Apple, ‘app store’ and trade mark infringement

Photograph by Cristiano Betta

Posted by Nicholas Stewart & Lucy McGovern

The U.S. District Court recently refused Apple's application for a preliminary injunction to stop Amazon from using the word 'appstore' in relation to its online portal through which consumers can purchase mobile applications (called the 'Amazon Appstore'). The application was part of the trade mark proceedings filed by Apple in March this year against Amazon.

In light of this, it is timely to reflect on the American decision and consider how it could play out in the Australian context.

Apple's 'App' trade marks

In 2008, Apple filed U.S. trade mark application No. 77/525,433 for the words APP STORE with the U.S. Patent and Trademark Office. Microsoft filed an opposition to the registration of the trade mark on the basis that it was too generic. That opposition is still pending.

In Australia, Apple currently owns the mark 'APPSTORE' (registration number 1156967) in classes 35 (in relation to operating on-line marketplaces for buying, selling and exchanging computer software and on-demand applications) and 42 (in relation to application service provider (ASP) featuring computer software in the field of business project management, business knowledge, information and asset management, customer relationship management, sales, marketing, e-commerce, electronic messaging, and web site development. It also has an application pending for the mark 'APP STORE' (application number 1252301) in classes 35, 38 and 42.

The U.S. proceedings and approach to trade mark infringement

A plaintiff seeking an injunction in trade mark infringement proceedings must satisfy certain criteria. In the U.S., the plaintiff must show that it is likely to succeed on the merits, that it is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in its favour, and that an injunction is in the public interest. Alternatively, the plaintiff may demonstrate that serious questions going to the merits were raised and that the balance of hardships tips sharply in the plaintiff's favour and that there is a likelihood of irreparable injury and that the injunction is in the public interest.

The nature of the injunction test and the fact that the trade mark was the subject of an opposition proceeding, lead to a focus on the strength of Apple's trade mark application. In particular, Apple needed to show, amongst other things, that:

• it owns a legally protectable mark; and
• Amazon's use of the mark will likely confuse consumers.

Amazon contended that Apple did not own a legally protectable mark, arguing that the ‘App Store’ mark is generic. Even if the mark is not generic, Amazon argued that there was no likelihood of confusion.

US District Judge Hamilton made several important points in her judgment that highlight aspects of U.S. trade mark law:

Ownership of a legally protectable mark

• Trade marks are normally classified as either generic, descriptive, suggestive, arbitrary, or fanciful.
• Suggestive, arbitrary, and fanciful marks are inherently distinctive and automatically entitled to federal trade mark protection because 'their intrinsic nature serves to identify a particular source of a product'.
• A descriptive mark is not automatically entitled to trade mark protection unless the mark has acquired distinctiveness through secondary meaning.
• Generic marks are not eligible for trade mark protection.

Likelihood of confusion

In assessing whether the trade mark gives rise to a likelihood of confusion, Hamilton J applied an eight-factor test propounded in the Ninth Circuit (Sleekcraft Test):

• trade mark strength;
• proximity of related goods;
• similarity of the marks;
• evidence of actual confusion;
• marketing channels used;
• degree of care customers exercise in purchasing goods;
• the defendant (Amazon's) intent in selecting the mark; and
• likelihood of expansion into other markets.

Applying these principles Hamilton J held that Apple had failed to establish its likelihood of succeeding on its claim. This was based on his Honour's finding that: (a) Apple's trade mark was not strong; (b) Amazon intended to use the mark on the basis that it was generic; and (c) Amazon's marketing channel (Amazon.com) distinguished Amazon's goods from Apple's. Conversely only two factors favoured Apple (similarity of the marks and relatedness of the goods). While the ‘App Store’ mark was not ‘purely generic’, on balance His Honour held that Apple failed to demonstrate a likelihood of confusion.

Dilution

Apple's second ground for seeking an injunction was a dilution claim under the United States federal dilution statute. To be awarded an injunction under this statute, Apple would have to establish that:

• its "App Store" mark is famous;
• Amazon is making commercial use of the mark;
• Amazon's use of the mark began after the "App Store" name became famous; and
• Amazon's use presents a likelihood of dilution of the distinctive value of the mark.

In particular, the US statute recognises dilution by either blurring (meaning that the association arising from the similarity of the marks impairs the distinctiveness of the famous mark) or by tarnishment (where the association arising from the similarity of the marks harms the reputation of the famous mark).

Her Honour held that Apple's dilution claim failed. In particular, Apple failed to prove that:

• Its 'App Store' mark was famous, in the sense of being 'prominent' and 'renowned'. Although the evidence showed that Apple had spent money on advertising and publicity and had sold a large number of apps from its AppStore as well as the evidence showing that 'AppStore' mark was actually recognised in the market, there was also evidence that the term 'app store' was used by other companies as a descriptive term for a place to obtain software applications for mobile devices.
• There was a likelihood of dilution. While the marks were similar, the Court thought that 'App Store' was more descriptive than distinctive. Hence, even though the mark enjoyed widespread recognition, it was not clear from the evidence whether its recognition was a trade mark or as a descriptive term.
• Amazon intended to create an association between its Android apps and Apple's apps. There was no evidence of actual association.

Australian approach

In Australia, the criteria for an injunction are whether the plaintiff has made out a prima facie case, damages are an inadequate remedy and the balance of convenience favours an injunction. In the United States, a plaintiff's success is much more dependant on the merits of its case and these issues can be argued and considered in detail. The nature of the Australian test is such that the strength of Apple's case is less determinative.

Further, in Australia, Apple has a trade mark registration for APPSTORE. Given the trade mark is registered and not subject to an opposition proceeding, arguments by an alleged infringer attacking the strength of the trade mark are unlikely to carry much weight in an interim hearing. The test under the Australian Trade Marks Act 1995 (Cth) (the Act) is whether a person 'uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered'.

A trade mark is taken to be deceptively similar to another trade mark if it so nearly resembles that other trade mark that it is likely to deceive or cause confusion. A company using the words App Store in relation to the sale of Apps, may seek to defend such a claim on bases including that:

• the word is not used by the company as a trade mark;
• the sign was used in good faith to indicate the kind, intended purpose or some other characteristic of the goods or services.

Otherwise, it would need to counter-claim seeking revocation of the trade mark. Any company using the word 'APPSTORE' in the context of selling applications for Apple iPhones and other phones such as Android phones online should be wary of the risks of doing so.

It should also be noted that Australian trade mark law does not have specific 'dilution' provisions. The closest provision in the Act is s 120(3), which provides protection of 'famous' or 'well known' marks. Infringement occurs where a registered trade mark:

• is well known in Australia (taking into account the extent to which the trade mark is known within the relevant sector of the public); and
• the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to the trade mark in relation to goods or services which are unrelated to those in respect of which the trade mark is registered; and
• because the trade mark is well-known, the sign would be likely to be taken as indicating a connection with the registered owner of the trade mark; and
• for that reason, the interests of the registered owner are likely to be adversely affected. The provision provides a more expansive monopoly for 'well known' trade marks as the owner can prevent its use in respect of any goods and services.

The criteria set out under s 120(3) of the Act, while not addressing 'dilution', has some similarities to the U.S. 'dilution' provision. For example, a United States dilution claim requires the applicant's trade mark enjoy fame – being reputable or recognisable. Such a claim must also show that the infringing mark is identical or substantially similar to the plaintiff's trade mark. Ultimately, a United States plaintiff must show the lessening of the capacity of its trade mark to identify and distinguish goods or services.

Ongoing disputes

The exponentially expanding technology market (in particular the success of 'apps') and increased competition between producers to capture market share mean that the field is primed for similar disputes in the near future. Of note is the recent (extensive) news coverage of Apple's ongoing dispute with Samsung over similarities in Samsung's Galaxy S mobile phone with the Apple iPhone and similarities between the latest Samsung Galaxy Tab 10.1 and Apple's iPad.

On 1 August 2011 Apple argued in the Federal Court of Australia that Samsung's Galaxy Tab 10.1 infringes 10 Apple patents, including the 'look and feel' and touchscreen technology of the iPad. Samsung agreed to undertakings not to promote or sell the Galaxy Tab 10.1, subject to Court order or settlement with Apple. However, it has since accused Apple of patent infringement in relation to Samsung's wireless patents. In Germany, similar court action is in play.

Worth mentioning too is that Apple has found itself on the other side of proceedings with other competitors in the smart phone game, facing prosecution by HTC and Nokia for patent infringement overseas. These certainly are interesting times in the mobile space.

Partner: Paul Kallenbach