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Plaintiff owned a web site and sold perfume using trademarks “perfumebay”, “PerfumeBay” and “Perfume Bay”. After settlement negotiations with eBay failed, plaintiff filed declaratory action, asking court to rule that its marks did not infringe eBay’s marks. District court held, among other things, that plaintiff’s use of marks “perfumebay” and “PerfumeBay” was likely to cause confusion, but that use of “Perfume Bay” was not likely to cause confusion. Both parties appealed and Ninth Circuit affirmed both rulings.

Citing Interstellar Starship Services, Ltd. v. Epix, Inc., 304 F.3d 936 (9th Cir. 2002), court said that the three most important factors in evaluating a likelihood of confusion in the internet context are similarity of the marks, the relatedness of the goods and services, and the parties’ simultaneous use of the web as a marketing channel. Court found that these three factors weighed toward likelihood of confusion when plaintiff’s mark was a single word (“perfumebay” and especially “PerfumeBay”) because the mark contains eBay’s mark in its entirety. Court downplayed plaintiff’s claim of no likelihood of confusion because the words “perfumebay” and “ebay” are pronounced differently; instead, court explained that the likelihood of confusion analysis must be conducted in the context of their usage, which is as typed words on the internet rather than spoken words.

Court also held that the district court did not clearly err in declining to enjoin uses of the non-conjoined versions of “Perfume Bay” and that its injunction “maintained an equitable balance with respect to the disputed marks.” Reiterating that a court is “not required to enjoin the infringer from all uses of the contested mark,” the court held that the injunction against the conjoined versions effectively prevented confusion when used in domain names, online advertising and search engines, and left plaintiff free to use the non-conjoined “Perfume Bay,” which, the court held, did not resemble eBay’s mark in the same manner as the conjoined version.

The Ninth Circuit affirmed the district court’s conclusion that “Perfume Bay” was not likely to cause confusion, but found that the district court erred when it held that the two marks were not sufficiently similar to prove a likelihood of dilution. In addition, the Ninth Circuit affirmed that the parties’ settlement negotiations conducted by email did not create an enforceable contract and affirmed the district court’s rejection of eBay’s breach of contract claim.