Lens.com Receives Mostly Clear Victory from Tenth Circuit's Keyword Advertising Decision Concerning 1-800CONTACTS | Practical Law

Lens.com Receives Mostly Clear Victory from Tenth Circuit's Keyword Advertising Decision Concerning 1-800CONTACTS | Practical Law

In 1-800 Contacts, Inc. v. Lens.com, Inc., the US Court of Appeals for the Tenth Circuit  affirmed summary judgment that Lens.com did not directly infringe 1-800CONTACTS' trademark by purchasing keywords that resembled that mark. The court also affirmed the district court on 1-800CONTACTS' vicarious trademark infringement claims but reversed and remanded the district court's summary judgment of no contributory infringement based on Lens.com's affiliates' use of the 1-800CONTACTS mark in advertising.

Lens.com Receives Mostly Clear Victory from Tenth Circuit's Keyword Advertising Decision Concerning 1-800CONTACTS

by Practical Law Intellectual Property & Technology
Published on 18 Jul 2013 • USA (National/Federal)
In 1-800 Contacts, Inc. v. Lens.com, Inc., the US Court of Appeals for the Tenth Circuit affirmed summary judgment that Lens.com did not directly infringe 1-800CONTACTS' trademark by purchasing keywords that resembled that mark. The court also affirmed the district court on 1-800CONTACTS' vicarious trademark infringement claims but reversed and remanded the district court's summary judgment of no contributory infringement based on Lens.com's affiliates' use of the 1-800CONTACTS mark in advertising.
On July 16, 2013, the US Court of Appeals for the Tenth Circuit issued an opinion in 1-800 Contacts, Inc. v. Lens.com, Inc. affirming the district court's grant of summary judgment that Lens.com's purchase of advertising keywords incorporating the 1-800CONTACTS trademark was not direct trademark infringement where the resulting advertising impressions did not display the mark. The court also addressed secondary liability based on Lens.com's affiliates' publication of ads that featured the 1-800CONTACTS mark and affirmed the district court's grant of summary judgment that Lens.com was not vicariously liable for trademark infringement but reversed and remanded the district court's grant of summary judgment that Lens.com was not liable for contributory infringement.

Background

A typical Google search simultaneously yields:
  • The organic search results that are the links generated by Google's search algorithms.
  • Sponsored links that include advertising copy and the advertiser's website address.
Google's AdWords program allows an advertiser to bid to reserve a particular word or phrase that will trigger the display of its ad as a sponsored link, which usually appears above or to the right of the organic search results.
Lens.com and 1-800 Contacts both sell replacement contact lenses online. In 2005, 1-800 discovered that searching for the phrase "1800 CONTACTS" (and variations) on Google resulted in Lens.com ads appearing as sponsored links on the Google search results page. Thereafter, 1-800 contacted Lens.com to complain about the Lens.com ads. Lens.com responded that third-party affiliates were responsible and that it would advise those affiliates not to bid on "1-800-CONTACTS" as a keyword in the future. Third party affiliates are typically paid by advertisers to publish ads for them through AdWords and other search-engine programs. In this case, internet users who clicked on a sponsored ad published by a Lens.com affiliate would be routed directly to one of Lens.com's four websites or would be taken to the affiliate's own website where links to Lens.com's websites were displayed. When the user made a purchase at one of Lens.com's websites by clicking on the affiliate's ad, the affiliate earned a commission. 1-800 continued to express concerns about Lens.com ads appearing on Google search results and ultimately sued Lens.com in August 2007.
1-800 initially claimed that Lens.com had directly infringed its 1800CONTACTS trademark. After discovery revealed that both Lens.com itself and certain third-party affiliates bid on the 1800Contacts keyword and other variations of 1-800's mark, 1-800 amended its complaint to allege that both:
  • Lens.com directly infringed the 1800CONTACTS mark by purchasing keywords containing the mark.
  • Lens.com's affiliates infringed the mark and that Lens.com was secondarily liable for that infringement under theories of vicarious liability and contributory infringement.
The district court granted Lens.com summary judgment, finding that Lens.com's:
  • Purchasing of keywords containing the 1-800 mark was a use in commerce under the Lanham Act, but that a purchase of a keyword cannot, by itself, create the likelihood of confusion necessary for infringement liability. The court ruled that likelihood of confusion can only occur in combination with the specific language of the resulting advertising impressions.
  • Purchase of keywords containing 1-800's mark did not result in a likelihood of confusion because the resulting sponsored ads did not display 1-800's mark.
  • Affiliates' purchase of keywords containing 1-800's mark and publication of ads that did feature 1-800's mark in the text did not result in secondary liability for Lens.com because:
    • there was no principal-agent relationship between Lens.com and its affiliates; and
    • 1-800 failed to provide evidence that Lens.com either intentionally induced its affiliates to use 1-800's mark in the text of the ads or that Lens.com knew or had reason to know that the affiliates were doing so and had failed to take appropriate action.
1-800 appealed to the Tenth Circuit and argued that:
  • There were disputed facts regarding likelihood of confusion.
  • The evidence supported findings of secondary liability under both vicarious and contributory infringement.

Outcome

The Tenth Circuit affirmed the district court on all issues except for contributory infringement. The Tenth Circuit also rejected Lens.com's unclean hands defense to 1-800's claims.

Direct Infringement Liability

On appeal, 1-800 argued that Lens.com directly infringed 1-800's mark because although Lens.com never published ads with 1-800's mark in the text, purchasing keywords containing 1-800's mark caused Lens.com ads to appear in searches for the 1-800 mark. These ads then diverted customer interest away from 1-800's website and toward Lens.com's websites. As a result, according to 1-800, there was initial interest confusion.
The court noted that while it generally applies a six factor test to assess likelihood of confusion in trademark actions, in cases where certain facts are more probative than others on the likelihood of confusion issue those facts may dominate the analysis.
In this case, the court noted that AdWords data showed that over an eight month period, consumers clicked on only 1.5% of the Lens.com ads that appeared in search results. The court found that this was insufficient to support an inference that the keyword activity was likely to lure consumers away from 1-800. The court rejected 1-800's arguments concerning overlapping trade channels, the degree of purchasing care exercised by consumers and the strength of its mark, noting that these traditional likelihood of confusion factors did not have particular relevance to the key issues of whether consumers searching for 1-800 and seeing an ad for Lens.com would be confused into thinking that Lens.com was associated with 1-800.
The Tenth Circuit also rejected 1-800's claim of actual consumer confusion. Initially the court addressed a single customer service recording reflecting that a customer cancelled a Lens.com order after realizing that Lens.com was not 1-800. The court found that this record was entitled to little weight because it gave no reason for how the customer found Lens.com to place the initial order.
The court then addressed 1-800's confusion survey, finding it to be entitled to no more than minimal weight given certain design flaws and a low net confusion rate of 7.4%.
The court summarized the evidence as overwhelmingly indicating an "unlikelihood" of confusion.

Secondary Liability

1-800 argued that Lens.com's affiliates' publications of sponsored ads containing 1-800's mark constituted infringement for which Lens.com should be secondarily liable based on theories of vicarious liability and contributory infringement. The Tenth Circuit noted that for Lens.com to be secondarily liable for trademark infringement, at least one of its affiliates must have directly infringed 1-800's mark. It therefore concluded that their publication of sponsored Lens.com ads that did not display 1-800's mark in their text did not result in secondary liability. As for sponsored ads that featured variations of the 1-800 mark in their text, the Tenth Circuit held that Lens.com was:
  • Not vicariously liable because the relevant affiliate did not reasonably believe the Lens.com authorized it to place the ads in question.
  • Potentially liable for contributory infringement because it knew that at least one of its affiliates was using 1-800's mark in its ads and it did not make reasonable efforts to stop the affiliate's infringing activities.
On the contributory infringement claim, the Tenth Circuit noted that Lens.com could have stopped the use of ads using 1-800's mark simply by sending an email blast to its affiliates forbidding that use. The court therefore reversed the district court's grant of summary judgment to Lens.com on the contributory infringement claims and remanded the issue to the district court for further proceedings.

Unclean Hands, Sanctions and Attorney Fees

Lens.com argued that 1-800's claims should be barred by 1-800's unclean hands because 1-800 also purchased Lens.com and other keywords similar to its competitors' marks. The Tenth Circuit rejected the unclean hands defense, noting that the inequitable conduct was unrelated to the plaintiff's cause of action.
Lens.com also cross-appealed the district court's award to 1-800 of attorney fees and sanctions in pursuing a successful motion to compel discovery. The Tenth Circuit affirmed the sanctions, finding the district court did not abuse its discretion, but declined 1-800's request for further sanctions. The Tenth Circuit also affirmed the district court's motion for attorney fees, pointing out that the partial reversal of summary judgment provides further support for denying attorney fees.

Practical Implications

This case shows the potential difficulty for a trademark owner to prevail on an infringement claim arising out of a competitor's purchase of keywords containing the trademark owner's mark for sponsored advertising where the advertising does not display the trademark owner's mark or otherwise affirmatively suggest an affiliation between the parties. A trademark owner is unlikely to prevail in such a case absent evidence of high click-through rates, reliable and persuasive survey evidence, or other compelling evidence of consumer confusion.
For companies using affiliates or other third parties to purchase keyword ads, the ruling on contributory infringement shows a need to take reasonable steps to monitor and consider potential infringement by those parties.

Court Document