In a recent decision, the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) held that the U.S. District Court for the Central District of California erred in holding that use of the PERFUMEBAY mark did not create a likelihood of trademark dilution with eBay’s famous, distinctive and widely known EBAY mark.1

Perfumebay.com is a website specializing in perfume sales. eBay describes itself as an Internet “marketplace” where buyers and sellers of an almost endless variety of products can meet and safely exchange merchandise and payments. Perfumebay’s owner began selling perfume on eBay in 1998 and decided in 2004 to create her own “e-tailing” websites because she no longer wanted to use eBay’s approach to Internet retailing. Total gross sales of fragrances on eBay were almost $6 million between January 2002 and September 2004. Sales on Perfumebay.com totaled $6.6 million in 2004. Survey evidence submitted by eBay in the litigation indicated that a substantial majority of consumers shopping on the Internet identified eBay as the company that came to mind when they heard the word “bay” used in connection with a website or when “bay” was part of the name of a website. Furthermore, Perfumebay’s customer service department had received calls asking if it was associated with eBay. However, Perfumebay’s owner indicated she had no intention of copying eBay and that the PERFUMEBAY mark was intended to convey the idea of a bay where ships from around the world would bring fragrances and cosmetics to be sold to waiting consumers.

eBay sued Perfumebay.com for federal trademark infringement, breach of contract, and trademark dilution. With respect to the dilution claim, the district court found, without analysis, that the marks were not sufficiently similar and thus there was no likelihood of dilution.2 The Ninth Circuit held that the district court erred in not fully considering the strength of eBay’s mark in making its dilution finding because the stronger a mark, i.e., the more likely it is to be remembered and associated in the public’s mind with the mark owner, the more protection the mark should be afforded. Accordingly, the Ninth Circuit concluded that an incomplete analysis of the mark’s strength prevented the district court from applying the appropriate level of trademark protection to eBay’s mark.

In reaching its conclusion, the Ninth Circuit explained that a “mark used by the alleged diluter must be identical, or nearly identical, to the protected mark for a dilution claim to succeed.”3 The court defined “nearly identical” to mean that marks must be similar enough so that a significant segment of the target group of consumers sees the two marks as essentially the same. The Ninth Circuit stated, however, that the degree of similarity required must be evaluated in light of the distinctiveness/fame of the senior mark and the similarity of the relevant products. Thus, the requirement that the marks be identical or nearly identical may be relaxed when the senior mark is highly distinctive or famous, and the junior mark is being used on a closely related product.4

The size of eBay’s business, the extent of its advertisement efforts, and eBay’s survey data showing a strong recognition and association of eBay’s mark with its services were found by the Ninth Circuit to be substantial evidence reflecting the strength of eBay’s mark. This strength led the Ninth Circuit to conclude that eBay possessed a famous, widely known, and highly distinctive mark. Finally, the court examined the similarity of the marks and products/services and found that the PERFUMEBAY mark contained either the entire EBAY trademark or the dominant suffix “bay.” Moreover, Perfumebay utilizes the Internet to sell the same products available through eBay through the same medium. The court observed that continued use of the PERFUMEBAY mark could result in consumers no longer associating the “bay” suffix with eBay. Therefore, Perfumebay’s mark was found to be likely to dilute the distinctiveness of eBay’s mark.5

This case demonstrates that mark owners considering a dilution claim should be prepared to present strong evidence of the fame of their marks through sales numbers, advertising/marketing expenditures, and, if available, survey data showing an association between the senior and junior marks, as well as other evidence of the similarity of the marks and the products/services. Finally, in light of this favorable ruling for eBay and recent contrasting trademark dilution rulings from other U.S. Courts of Appeal, trademark owners should evaluate all potential venues when considering initiating trademark dilution litigation.