In a decision rendered on July 6, 2011, Apple, Inc. v. Amazon.com Inc. et al., C 11-1327 PJH, the United States District Court of the Northern District of California denied Apple's Preliminary Injunction which would have effectively prevented Amazon from using Apple's common law trade-mark "App Store" as part of Amazon's mark "Amazon Appstore for Android". In order to succeed, Apple needed to satisfy a four part test, namely to demonstrate that: (i) it would be likely to succeed on the merits of the case; (ii) it is likely to suffer irreparable harm in the absence of preliminary relief; (iii) the balance of equities favours it; and (iv) the injunction is in the public interest. The Court was of the view that Apple failed to demonstrate that it would be likely to succeed on the merits of the case, and so its motion was denied. This decision may have far reaching consequences for Apple as the registration of its mark "App Store" is currently the object of opposition proceedings by Microsoft in the United States and that, in Canada, the registration of the mark was up until the publication of this bulletin the object of a first Examiner's report refusing registration on the basis of its allegedly clearly descriptive nature.
The first part of the test to obtain a preliminary injunction involved a demonstration by Apple that it has ownership of a legally protectable mark and that there would be a likelihood of confusion. Since Apple's mark "App Store" is not yet a registered mark, Apple could not rely on its registration to satisfy the Court that it has ownership of a legally protectable mark. Rather, Apple argued that "App Store" is a suggestive mark, and thus registerable, because it's meaning is not inherently obvious, and that it has devoted substantial resources educating consumers about the service. In the alternative, Apple argued that the mark is protectable because it has acquired a secondary meaning.
In response to Apple's arguments, Amazon contended that the mark is generic because "App Store" is simply an online store where customers can search for, choose and download applications. This position is somewhat similar to that adopted by the Canadian Registrar of Trade-marks with respect to the registrability of the mark "App Store". In the end, the Court assumed without deciding that the "App Store" mark is protectable as a descriptive mark that has arguably acquired a secondary meaning.
Apple further needed to establish that there would be a likelihood of confusion arising from Amazon's use of the mark "Amazon Appstore for Android". The likelihood of confusion test in the United States was stated by the 9th Circuit Appeal Court in the AMF Inc. v. Sleekcraft Boats and Reno Air Racing Ass'n., Inc. v. McCord and is based on eight factors that must be weighted by the Court. In Canada, the test to be applied is somewhat similar and can be found at section 6(5) of the Trade-Marks Act.
Upon weighing these eight factors, the Court decided that only two of the factors somewhat favoured Apple, while three somewhat favoured Amazon and the remaining three were neutral or did not clearly favour either side. The factors which favoured Apple were the relatedness of the services, namely download services of software applications for mobile devices, and the similarity of the marks, since Amazon uses the mark identical in sight, sound and meaning along with other words "Amazon Appstore for Android". However, the Court gave more weight to the factors favouring Amazon. The Court recalled that "App Store" was a weak mark since it is essentially a descriptive mark which has acquired a secondary meaning. Moreover, the difference in the channels of trade was given a lot of weight by the Court, since App Store is a mark used in association with download services of software applications for Apple mobile devices, while "Amazon Appstore for Android" targets Android mobile devices. Thus, there is a technical barrier which prevents users of either device from downloading applications designed for the other, which in turn greatly reduces the risk of confusion in the Court's view. Moreover, the Court also considered relevant the unlikelihood of expansion of Amazon's services into Apple's territory, since that would require a licence from Apple. At the end, the Court decided that Apple had failed to meet its burden of proof and so its motion for a Preliminary Injunction was denied.
Apple also made an alternative argument based on the alleged dilution of its mark under the federal dilution statute. In order to establish likelihood of success on the merits and to obtain a Preliminary Injunction, Apple had to prove that the "App Store" mark is famous, that Amazon is making commercial use of the mark, that Amazon's use of the name began after the mark became famous, and that Amazon's use presents a likelihood of dilution of the distinctive value of the mark. One should note that in Canada, on the other hand, no claim for trade-mark dilution pursuant to the Trade-Marks Act may be made before the mark is registered, which was not the case here. Upon consideration of the arguments of both parties, the Court decided that Apple did not establish likelihood of success on a dilution claim. Indeed, Apple failed to establish that its mark was famous. The fact that other companies used "app store" as a descriptive term played against Apple's argument. Moreover, the Court found that there was no evidence of blurring, again based on the fact that Apple's mark was more descriptive than distinctive and that other companies were using the mark. Finally, the Court found that Apple failed to demonstrate that Amazon's use of the expression "Appstore" would somewhat tarnish Apple's mark, as this argument was based on speculation that Amazon's service would somewhat be of an inferior quality.
This decision highlights some of the dangers for any US or Canadian company to use a trade-mark which can be seen as clearly descriptive. The Registrar of Trade-marks may refuse the registration of such mark on that ground, in which case the applicant will have to argue that the mark is not descriptive or to adduce evidence that the mark has acquired a secondary meaning in order to be entitled to registration. Moreover, the descriptive nature of the mark also has an impact on test to obtain injunctive relief against another company using the same or a similar mark, as the mark may be considered "weak", a factor that according to the Court favoured Amazon over Apple in this case. Thus, when choosing a mark, one should preferably choose one that is distinctive rather than descriptive and register it as early as possible in order to benefit from the full range of remedies available under trade-mark legislation. Moreover, it remains to be seen whether Apple will obtain a registration for its mark in the US and in Canada, and also what the outcome of the final judgment in the case against Amazon is going to be.