Could Coca-Cola sue a diner for offering Pepsi to customers who requested Coke?

Clearly not, according to a California federal court that didn’t find any problem with Amazon’s merchandising practices. Multi Time Machine, Inc., (MTM), a watchmaker filed suit against Amazon for displaying competitor’s watches whenever Amazon customers searched for MTM’s.

In this specific case, Amazon does not sell MTM watches. Searching for MTM watches only yields results from competitors instead. Amazon’s merchandising practices implemented various keywords including trademarks into its internal search engine. So whenever a customer searches for a product, the search results not only include the original product (if Amazon sells it), but also competing products alongside it. This practice led MTM to sue Amazon for trademark infringement.

This case stands for the idea that Amazon’s merchandising practice is acceptable in online retail if using other vendors’ trademarks is not likely to confuse consumers. Amazon’s use of the actual MTM trademark was clearly NOT part of the results, instead shown only as verification that Amazon’s internal search engine understood what you were searching for.

This is where clear labeling and context was critically important. In context, it was clear Amazon was merchandising, showing you products similar to those for which you searched. The only thing Amazon could have done further is show a heading that says explicitly: “NONE OF THESE  WATCHES ARE MADE BY MTM.”

The takeaway here is that Amazon developed an intuitive, user-friendly interface with its trademark concerns in mind. By thinking about their potential liabilities earlier, Amazon was able to keep its merchandising practice and search tool intact. As for similar trademark practices, be careful with context and labeling to make sure that whatever you’re selling is clearly marked. Merchandising is OK so long as you do everything you reasonably can to minimize likelihood of confusion about vendors.