intent to use successful term in ads isn't intent to confuse

Overstock.com, Inc. v. Nomorerack.com, Inc., No. 2:13-CV-1095 (D. Utah June 30, 2014)

Overstock sells a lot of stuff online: over one million products, with over six million customers last year. Nomorerack directly competes with Overstock, and has sold more than $420 million worth of products to nearly 5.2 million customers since it was founded. Overstock owns a number of registrations for OVERSTOCK.COM, and sued Nomorerack for using “overstock” in ads, like so:

The court denied a preliminary injunction.

First, the court found the similarity between the marks to favor defendants. (This might be an example of stampeding the factors.) Marks aren’t to be dissected, so the court rejected the argument that “overstock” was nearly the same as “overstock.com.” The marks have to be considered as they’re encountered in the marketplace, including Overstock’s stylization of its mark. By contrast, Nomorerack didn’t use a stylized “O” design and it didn’t use .com. It used “overstock” in combination with other words, such as “overstock clearance,” generally in all caps, and always with a reference to “nomorerack” or “nomorerack.com.” Though Nomorerack used text-based ads that didn’t have distinct stylization, the domain name was always clearly displayed in those. Thus, there was little visual or aural similarity between the marks. There was similarity in meaning: the sale of discounted products. But Overstock used the term to identify its company, while Nomorerack used it to identify a type of product or sale. 

Next, the court found Nomorerack’s intent unproblematic. The court refused to infer intent to confuse based on Nomorerack’s knowledge of Overstock. Intent to copy a mark can justify an inference of likely confusion, but intent to copy a product can’t justify that inference; so therefore with awareness of the plaintiff. Instead, the evidence was that Nomorerack used a number of different terms in ads—“Cyber Monday, Black Friday, Free Shipping, Blowout Sale”—and settled on “overstock” because that word had the best performance. The intent was not to copy, but to sell more effectively. “Whether the success of this term is based on Plaintiff’s reputation and good will or some other reason is not clear.” Continued use after receipt of a C&D also didn’t justify an inference of bad intent, since intent at the time of adoption is key.

Overstock argued that Nomorerack moved away from its own green and white color scheme to adopt Overstock’s red and white colors. But the evidence didn’t justify that finding; instead Nomorerack used a variety of color schemes in its ads. Intent weighed in Nomorerack’s favor.

Actual confusion: All Overstock had were isolated, anecdotal instances of confusion, which could be disregarded, given the large volume of transactions at issue. Overstock received ten consumer complaints about Nomorerack, and Nomorerack produced over 200 complaints. Some consumers who bought from Nomorerack thought they were buying from Overstock; others thought that Nomorerack somehow “hijacked” their order; others believed that Nomorerack’s ad was an ad for Overstock; others believed that the parties were somehow affiliated. (Other than the ad-based ones, how do we know these incidents derived from ads using “overstock” in the text?) However, even in the evidence provided by Overstock, some consumers clearly recognized the difference. E.g., one consumer said “[s]ome items listed on Nomorerack.com are cheaper than the same items that Overstock.com has” and that they found “better pricing on nomorerack.com.” Plus, in the context of millions of customers and millions of sales per year, “relative to the total volume of sales, the limited evidence of actual confusion provides little weight.”

Overstock argued that Nomorerack’s denominators were meaningless because we don’t know how many consumers saw the infringing ads. But that weighed against Overstock, which bore the burden of proof. It only provided a handful of complaints, which could be disregarded.

Similarity in products/manner of marketing: this favored Overstock.

Degree of care: The expense of the parties’ products varied widely, but price isn’t determinative. What matters is the consumer’s degree of care exercised at the time of purchase. Overstock argues that consumers trying to get a good deal wouldn’t be careful about the source of the offer, but Overstock’s VP of marketing said that a high percentage of its customers engage in comparison shopping, and Overstock prices products on the assumption that people are comparing prices. “Because both parties purport to offer items at discounted prices, the Court believes that consumers will exercise care to find the best price for the product they seek to purchase, rather than purchasing the item on impulse.” This favored Nomorerack.

Strength of the mark: OVERSTOCK.COM was incontestable, but that didn’t make it strong. The court found the conceptual classification “close,” but ultimately “overstock” was descriptive: it conveyed the characteristics of the products, that they were excess or surplus inventory. Overstock originally began as an Internet-based liquidator of excess or surplus inventory. Overstock argued that it now carried more goods and services than that, but descriptiveness doesn’t require that a term convey all of a product’s characteristics, uses, or functions. (And relatedly, a term can be descriptive of some of a business’s products/services and be descriptive for the business as a whole—e.g., In re Quik-Print Copy Shops, Inc., 616 F.2d 523 (C.C.P.A. 1980), where the business provided services other than quick printing.)

Commercial strength: Overstock provided evidence to support a finding of commercial strength. It submitted a study indicating that approximately 73% of United States consumers and 89% of online shoppers had heard of Overstock.com or “the Big ‘O.’” The commercial strength of the mark made up for its conceptual weakness, making the overall factor favor Overstock.

The particular factors favoring Nomorerack indicated that confusion was unlikely. Thus, the court didn’t need to evaluate Nomorerack’s descriptive fair use defense, though it noted that Nomorerack’s evidence on this was compelling: it submitted evidence that it wasn’t using the term as a mark (query what would count as “evidence” of this), that the term was descriptive, and that its use was fair and in good faith.

Belt and suspenders: Overstock also didn’t show irreparable harm, given the minimal actual confusion, and given that its evidence of lost sales suggested that cost and product selection could explain consumers’ choices to buy from Nomorerack instead of confusion. By contrast, an injunction would require Nomorerack to stop using one of its most effective ad campaigns, harming it.