Apple Sues Amazon over “App Store”

Apple Inc. (AAPL) has filed a trademark infringement lawsuit against online retailer Inc. (AMZN) in a federal court in the Northern district of California for using the phrase “App Store”.

Apple has accused Amazon of using the words “App Store” since January 2011 for its mobile software download service, stating that Amazon violated the trademark law, potentially confusing developers and consumers. Apple also argued that Amazon has been promoting a program in the name of Angry Birds Rio in its website and plans to launch it soon, while Apple’s App Store already boasts a very popular program called Angry Birds.

Apple has requested the court to restrict Amazon from using the name but has not yet specified the amount of damages.

In Amazon’s defense, the company said that it uses the word ”Appstore” without a space in between and a lower case “s”, not the way Apple uses it.

On July 17, 2008 Apple gained the trademark right to use the term App Store from the US Patent and Trademark office following the roll out of its 3G-enabled iPhone. Currently Apple’s App Store has been the most successful of its kind, offering over 350,000 games, news and various other downloadable applications for Apple devices such as iPhones, iPods and iPads.

Apple and Amazon are direct competitors in the digital downloading space, as well as in other businesses such as e-books and online movie sales.

Further, Microsoft (MSFT) has challenged Apple regarding the use of the phrase “App Store” before a special board of the US patent and Trademark Office. The legal proceedings are currently underway. Microsoft believes that the phrase “App Store” should not be trademarked as the term “app” is used for any software program.

We continue to believe that Apple is in a position to outperform its peers given its strong product line and a robust demand for its newly released iPad2 and these lawsuits are not likely to have much impact on the company.

Thus, we have an Outperform rating on Apple over the long term. Currently, Apple has a Zacks #3 Rank, implying a short-term Hold rating.

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