In a recent decision—Multi-Time Machine, Inc. v. Amazon.com, Inc., et al., D.C. No. 2:11-cv-09076-DDP-MAN—the Ninth Circuit Court of Appeals held that Amazon’s consumer-generated product search function could create trademark infringement liability absent a clear label eliminating likely confusion. The Ninth Circuit found that a consumer’s search for Multi-Time Machine, Inc.’s (“Multi-Time”) products on Amazon.com returned search results for competing products and Amazon failed to warn consumers that it did not actually sell Multi-Time products.

Multi-Time, a high-end military-style watch manufacturer, which owns the trademark “MTM Special Ops,” does not sell any of its watches on Amazon.com, and it prohibits any of its authorized distributors from doing so. When Amazon consumers search for “MTM Special Ops” on Amazon.com, the search results in several of its competitors’ watches without an explicit warning that Amazon does not sell Multi-Time watches. Unlike Amazon, similar retail websites, such as Buy.com and Overstock.com, explicitly state in the search results that none of the products match the search query if the retailer does not offer that product. Moreover, at the top of Amazon’s search results page, “MTM Special Ops” is written in the query field, directly below the search line, and again immediately after the words “Related Searches.”

A search for “MTM Special Ops” on Amazon.com results in Multi-Time’s competitors’ watches, in part, due to Amazon’s behavior-based search technology, which tracks customer searches, views, and purchases, and returns future search results based on past behavior. For example, if enough customers search for product “X” and ultimately view and purchase product “Y,” eventually searches for X will return search results for Y.

Multi-Time filed suit against Amazon in the U.S. District Court for the Central District of California, alleging trademark infringement in violation of the Lanham Act. On Amazon’s motion, the District Court granted summary judgment in favor of Amazon on the grounds that Multi-Time did not put forth sufficient evidence from which a jury could determine that there was a likelihood of confusion. Multi-Time appealed.

The Ninth Circuit reversed the District Court’s grant of summary judgment, holding that Multi-Time presented sufficient evidence for a jury to determine that Amazon’s search function causes a likelihood of confusion under the “initial interest confusion” test.

First, the Ninth Circuit pointed out that the “confusion” at issue in this case does not necessarily fall within the category of confusion at the point-of-sale; but instead, also includes “initial interest confusion.” This occurs when a consumer is not necessarily confused at the time of purchase, but something earlier in the shopping process creates an initial interest in a competitor’s products and thereby “impermissibly capitalizes on the goodwill associated with a mark and is therefore actionable trademark infringement.” The Court held that a jury could infer that the search results page, coupled with Amazon’s failure to warn the customer that it does not carry Multi-Time products, gives rise to an initial interest confusion. For example, the Court pointed out that a jury could infer that customers might believe that a competitor has acquired Multi-Time or is somehow affiliated with Multi-Time.

Second, the Court analyzed the relevant Sleetkraft factors, most of which weighed in favor of Multi-Time. The Court determined that Multi-Time’s trademark, “MTM Special Ops,” is suggestive and conceptually strong because it does not merely describe its military-style watches, but is potentially suggestive of them. Additionally, the Court determined that the “similarity of the goods” factor weighs in favor of infringement because Amazon sells military-style watches and even displays them in response to a search for Multi-Time’s trademark.

The Court also determined that the “defendant’s intent” factor weighed in favor of infringement because Amazon received complaints from vendors and customers regarding similar search result problems. Amazon did nothing to address the complaints and did not disclose how the behavior-based search operated—therefore, the Court held that a jury could infer that Amazon intended to confuse its customers. Finally, the Court entertained Multi-Time’s evidence of actual confusion in the form of several instances in which customers searched for “MTM Special Ops” and thereafter purchased a competitor’s watch on the same day.

Therefore, because there was sufficient evidence to demonstrate likelihood of confusion, the Court reversed the District Court’s grant of summary judgment and remanded the case for a jury trial.

Circuit Judge Barry G. Silverman dissented from the majority because he believed the majority applied the wrong test to determine likelihood of confusion. Judge Silverman, citing to Ninth Circuit precedent, pointed out that the Court should have applied the test specifically developed for trademark infringement claims based on keyword advertising, which boils down to two factors: “(1) who is the relevant reasonable consumer?; and (2) what would he reasonably believe based on what he saw on the screen?” Judge Silverman determined that the relevant consumer in this context is a person accustomed to shopping online, and the consumer would not be confused by the search results because each product result is clearly identified by the product manufacturer. Therefore, it is unnecessary for Amazon to explicitly state that it does not sell Multi-Time watches.

This Ninth Circuit opinion clarifies that an online retailer’s consumer-generated product search function can create trademark liability if it does not adequately dispel any potential confusing inferences that might be derived from it.