Suppose you walk into a greasy cheeseburger joint and ask for a Coke®. A cook who looks remarkably like the late John Belushi doesn’t say, “No Coke; Pepsi.” Instead, he says, “You want Coke? Have a Pepsi!” and you buy the Pepsi®. Does Coke have a claim that you were confused into buying Pepsi? That you considered Pepsi only because the cook mentioned it? That you might think Pepsi and Coke are related or somehow interchangeable

Most courts considering this in the bricks-and-mortar world would be quick to throw out Coke’s claims. We often see competing goods on store shelves, side by side, and sometimes we buy whatever they are selling even if we start out looking for something else. However, there has been a line of (controversial) cases which have held that “initial interest confusion” can exist, so that the use of brand names to interest customers in competing products gives rise to a claim by the company whose trademark is allegedly misused.

Earlier this month, Amazon.com failed to get out of such a case in its early stages, in a ruling by the Ninth Circuit Court of Appeals, which may send the case to trial. The opinion is available here. In short, Multi Time Machine (MTM) makes high-end watches which are sold through distribution channels that exclude Amazon. An Amazon consumer searching for watches using the MTM trademark saw the search terms (MTM’s brand) three times above the search results, which were thumbnail photos and a list of watches manufactured by MTM’s competitors, as well as items that were not watches. See page 24 of the opinion for a screen image. In a split opinion, the court held that a jury might find that MTM had some connection with the competitors, or that it was unclear that Amazon did not carry these watches, and that Amazon was trading on MTM’s goodwill.

So Amazon didn’t say, “No Coke; Pepsi.” Instead, Amazon basically said, “Looking for Coke? Here’s what we have if you want Coke. Coke lovers might like this.” Then there would be photos of bottles labeled Pepsi, along with a book about the history of Coke and some old Coke ads. (This is very close to what you see in organic search results, and may have implications for Google and the social networks as they implement “buy” buttons.)

MTM will now have a chance to prove that consumers were likely to be confused by this practice and that it was damaged by this mode of operation, and many other merchants will undoubtedly be watching this to see if they can make their own claims.

What is the difference between what Amazon did and how Google AdWords operates? Google’s AdWords program allows a merchant to buy the brand name of its competitor for sponsored ads marketing the ad buyer’s own goods. Google has been sued for this many times, and has won nearly all of these cases. Google’s current U.S. policy allows companies to buy the trademarks of others as ad triggers, so long as the text does not include that other trademark. In other words, Pepsi can buy the word “Coke” to trigger sponsored online ads that say, “Drink Pepsi, buy it here,” but the ad cannot say, “No Coke, buy Pepsi here.” Other e-commerce sites which compete with Amazon respond to no-result searches with some variation of “No Coke; Pepsi,” or “No Coke found, please try again.”

Amazon may appeal this holding, possibly based on the spirited dissent which cited this famous old comedy sketch. However, until this is resolved and harmonized with the AdWords cases, online retailers should probably change the way they use brand names of items they don’t carry when they list goods which are available on the site. Search results should say, “No Coke, please try again,” “No Coke; Pepsi,” or just “Pepsi.” Does this make a difference to consumers? Cheezborger, cheezborger, cheezborger!