Perfumebay. Com Inc. v. eBay, Inc.

In this trademark infringement ease, we must decide whether various forms of the mark “Perfumebay” infringe upon the trademark “eBay.” Appellant Perfume-bay.com, Inc. (Perfumebay) appeals from the district court’s decision that Perfume-bay infringed eBay’s trademark. Perfumebay challenges the district court’s finding that the conjoined terms “perfumebay” and “PerfumeBay” created a likelihood of consumer confusion under the Lanham Act with respect to the mark “eBay.” Perfume-bay contends that the district court erred in finding initial interest confusion; in granting injunctive relief despite eBay’s unclean hands; and in fashioning the permanent injunction to prohibit Perfume-bay’s use of the names “perfumebay” and “perfume-bay.” Perfumebay also contests the district court’s denial of attorneys’ fees.

eBay cross-appeals the district court’s denial of its breach-of-contract claim based on the settlement negotiations of the parties. eBay also contends that the district court erred in rejecting its claim for likelihood of dilution, and for not permanently enjoining Perfumebay from using non-conjoined versions of its names that include a space between “Perfume” and “Bay,” such as “Perfume Bay.” We have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm in part and reverse in part.

*1169 I. BACKGROUND

Between 1998 and 1999, Jacquelyn Tran (Tran), the president and owner of Perfu-mebay, decided to sell perfume on the internet. Tran developed several web sites, including perfumebay.com. For her business, Tran utilized both conjoined and non-conjoined forms of “perfumebay,” including PerfumeBay and Perfume Bay.

When Perfumebay applied for a trademark for its Perfume Bay mark, eBay filed an opposition with the United States Patent and Trademark Office. Perfumebay and eBay then entered into negotiations concerning a potential name change by Perfumebay. eBay and Perfumebay stipulated to a suspension of the trademark opposition proceedings pending the result of the settlement negotiations.

When the parties failed to reach a settlement, Perfumebay filed a complaint in federal district court seeking a declaratory judgment that its various marks did not infringe on eBay’s mark or otherwise violate the Lanham Act. A bench trial was held on the parties’ various claims.

During the bench trial, Gary Briggs (Briggs), an employee of PayPal, an eBay subsidiary, testified on eBay’s behalf. Briggs described eBay’s operations as “a marketplace.” eBay does not have warehouses or any inventory. Instead, it “bring[s] together sellers and buyers.” According to Briggs, “buyers come to the web site to then bid and/or buy.” There are two methods for “buying and selling on the eBay online marketplace,” including an “auction, in which the price changes over a time period,” and “fixed price” which eBay calls “Buy It Now.” Approximately one-third of eBay’s sales are made through the fixed price method.

Between January, 2002, and September 1, 2004, eBay’s “total gross merchandise value of transactions in [its] fragrance section” was approximately $6 million. According to Briggs, this indicates “that fragrance is an important category of items traded on the eBay web site.”

Briggs estimated that “about half of the people who come to the eBay web site will type in [the domain name] ‘eBay.com’ or ‘www.ebay.com.’ And the other half will come in through pages on the internet.” “The largest sites that they come from are Google and Yahoo in the United States.” 1

Briggs explained that “text, as opposed to logos, is more important for internet marketing than with regard to non-internet marketing,” because consumers utilize text-based search engines like Google and Yahoo, as opposed to services driven by company logos. According to Briggs, eBay’s dominant method of advertising “is in paid search advertising, which are sponsored links, sponsored lines of text that are on a Google or a Yahoo.”

Briggs testified that eBay purchases keywords through two methods. eBay “contract[s] directly with companies like Yahoo and Google either through both short-term and long-term contracts. And then [it] also use[s] what’s called ‘affiliates,’ which are third parties that make a living by — they buy keywords and market on [eBay’s] behalf.” 2

*1170 Briggs conducted a search of “perfume eBay” on the Google, Yahoo, and Ask Jeeves search engines. For the Google search, the natural search results produced links to eBay’s store, as well as “sponsored links for every-day perfume specials ...” The sponsored link was to Perfumebay’s web site, specifically its “fragrance museum,” which is “an area for hard-to-find fragrances on PerfumeBay.” According to Briggs, eBay also offered such “hard-to-find products.” Briggs testified that such results are a concern to eBay because “the fact that you have a search result, a paid search result, that’s ‘perfume’ and ‘eBay,’ and then you go to hard-to-find fragrances which indicate that you are not just buying the word ‘perfume,’ you’re buying ‘eBay’ because eBay is known for hard-to-find products.”

For the Ask Jeeves search, Briggs testified that the search for “perfume eBay” produced results for eBay.com and for PerfumeBay.

According to Briggs, the similarity in the names eBay and PerfumeBay concerns eBay because of potential consumer confusion. Briggs testified that he was “concerned that affiliates are showing results that capitalize the B in PerfumeBay.” According to Briggs, “you have nine million unique users coming to eBay every day. And it doesn’t take, you know, much confusion at all to have someone, you know, think that something is eBay when it isn’t.” Briggs maintained that the problem would not be solved by placing a space between “Perfume” and “Bay” because of “the importance of ‘bay’ in eBay,” and the methods utilized by affiliates. According to Briggs, a space also would not be available, as the internet only utilizes “a connected string of text.”

During cross-examination, Briggs was presented with a search for the terms “perfume” and “bay” as two words. The demonstration produced a paid advertisement for PerfumeBay with a link to eBay. Briggs explained that eBay “commonly would buy the word ‘perfume.’ ” Briggs acknowledged that eBay does not sell PerfumeBay products on its web site. According to Briggs, a reasonable explanation for the advertisement was that affiliates would often purchase misspellings of a term. Briggs testified that its “affiliates are buying those links and not eBay.” Briggs also explained that the affiliates follow Google’s policy for the advertisements. Briggs acknowledged that eBay does permit “the use of someone else’s brand name in an advertisement on Google when it has no relationship with that brand name.”

Briggs also demonstrated searches that he conducted involving the terms “sf bay, Los Angeles freeway, Hollywood sign, [and] Gold Line ...” The Google search for “Los Angeles freeway” resulted in an ad for “great deals on Los Angeles freeway. Shop eBay and save.” Because it is not possible to purchase the Los Angeles freeway on eBay, Briggs opined that the advertisement was purchased by an eBay affiliate. Briggs presented similar Google search results for the Hollywood sign; “sf bay”; and “Gold Line.”

Jay Monahan (Monahan), eBay’s Vice President of Litigation, Intellectual Property, testified that he was “concerned about any use of bay which is likely to lead consumers into thinking that that web site *1171 is sponsored, affiliated, endorsed by us, or one where they’re basically frontally assaulting the brand by treating bay as a generic reference to online commerce.” He was also concerned that the use of a generic word plus “bay” would lessen the distinctiveness of eBay’s trademark.

According to Monahan, eBay became aware of the PerfumeBay web site in July, 2002. He was not aware of “any specific instances of confusion involving Perfume-bay.”

Tran testified that she developed the idea in “late 1998 or early 1999 ... to sell perfume from [her] parents’ company on the internet ...” Tran first sold perfume on eBay’s web site. She used “five or six different user names in order to trade on eBay,” two of which, Beautiful Perfumes and Classy Perfumes, were web sites owned by Tran for the sale of perfume. She continued to sell perfume on eBay until October, 2004, when Tran decided that she no longer wanted to use eBay, because of eBay’s auction approach.

The “target customer for Perfumebay is anyone who has access to the internet and purchases fragrances and cosmetics ...” Tran chose the name for the web site while she was still selling perfume on eBay. According to Tran, she “did not have any intention of copying eBay or trying to confuse customers to come to Perfume-bay’s web site because of eBay.”

Tran selected the first part of the name, “perfume,” as a description of her products. She added the term “bay” because she “envisioned a bay filled with ships importing perfumes from all parts of the world and this bay would be the place where perfume lovers could go to locate the selection of fragrances ...” However, “there was never an image of a bay filled with ships on [her] web site.” There were no ships on the web site, and Tran “never explained on [her] web site at any time that the name Perfumebay was intended to suggest a bay into which products are brought by ship from abroad ...” Her web site developers “never created any kind of graphical design for the Perfume-bay web site that incorporated a bay filled with ships ...”

Tran acknowledged that “the Perfume-bay web site has, from time to time, displayed the Perfumebay name as one word with a capital B ...” Additionally, “Perfumebay sometimes refers to itself [as] Perfume[B]ay, capitalizing the letters P and B in one word ...” The sign-up documentation for affiliates “spells the Perfume[B]ay name in one word with the P and the B capitalized ...” In its trademark application, “the header Perfume[B]ay.com is displayed as one word with a capital B ...” According to Tran, the usage of “Perfume-Bay” occurred because “it was a common thing [she] saw online where companies would capitalize the first letter of the first word if they had separate words.” However, during the litigation, Tran stopped using “the spelling of Perfume[B]ay, one word, capital P, capital B.”

PerfumeBay also used a logo that included the phrase “Where Perfume Lovers Go.” The logo contains a starfish between “Perfume” and “Bay.” Tran testified that the starfish was used “[t]o convey the image of the bay with perfumes.”

According to Tran, Perfumebay.com operates five other web sites “called Beautiful Perfumes.com; Scentguru.com; Classy Perfumes.com; Beauty Encounter.com and ... Pefume Shop.com.” “[A]ll of these sites offer the same products for sale as the Perfumebay.com web site ...” These web sites “have the same categories of products ... [a]nd they link to the same product descriptions ...” The majority of key-word advertising is spent for Perfume-bay. Although the majority of key-word *1172 advertising is spent for Perfumebay, Tran acknowledged that she could “put more money into keyword advertising for Beautiful Perfume — Beautiful Perfumes.com if [she] wanted to ...”

In 2004, Perfumebay.com’s sales totaled $6.6 million. The sales for all of Tran’s web sites totaled approximately $9 million.

Prior to the lawsuit, Tran learned through her customer service personnel that “people were calling Perfumebay asking if it was associated with eBay ...” She directed her customer service representatives to inform these callers that Perfume-bay was not associated with eBay.

Philip Johnson (Johnson), chief executive officer of Leo Shapiro and Associates, a research and consulting firm, testified for eBay that he developed a consumer survey “to measure the extent to which the word ‘bay’ used in conjunction with a common name causes or is likely to cause confusion, ... or dilution.” According to Johnson’s survey, “a substantial majority of consumers — the average would be 70 percent if one took California and the rest of the country and averaged the two together — believe that eBay is the company that comes to mind when they hear the word ‘bay’ used in connection with a web site or is part of the name of a web site, when they are on the internet engaged in shopping behavior.” Johnson concluded that initial interest confusion and actual confusion can result from usage of the term “bay.”

Another study designed by Johnson was conducted by telephone interviews. The survey reflected that fifty-two percent of the California sample and sixty-four percent of the nationwide sample responded that eBay came to mind when they saw the term “bay” utilized by a web site. Based on this survey, Johnson opined that “combining a generic term with the word ‘bay’ as part of an [sic] web site name or internet address ... causes a substantial degree of confusion, and that that will lead to at least dilution if not initial-interest confusion.”

Johnson acknowledged that his survey was not designed to measure actual confusion or actual dilution. Johnson also confirmed that he only tested “bay,” and not “PerfumeBay.”

Eli Seggev (Seggev) testified for Perfu-mebay and criticized Johnson’s methodology. Seggev opined that, because the California and nationwide samples could not be combined properly, the survey failed to “project to a population.” Seggev also pointed to Johnson’s failure to utilize a control group. In addition, according to Seggev, the survey neglected to properly validate the interviews. Finally, Seggev faulted the survey for using only telephone interviews, as “the entire process by which consumers are interacting with these companies is visual rather than oral.”

The district court found that conjoined forms of “perfumebay” created a likelihood of confusion. The district court permanently enjoined Perfumebay from depicting “Perfume Bay” as a single word. However, the district court held that non-conjoined forms of “Perfume Bay” did not create a likelihood of confusion. The district court also held that the Perfumebay marks did not engender a likelihood of dilution.

Additionally, the district court permanently enjoined eBay from displaying “Perfume Bay” in any advertising, except for “truthful, non-confusing comparative advertising,” based on an unclean hands defense raised by Perfumebay at the end of the bench trial. Perfumebay and eBay filed timely notices of appeal.

II. STANDARDS OF REVIEW

We “review the district court’s determination of likelihood of confusion for *1173 clear error.” Reno Air Racing Ass’n, Inc. v. McCord, 452 F.3d 1126, 1135 (9th Cir.2006) (citation omitted). “If the district court’s account of the evidence is plausible in light of the record viewed in its entirety, we may not reverse even though as the trier of fact, we would have weighed the evidence differently.” Id. (citation and alteration omitted).

“A district court’s interpretation of state law is reviewed de novo.” Jorgensen v. Cassiday, 320 F.3d 906, 914 (9th Cir.2003) (citation omitted).

“The district court’s injunctive relief is reviewed for an abuse of discretion.” Interstellar Starship Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 941 (9th Cir.2002) (citation omitted). “The grant of a permanent injunction will be reversed only when the district court based its decision on an erroneous legal standard or on clearly erroneous findings of fact.” Id. (citation omitted).

We “review the district court’s denial of attorney’s fees under 15 U.S.C. § 1117 for an abuse of discretion.” Rolex Watch, U.S.A., Inc. v. Michel Co., 179 F.3d 704, 711 (9th Cir.1999) (citation omitted). “In making this assessment, we review de novo the district court’s legal analysis and interpretation of the Lanham Act.” Id. (citation omitted).

III. DISCUSSION

A. Perfumebay’s Appeal

Perfumebay contends that the district court erred in its likelihood of confusion findings. Perfumebay believes that it should prevail because its marks are not similar to the eBay mark. However, the district court did not clearly err in finding a likelihood of confusion stemming from the conjoined forms of “Perfumebay.”

“The core element of trademark infringement is whether customers are likely to be confused about the source or sponsorship of the products.” McCord, 452 F.3d at 1135 (citation omitted). “An eight-factor test—the so-called Sleekcraft factors—guides the assessment of whether a likelihood of confusion exists.” Id. (citation and internal quotation marks omitted). The Sleekcraft factors are:

(1) the strength of the mark; (2) proximity or relatedness of the goods; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the marketing channels used; (6) the degree of care customers are likely to exercise in purchasing the goods; (7) the defendant’s intent in selecting the mark; and (8) the likelihood of expansion into other markets.

McCord, 452 F.3d at 1136 n. 9 (citation omitted). “The test is a fluid one and the plaintiff need not satisfy every factor, provided that strong showings are made with respect to some of them.” Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 631 (9th Cir.2005) (citation omitted).

In the internet context, “the three most important Sleek craft factors in evaluating a likelihood of confusion are (1) the similarity of the marks, (2) the relatedness of the goods and services, and (3) the parties’ simultaneous use of the Web as a marketing channel.” Interstellar Starship Servs., 304 F.3d at 942 (citation and internal quotation marks omitted). ‘When this controlling troika or internet trinity suggests confusion is likely, the other factors must weigh strongly against a likelihood of confusion to avoid the finding of infringement.” Id. (citations, alteration, and internal quotation marks omitted). “If the internet trinity does not clearly indicate a likelihood of consumer confusion, a district court can conclude the infringement analysis only by balancing all the Sleekcraft *1174 factors within the unique context of each case.” Id.

1. The Similarity of the Marks

“The similarity of the marks will always be an important factor. Where the two marks are entirely dissimilar, there is no likelihood of confusion.” Brookfield Commc’n, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036, 1054 (9th Cir.1999). “Nevertheless, the more similar the marks in terms of appearance, sound, and meaning, the greater the likelihood of confusion.” Id. (citation omitted). “However, similarity of the marks is but one factor in the Sleelccraft test, albeit an important one, and a court does not consider the similarity of the marks in the abstract, but rather in light of the way the marks are encountered in the marketplace and the circumstances surrounding the purchase.” McCord, 452 F.3d at 1137 (citation and internal quotation marks omitted).

“Because the result of the consideration of one factor can influence the consideration of another, if the trademark holder’s mark were strong, the fact that a consumer would likely notice the difference between two marks might not suffice for a finding that the marks are dissimilar.... [T]he fact that the similarity involves the use of a much stronger mark would make that similarity weigh more heavily in the analysis of this factor.” Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1145 n. 9 (9th Cir.2002).

The record in this case reflects the requisite similarity between the two marks. “Perfumebay” incorporates the eBay trademark in its entirety, especially when Perfumebay utilizes the spelling as “Perfu-meBay.” For example, in its publisher application, Pefumebay ostensibly utilizes the separate terms “Perfume” and “Bay” at the top. However, the application refers to “perfumebay.com” and “Perfume-Bay,” both of which completely incorporate eBay’s strong mark. Although Perfume-bay has utilized a logo on its web site separating “Perfume” and “Bay” with a starfish, the domain name itself is “perfu-mebay.com,” once again incorporating eBay’s mark. Additionally, the similarity is demonstrated in the search engine results, resulting in “eBay” and “perfume-bay” links. Although differences exist between the two marks, the fact that eBay’s mark is a strong one weighs against Perfu-mebay. See id.

The remaining two factors of the internet trilogy weigh equally against Perfume-bay. See Interstellar Starship Servs., 304 F.3d at 942. Pefumebay and eBay sell similar products on the internet — perfume. Although they may differ slightly in that eBay offers the additional auction component of its website, “even services that are not identical are capable of confusing the public.” GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1206 (9th Cir.2000). Thus, “[r]elated goods are generally more likely than unrelated goods to confuse the public as to the producers of the goods.” Brookfield, 174 F.3d at 1055 (citation omitted).

Perfumebay and eBay both utilize the internet “as a marketing and advertising facility, a factor that courts have consistently recognized as exacerbating the likelihood of confusion.” Id. at 1057 (citations omitted). “[T]he Web, as a marketing channel, is particularly susceptible to a likelihood of confusion since, as it did in this case, it allows for competing marks to be encountered at the same time, on the same screen.” GoTo.com, 202 F.3d at 1207.

Because the three primary factors for internet trademarks weigh against Perfumebay, the remaining Sleekcraft factors, actual confusion, marketing channels utilized, degree of consumer care, Perfume *1175 bay’s intent, and likelihood of expansion into other markets, “must weigh strongly against a likelihood of confusion to avoid the finding of infringement.” Interstellar Starship Servs., 304 F.3d at 942 (citation and internal quotation marks omitted). The record does not reflect such a showing by Perfumebay. See McCord, 452 F.3d at 1136 n. 9.

M2 Software, Inc. v. Madacy Entm’t, 421 F.3d 1073 (9th Cir.2005), is not to the contrary. In M2 Software, we considered whether the marks “M2 Entertainment” and “M2” were similar. Id. at 1076. We observed:

After considering (1) the addition of “Entertainment” by Madacy, (2) the use of the mark “interactive” in addition to M2 on M2’s Software CDs, (3) the use of other marks in addition to M2 Entertainment on Madacy’s CDs, and (4) the fanciful nature of M2 Software’s M2 mark, the district court ruled that the third Sleekcraft factor weighed only very slightly in M2’s favor. This ruling was not erroneous.

Id. at 1082.

In contrast, Perfumebay failed to demonstrate any additional distinguishing factors, particularly when its marks “perfumebay” and “perfumeBay” are utilized as domain names, in internet search engine results, and in online advertising. M2 Software also is distinguishable in its sight, sound, and meaning analysis as it did not involve internet usage. See id. at 1084. In sum, the pivotal factor in this case is that Perfumebay and eBay utilize the internet in selling and advertising similar products, a circumstance not present in M2 Software.

In Entrepreneur Media, we determined that “entrepreneur-pr.com” and “Entrepreneur” were not sufficiently similar. 279 F.3d at 1146-47. However, that case concerned only an internet user typing in the domain name. Id. We did not consider confusion resulting from internet search engine usage and online advertising. See id. Additionally, “Entrepreneur,” unlike “eBay,” was a weak mark, “which weighs heavily against finding infringement ...” Id. at 1153.

Perfumebay is correct that “Perfume-bay” and “eBay” are pronounced differently and have different meanings. However, we must evaluate the marks as they are utilized in the marketplace. See McCord, 452 F.3d at 1137. This requires an analysis of the marks in their internet usage, not simply as the terms are pronounced or viewed in the abstract. Internet users type “perfumebay” as a domain name and as an internet search term, and click onto “perfumebay” links as internet search results. Internet users do not utilize verbal communication as a basis for the services that they seek. The likelihood of confusion, therefore, does not arise in a vacuum, but rather from the manner in which “perfumebay” is used on the internet. The district court did not err when it considered the likelihood of confusion in the relevant context.

It is true that the term “Bay” may convey varying meanings. It may serve as a geographical reference to a body of water or describe a commercial storage compartment. However, that the term may convey different impressions to different individuals is irrelevant to a likelihood of confusion analysis, as the district court’s findings only need be plausible. See id. at 1135 (“If the district court’s account of the evidence is plausible in light of the record viewed in its entirety, we may not reverse even though as the trier of fact, we would have weighed the evidence differently.”) (citation and alteration omitted).

Perfumebay also emphasizes that eBay never demonstrated actual confusion. *1176 However, “the failure to prove instances of actual confusion is not dispositive against a trademark plaintiff, because actual confusion is hard to prove; difficulties in gathering evidence of actual confusion make its absence generally unnoteworthy.” Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., 457 F.3d 1062, 1077 (9th Cir.2006) (citation and alteration omitted) (emphases in the original).

Finally, Perfumebay argues that the district court placed undue emphasis on one-word spellings in internet search engine results. However, the district court’s consideration of “perfumebay” in search engine results was consistent with the evidence presented. Briggs testified that a significant number of consumers reach the eBay web site through internet search engines. eBay’s dominant method of advertising is through sponsored links provided on Google and Yahoo. Thus, the district court did not clearly err in addressing the marks in the contexts which might produce the predominant level of consumer confusion.

The district court did not err in holding that the marks were similar enough to create a likelihood of confusion.

2. The District Court’s Finding Of Initial Interest Confusion

Because the district court ruled that any initial interest confusion was not actionable, Perfumebay seeks to appeal a decision upon which it prevailed. However, “courts review judgments, not statements in opinions.” Envtl. Prot. Info. Ctr. v. Pacific Lumber Co., 257 F.3d 1071, 1075 (9th Cir.2001) (citation and internal quotation marks omitted). “A party who receives all that he has sought generally is not aggrieved by the judgment affording the relief and cannot appeal from it.” Id. (citations omitted). Perfumebay failed to demonstrate that it has the requisite standing to appeal the district court’s favorable ruling. See id.

In any event, the district court did not clearly err in its initial interest confusion analysis. “[Ajctionable initial interest confusion on the Internet is determined, in large part, by the relatedness of the goods offered and the level of care exercised by the consumer.” Interstellar Starship Servs., 304 F.3d at 945 (citation omitted). “Of course, the remainder of the Sleekcraft factors complete the case-by-case inquiry necessary to evaluate initial interest confusion on the Internet.” Id.

The district court had a valid basis for finding initial interest confusion. 3 The in-court demonstration reflected that consumers might be confused by search results for “perfume” and “eBay” that provided links to Perfumebay. Based on the search results, a consumer might assume that Perfumebay is part of eBay’s web site or one of eBay’s internet stores. Additionally, initial interest confusion is analyzed pursuant to the Sleekcraft factors for likelihood of confusion. See Interstellar Starship Servs., 304 F.3d at 945. As discussed, there is a likelihood of confusion given the marks’ similarities, the marketing channels utilized, and the similarity of the products.

3. The Permanent Injunction Against Using perfumebay.com and perfume-bay.com

Perfumebay failed to establish that the district court abused its discretion. “15 U.S.C. § 1116(a) vests the district court with the power to grant injunctions according to principles of equity and *1177 upon such terms as the court may deem reasonable, to prevent the violation of any right of the trademark owner ...” McCord, 452 F.3d at 1137 (citation and internal quotation marks omitted). “When the infringing use is for a similar service, a broad injunction is especially appropriate.” GoTo.com, 202 F.3d at 1211 (citation and internal quotation marks omitted). The district court did not clearly err in finding that the conjoined version of “perfumebay” created a likelihood of confusion. eBay and Perfumebay’s services are similar, as they both sell perfume on internet web sites and utilize search engines extensively for attracting customers. A broad injunction addressing such similarities “is especially appropriate.” See id. eBay also presented evidence that the hyphenated term “perfumebay” contributed to consumer confusion, as “e-bay” is associated with “ebay” by consumers. 4

4. The District Court’s Asserted Failure To Balance The Harm To Per-fumebay

Perfumebay failed to demonstrate an abuse of discretion, as it has viable options other than using the infringing domain names. Perfumebay operates five other web sites which offer the same products as perfumebay.com. The web sites share the same product categories and provide links to the same product descriptions. Perfumebay acknowledged that it could shift advertising resources to these other web sites. Although perfumebay.com is the most profitable of the web sites, that fact does not mandate a conclusion that the district court failed to balance the harm to Perfumebay. See Idaho Watersheds Project v. Hahn, 307 F.3d 815, 833-34 (9th Cir.2002) (approving the balance struck by the district court where the court “was mindful of the equities on all sides”).

5. The District Court’s Finding Regarding eBay’s Unclean Hands

“Unclean hands is a defense to a Lanham Act infringement suit.” Japan Telecom, Inc. v. Japan Telecom America Inc., 287 F.3d 866, 870 (9th Cir.2002) (citation omitted). “Trademark law’s unclean hands defense springs from the rationale that it is essential that the plaintiff should not in his trade mark, or in his advertisements and business, be himself guilty of any false or misleading representation.” Id. (citation and internal quotation marks omitted). “To show that a trademark plaintiffs conduct is inequitable, defendant must show that plaintiff used the trademark to deceive consumers.” Id. (citation omitted). “Bad intent is the essence of the defense of unclean hands.” Id. (citations omitted).

At the conclusion of the bench trial, Perfumebay was allowed to amend its complaint to include the unclean hands defense. The primary testimony on the issue came from eBay’s witness, Briggs. Briggs testified that the advertisements for Perfumebay on eBay’s site may have resulted because affiliates would often purchase misspellings of a term. Briggs emphasized that “its affiliates were buying those links not eBay.” Briggs also demonstrated that affiliates had advertised the Los Angeles freeway, the Hollywood sign, sf bay, and Gold Line for sale on eBay. However, Briggs acknowledged that eBay does permit “the use of someone else’s brand name in an advertisement on Google *1178 when it has no relationship with that brand name[.]”

The record does not affirmatively demonstrate that eBay used the advertisements to “deceive consumers.” See id. There also is limited evidence, if any, supporting the district court’s finding that “it is axiomatic that the principal is responsible for the acts of the agent acting within the scope of their authority, i.e. the affiliates.” Although eBay’s conduct may be questionable, the evidence does not adequately detail eBay’s relationship with or control over the affiliates. Thus, it is not clear from the record that eBay acted with the requisite “bad intent” for an unclean hands finding. See id. As a result, we conclude that there was an insufficient foundation for the injunction against the advertising conducted by eBay’s affiliates. See Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 842 (9th Cir.2002).

6. The District Court’s Denial of Attorneys’ Fees and Costs to Perfu-mebay

“Under 15 U.S.C. § 1117(a), a court may award reasonable attorneys’ fees to the prevailing party in exceptional circumstances, which includes cases in which the act is fraudulent, deliberate, or willful.” Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1039 (9th Cir.2007) (citation omitted). “Under both sections 1117(a) and 1117(b), awards are never automatic and may be limited by equitable considerations.” Rolex Watch, 179 F.3d at 711 (citation and internal quotation marks omitted).

The district court did not abuse its discretion in denying attorneys’ fees to Perfumebay. Perfumebay was not a prevailing party, as it was permanently enjoined from using the conjoined form of its mark. Perfumebay also failed to demonstrate that this was an “exceptional case” involving fraudulent, deliberate, or willful conduct. See Horphag Research, 475 F.3d at 1039. Perfumebay is not entitled to attorney’s fees.

B. eBAY’s Cross-Appeal

In its cross-appeal, eBay asserts that the district court erred on several grounds. eBay contends that the district court erroneously denied its breach of contract claim based on Perfumebay’s promise to change its name to one that did not utilize a “Bay” suffix. eBay also challenges the district court’s findings that there was not a likelihood of dilution, and that non-conjoined forms of “Perfume Bay” did not create a likelihood of consumer confusion. We conclude that the district court erred only in its finding that there was not a likelihood of dilution.

1. The Alleged Contract Between eBay and PerfumeBay

“The principles of contract formation are the same in both the settlement and the nonsettlement context.” Terry v. Conlan, 131 Cal.App.4th 1445, 1458, 33 Cal.Rptr.3d 603 (2005) (citation omitted). “In order for acceptance of a proposal to result in the formation of a contract, the proposal must be sufficiently definite, or must call for such definite terms in the acceptance, that the performance promised is reasonably certain.” Weddington Prod., Inc. v. Flick, 60 Cal.App.4th 793, 811, 71 Cal.Rptr.2d 265 (1998) (citation omitted). “In particular, a provision that some matter shall be settled by future agreement, has often caused a promise to be too indefinite for enforcement.” Id. at 812, 71 Cal.Rptr.2d 265 (citation and alteration omitted). “If an essential element is reserved for the future agreement of both parties, as a general rule the promise can give rise to no legal obligation un