Amazon Defeats Apple’s False Advertising Claim in “App Store” Lawsuit

n January 2, 2013, the United States District Court for the Northern District of California rejected Apple, Inc.’s claim that Amazon.com, Inc.’s decision to name its marketplace for selling applications (“apps”) the “Amazon Appstore” was false advertising. The decision constituted a significant win for Amazon in its long-running dispute with Apple over Amazon’s right to use the term “app store.”

Since July 2008, Apple has been selling apps for its iOS-based mobile and tablet devices through its digital marketplace entitled the “APP STORE.” In January 2010, Apple learned that Amazon planned on using the word “Appstore” in the title of its own competing apps marketplace, which later sold apps for Google’s Android mobile devices and Amazon’s Kindle Fire tablet device. When Amazon launched the “Appstore for Android” in March 2011, Apple immediately sued Amazon for trademark infringement and unfair competition, alleging that the Amazon’s use of the term “Appstore” could cause confusion among consumers. In July 2011, U.S District Judge Phyllis Hamilton denied Apple’s motion for a preliminary injunction that sought to prevent Amazon from using the term “Appstore” name because Apple failed to establish a likelihood of success on its trademark infringement claims. Thereafter, Amazon changed the name of its digital store to “Amazon Appstore,” and Apple amended its complaint to add a false advertising claim against Amazon under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).

To prevail on a Lanham Action false advertising claim, a plaintiff must first show that the defendant made a false statement of fact in a commercial advertisement about its own or another’s product. Apple argued that Amazon’s use of the name “Amazon Appstore” was a false advertisement because it misrepresents the nature, characteristics, and qualities of Amazon’s mobile download service and will deceive consumers into believing that it is sponsored or affiliated with Apple or that it offers as many apps as Apple’s “APP STORE.”

However, Judge Hamilton granted Amazon’s summary judgment motion and found that Apple failed to establish that Amazon made any false statement that could deceive consumers because the mere use of “Appstore” to designate a site for purchasing apps “cannot be construed as a representation that the nature, characteristics, or quality of the Amazon Appstore is the same as that of the Apple APP STORE.”

Moreover, Judge Hamilton found that the Lanham Act false advertising claim does not require the advertisement to be explicitly false, but just that there be statement of fact, which can be express or implied. But where the false statement is implied, the plaintiff must produce evidence, such as market research or consumer surveys, that show what message was conveyed and how it was false or deceptive. Apple did not present any evidence that consumers understand “Appstore” to include specific features of Apple’s “APP STORE,” or that customers were somehow misled by Amazon’s use of the term. Judge Hamilton also highlighted that consumers that access the “Amazon Appstore” could not reasonably expect that it would be identical to Apple’s “APP STORE” because it only sells apps for Android and Kindle devices, whereas the Apple “APP STORE” sells apps solely for Apple devices.

The decision highlights that District Courts will look skeptically on Lanham Act false advertising claims that claim an advertisement is “implicitly” false where the plaintiff does not have any evidence of consumer confusion. While the decision is an important win for Amazon, the trademark infringement lawsuit continues and is scheduled for trial in August. Recently, the District Court has ordered the parties to meet and discuss settling the matter ahead of trial. Attorneys for both companies are scheduled to meet in late March 2013.