Intellectual Property Attorney

1-800 Contacts Is Unsuccessful, Yet Again, On Trademark Infringement Claim In Keyword Advertising Case

1-800 Contacts has been at the forefront of the growing (and often conflicting) body of law regarding keyword advertising. Unfortunately for the company, the law has not been in its favor. Not only did it lose its first case in the U.S. Court of Appeals for the Second Circuit (which includes both New York and Connecticut), 1-800 Contacts recently lost another keyword advertising case in the Tenth Circuit (comprising Oklahoma, Kansas, New Mexico, Colorado, Wyoming, and Utah).

When an internet user types a search term into a search engine, like Google or Yahoo!, the search engine displays a list of websites relevant to that search term. These search engines also sell advertising linked to certain search terms or “keywords” (e.g., Google’s AdWords program) and to display ads, consisting of a limited amount of text and a hyperlink to the advertiser’s website, alongside or directly above the objective search results in a designated section (e.g., Google’s Sponsored Links). The revenues generated from the increase in traffic can easily outstrip the costs of purchasing the keywords, provided an advertiser chooses the right keywords.

Advertisers can bid on and purchase virtually any keyword, including registered trademarks (unless the search engine agrees to block the registrant’s marks). In addition, some search engines will actually suggest keywords, including keywords consisting of a competitor’s trademark, to an interested advertiser (e.g., Google’s Keyword Suggestion Tool, now Keyword Planner). By purchasing a competitor’s trademark as a keyword, the advertiser ensures that its sponsored link is displayed whenever an internet user searches using the competitor’s mark. Understandably, trademark owners do not like the idea of their marks being used to trigger the display of a competitor’s ad and sponsored link, particularly when the competitor’s ad is displayed in a more prominent place on the search results page than the trademark owner’s own link.

1-800 Contacts brought one of the first cases alleging trademark infringement arising from a third-party’s use of its mark in the context of keyword advertising. In 1-800 Contacts, Inc. v., Inc., 414 F.3d 400 (2d Cir. 2005), defendant placed plaintiff’s web address (which consists of its trademark plus .com) in a directory that triggered “pop-up” ads when an internet user conducted a search for that address. The court observed that “use,” “in commerce” and “likelihood of confusion” were three separate elements in a trademark infringement claim. The court held that plaintiff could not establish that defendant had “used” its trademarks within the meaning of the Lanham Act because defendant’s activity was internal. “A company’s internal utilization of a trademark in a way that does not communicate it to the public is analogous to an individual’s private thoughts about a trademark.”
1-800 Contacts, 414 F.3d at 409. Accordingly, the court did not even consider whether such “internal utilization” created a likelihood of confusion.

In this most recent case, 1-800 Contacts sued, a direct competitor that had purchased, via Google’s AdWords program, various keywords that were forms of the 1800CONTACTS trademark. The district court granted defendant’s motion for summary judgment, finding use but no likelihood of confusion. 1-800 Contacts appealed, claiming that consumers who searched for its products would be confused by’s sponsored ad and click on it instead. However, the Tenth Circuit affirmed the district court’s decision. Finding a lack of actual confusion (only 1.5% of Google users actually clicked on’s sponsored ads), combined with the fact that plaintiff’s mark did not appear in the text of the ads, the appellate court likewise denied 1-800 Contacts’ infringement claim.

The case is 1-800 Contacts, Inc. v., Inc., Nos. 11-4114, 11-4204, 12-4022 (10th Cir. July 16, 2013).

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