the experience of going to Amazon to buy one thing but checking out with a huge shopping cart of items that we didn’t initially seek—or even know were available.  Amazon’s merchandising often benefits Amazon’s customers, but trademark owners who lose sales to their competition due to it aren’t as thrilled.  Fortunately for Amazon, a California federal court recently upheld Amazon’s merchandising practices in its internal search results.

The Case

The plaintiff is Multi Time Machine (MTM), which makes expensive “military and tactical” watches and tightly controls its distribution channel to prevent resales on Amazon.  When Amazon customers searched within Amazon’s internal search engine for “mtm special ops” (the name of one of MTM’s watches), Amazon’s search results page didn’t contain any results for MTM watches due to MTM’s distribution control (see screen shot).  Instead, the court says, “all of the watches retrieved by Amazon belong to MTM’s competitors, in particular Luminox and Chase-Durer.”

In other words, Amazon merchandises its customers.  In this case, because it doesn’t carry the products requested by customers, it suggests alternative options.  We could analogize Amazon’s search results to a retailer’s store shelves.  Following this analogy, when a customer walks into Amazon’s store and asks where MTM watches might be found, the only thing they find on the store shelves are watches that Amazon thinks are comparable to MTM watches.

MTM sued Amazon for trademark infringement.  Note that this is not a typical trademark lawsuit, where a trademark owner sues a competitor for copying its trademark too closely.  Instead, this is a trademark owner-vs.-retailer lawsuit for merchandising competitors’ items.  Trademark law wasn’t built to handle lawsuits like this, and the typical multi-factor test courts use to evaluate consumer confusion doesn’t make sense when applied to litigants at different levels of a distribution chain.

As I explain in my Brand Spillovers paper, we almost never see merchandising-related trademark owner-vs.-retailer lawsuit in the offline world, even though offline retailers engage in such activities frequently, such as:

* retailers often adopt vendor-submitted shelf design plans (a planogram) that shows the relative position of both the vendor’s products and its competitors’ products;

* retailers charge vendors “slotting fees” to place their products on store shelves next to the competitors’ products;

* Catalina Marketing’s competitive couponing system monitors customers’ buying activities and triggers competitors’ coupons at the checkout stand.

In my research, I could find few—if any—lawsuits where trademark owners challenged these practices in the offline world.  Yet, we regularly see legal challenges like this in the online world.  Why the difference?  In my Brand Spillovers paper, I argue it’s due to Internet exceptionalism.

Fortunately for Amazon and other online merchandisers, MTM’s lawsuit goes nowhere.  The court sidesteps the thorny “use in commerce” question (compare Habush v. Cannon, which I blogged about yesterday) and instead rules that Amazon doesn’t create a likelihood of consumer confusion about the watches’ source.  The court hews closely to the Ninth Circuit’s important 2011 ruling in Network Automation v. Advanced Systems Concepts, another example of how that case has helped defendants.

The court’s central point is that Amazon’s search results page clearly explains what it’s doing to consumers.  These labels and disclosures reduce the likelihood that consumers are confused when reviewing the results page.  The court provides an illustrative analogy:

the instant situation does not appear to be a case of palming off in the traditional sense. It is akin to the consumer asking for a Coca-Cola and receiving a tray with unopened, labeled, authentic cans of Pepsi-Cola, RC Cola, Blue Sky Cola, Dr. Pepper, and Sprecher Root Beer, and a copy of Coca Kola: The Baddest Chick, by Nisa Santiago. This is a substitution, but given the context it is not infringing because it is not likely to confuse.

Implications

Because the opinion only deals with Amazon’s internal search engine, the court doesn’t explicitly address search results pages at general-purpose search engines like Google ($GOOG) or Bing.  Still, this opinion probably applies to those pages as well.  Google, Bing and other search engines routinely merchandise their customers by automatically reinterpreting search queries, suggesting other useful search terms (like a “Did you mean….?” prompt), displaying links to sister properties, and displaying sponsored links/ads such as Google AdWords.  This case suggests that so long as viewers understand the relationship between their search query and the search results page, search engines should not suffer actionable trademark infringement based on those pages.  Over the past decade, Google has largely achieved that legal conclusion via its many court battles, but this ruling will help if Google has to defend the likelihood of consumer confusion question again.

While trademark owners may be frustrated by the exposure their competitors get when retailers and other intermediaries merchandise their prospective customers to alternative offerings, we as consumers want—and expect—online intermediaries like Amazon and Google do such merchandising to help us achieve our goals.  Although the court doesn’t get into the pro-consumer and pro-competition benefits of its ruling, undoubtedly the ruling is a win for both.