Tread Carefully When Using Competitor’s Trademarked Name With Online Advertising

by Gray Reed & McGraw
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The Ninth Circuit issued a decision yesterday in the 1-800 Contacts v. Lens.com case we discussed several years ago when originally filed.   For those of you who simply want the result, the Court of Appeals ruled:

1.  There was no evidence of likelihood of confusion – an essential element to a trademark claim.

2.  The court also threw out the secondary infringement claims based on the use of the trademarked term by Lens.com’s affiliate marketers because the agents, or sub-agents, lacked authority to include 1-800’s mark in ads for Lens.com.

3.  The court of appeals, however, sent the case back to the trial court on the one claim to determine whether Lens.com was liable for contributory infringement because the evidence could support a reasonable finding that Lens.com did not take reasonable steps to halt the display of 1-800’s marks in affiliate ads once it learned of such display.

The trademarked term was 1800CONTACTS.  Lens.com itself bid on the following nine terms (the Challenged Keywords) as AdWords keywords: “1-800 contact lenses”; “1800 contact lenses”; “800 contact lenses”; “800comtacts.com”; “800contacta.com”; “800contavts.com”; “800contaxts.com”; “800contzcts.com”; and “800conyacts.com.” Lens.com did not dispute that it bid on the Challenged Keywords, nor does 1-800 contend on appeal that Lens.com ever bid on the 1800CONTACTS mark itself. Additionally, 1-800 did not claim that any impressions created by Lens.com featured the 1800CONTACTS mark in their text.

Discovery revealed, however, that two Lens.com affiliates had bid on the keyword “1800Contacts” and close variations of 1-800’s mark. And at least one of the affiliates published at least one ad for www.JustLenses.com (one of Lens.com’s websites) that featured the phrase “1800 Contacts” in its advertising copy.

The main claims against Lens.com related to the conduct of the affiliates were based on two theories.  The first—vicarious infringement—imposes liability on a principal for the infringing acts of its agent.  The second—contributory infringement—is analogous to aiding and abetting.

The direct claim against Lens.com argued there was initial interest confusion when the trademarked term triggers the ad.  Initial-interest confusion results when a consumer seeks a particular trademark holder’s product and instead is lured to the product of a competitor by the competitor’s use of the same or a similar mark.  As the name implies, the improper confusion occurs even if the consumer becomes aware of the defendant’s actual identity before purchasing the product.

The court of appeals cited Lens.com’s expert report to find Lens.com’s use of the nine Challenged Keywords yielded 1,626 impressions for Lens.com or its associated websites over eight months. In only 25 (1.5%) of these 1,626 instances did the user click on the ad for Lens.com. (We do not know how many of the 25 made a purchase from Lens.com.) The users in those 25 instances may have been confused into thinking that Lens.com was affiliated with 1-800, or they may simply have wished to look at the offerings of those whom they knew to be 1-800’s competitors. What we can say, though, is that initial-interest confusion occurred at most 1.5% of the time that a Lens.com ad was generated by a Challenged Keyword in those eight months. This number cannot support an inference that Lens.com’s keyword activity was likely to “lure” consumers away from 1-800.

Finally, the court determined there was no evidence Lens.com instructed their affiliates to the use the 1-800 mark in the ad copy.  By doing so, the agents went beyond their scope and Lens.com could not be held vicariously responsible.  Lens.com may not have taken sufficient action, however, to stop the affiliates from using the trademarked term when notified about it and therefore, there could be a trial on the issue of contributory infringement.

What did we learn?

1.   Initial interest is becoming a difficult weapon for plaintiffs in these cases.  Professor Goldman, who will probably write about this decision soon, will be glad.

2.  Don’t use the trademarked term in the copy.

3.  Instruct your affiliates on #2 and take action if you are told the affiliates have crossed the line.

4.  Finally, although I did not discuss the rejection of the plaintiff’s survey in the case, if you are going to do a survey to help show confusion, read this case and take heed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Gray Reed & McGraw | Attorney Advertising

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