Sunday, January 9, 2011

Utah District Court Rejects 1-800 Contacts Google Adword Lawsuit Against Lens.com

While this decision is a little old by blogging standards, since it did not receive much publicity and yet deals directly with the hot trademark issue of purchasing a competitor’s trademarks as part of Google’s Adwords program, I thought it worthwhile to give it some coverage.

Plaintiff 1-800 Contacts, Inc. (“Plaintiff”), an online seller of contact lenses, had filed suit against Defendant Lens.com, Inc. (“Defendant”), also an online seller of contact lenses, for trademark infringement arising from the purchase by Defendant (or marketing affiliates of Defendant) of Plaintiff’s trademarks as keywords to generate sponsored links to Defendant’s website.

Both parties filed motions for summary judgment and on December 14, 2010, the U.S. District Court for the District of Utah, in a lengthy but detailed decision (including providing great detailed background information regarding Google’s Adword program), granted Plaintiff’s motion for summary judgment on Defendant’s defense that purchase of a keyword is not a use in commerce, but also found that Defendant was entitled to summary judgment on all of Plaintiff’s claims. See 1-800 Contacts, Inc. v. Lens.com, Inc., Case No. 2:07-cv-591, 2010 U.S. Dist. LEXIS 132389 (D. Utah December 14, 2010). A copy of the decision can be found here (Justia.com).

After setting forth the respective trademark rights of the parties and providing a detailed discussion of Google’s Adword program (recommended reading for any trademark attorneys with clients out there upset about competitors purchasing their trademarks as keywords for sponsored links), the court noted that while Defendant had purchased numerous keywords that consisted of variations and misspellings of Plaintiff’s service mark, none were Plaintiff’s actual service mark and Plaintiff had failed to present any evidence showing that Defendant ever purchased Plaintiff’s exact service mark as a keyword.

The court noted, however, that some of Defendant’s marketing affiliates had purchased Plaintiff’s exact service mark as a keyword (the court’s decision also provides a detailed discussion regarding the use by online sellers of marketing affiliates). Defendant has a relationship with the affiliate network Commission Junction, which included the marketing of Defendant’s website JustLenses.com.

Plaintiff presented evidence showing two of Defendant’s affiliates as having purchased Plaintiff’s service mark as a keyword. The first affiliate purchased variations of Plaintiff’s trademark as keywords which resulted in the following “impressions” (i.e., the appearance of an advertiser’s link after a user conducts an internet search), the language of which were drafted by the affiliates’ own employees:
1. Buy Contacts Online
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/
2. 1-800 Contacts
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/
3. 1800 Contacts: Buy Online
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/

The second affiliate’s keyword purchases resulted in the following impressions
LensWorld.com 75% Off
Up to 75% off Retail Price!
Free Shipping on Orders Over $89
http://www.lensworld.com/
JustLenses.com Savings
Up to 70% off Retail Price. Name
Brand Contacts & Low Prices.
http://www.justlenses.com/

In 2005, Plaintiff, having done some routine searches to see what competitor impressions appear when doing a internet search for Plaintiff’s trademarks, contacted Defendant about sponsored advertisements for Defendant’s website being triggered by searches of Plaintiff’s trademarks. After Defendant discovered that the ads were coming from Defendant’s marketing affiliates, Defendant agreed to work with Plaintiff’s counsel, who provided Defendant with a list of twenty terms that Plaintiff asked Defendant and its affiliates to implement “negative matching” for such terms (i.e., to ensure that no ad is generated when a particular term is searched). Plaintiff again contacted Defendant in April 2007 about impressions being generated from searches of Plaintiff’s trademarks. After receiving no satisfaction, Plaintiff filed suit in August 2007. In October 2007, Commission Junction put Defendant in touch with one of the affiliates, who was informed by Defendant to implement certain negative keywords such as “1-800-Contacts.” Defendant ultimately was able to get Commission Junction to identify and communicate to the affiliates who were generating the offending impressions (the two mentioned above) to cease bidding on certain keywords, which they did immediately.

The court first analyzed the “use in commerce” issue – and quickly sided with those courts who have concluded that use of another’s mark to trigger internet advertisements for itself is a use in commerce:
The Lanham Act does not require use and display of another’s mark for it to constitute “use in commerce.” Rather, “use in commerce” occurs when a mark is “used or displayed in the sale or advertising of services and the services are rendered in commerce.”120 Here, Plaintiff’s service mark was used to trigger a sponsored link for purposes of advertising and selling the services of Defendant. In other words, Plaintiff’s mark was used to promote Defendant’s services and to provide a consumer with a link to a website where it could make a purchase from Defendant. The court concludes such actions constitute a “use in commerce” under the Lanham Act.
The court then turned to the issue of likelihood of confusion. Plaintiff attempted to argue that the appearance of Defendant’s advertisements whenever a user does a search for “1800Contacts,” amounts to a “bait and switch that “spawns confusion,” – “akin to a consumer asking a pharmacist for Advil and the pharmacist handing the consumer Tylenol.” However, the court quickly shot down Plaintiff’s faulty analogy:

This analogy mischaracterizes how search engines function. A more correct analogy is that when a consumer asks a pharmacist for Advil, the pharmacist directs the consumer to an aisle where the consumer is presented with any number of different pain relievers, including Tylenol. If a consumer truly wants Advil, he or she will not be confused by the fact that a bottle of Tylenol is on a shelf next to Advil because of their different appearances.

This analogy is supported by case law. In J.G. Wentworth, a court questioned the Brookfield decision because of its “material mischaracterization of the operation of internet search engines.” “At no point are potential consumers ‘taken by a search engine’ to defendant’s website due to defendant’s use of plaintiff’s marks in meta tages.” Instead, “a link to defendant’s website appears on the search results page as one of many choices for the potential consumer to investigate.” When the link does not incorporate a competitor’s mark “in any way discernable to internet users and potential customers,” there is “no opportunity to confuse defendant’s services, goods, advertisements, links or websites for those of” its competitor.

The court then goes on to explain the problem with companies like Plaintiff who focus too much on the “use” of their marks alone rather than focusing on use that is likely to cause consumer confusion:

Plaintiff monitors use of its mark by others on the Internet. It does so by entering its mark or a variation of it as a search term. If a competitor’s advertisement appears on the search-results page, it sends a cease and desist letter to the competitor to preclude the competitor’s advertisement from appearing on the same page as Plaintiff.

Notably, however, ninety-five percent of the impressions for Plaintiff are triggered by non-trademarked keywords such as contacts, contacts lenses, or by brand names such as Acuvue or Focus. When a company incorporates broad matching for terms such as “contacts or contact lenses,” its sponsored link will appear even if the search term is “1800Contacts.” In other words, simply because the search term is “1800Contacts,” does not mean the keyword generating the sponsored link also was 1800Contacts or a similar variation thereof. One cannot tell from a screen shot alone what keyword generated the sponsored link.

The end result, though, is that when a consumer enters “1800Contacts” as a search term, it will see a competitor’s advertisement anytime the competitor bids on “1800Contacts” “contacts” or “contact lenses” as a broad match. If the advertisement remains the same regardless of which search term triggers it, there is no more likelihood of confusion for the advertisement triggered by the trademark versus the advertisement triggered by the generic phrases. Nor is there any greater impact on the goodwill or reputation of the trademark holder. It is beyond dispute that a competitor cannot be held liable for purchasing a generic keyword to trigger an advertisement that does not incorporate a holder’s mark in any way, even if that competitor’s advertisement appeared when a consumer entered a trademarked search term. Given that fact, it would be anomalous to hold a competitor liable simply because it purchased a trademarked keyword when the advertisement generated by the keyword is the exact same from a consumer’s perspective as one generated by a generic keyword. Imposing liability under such circumstances would elevate “use” over consumer confusion.

As stated above, Plaintiff sends cease and desist letters anytime a competitor’s advertisement appears when Plaintiff’s mark is entered as a search term. Were Plaintiff actually able to preclude competitor advertisements from appearing on a search-results page anytime its mark is entered as a search term, it would result in an anti-competitive, monopolistic protection, to which it is not entitled. Because a consumer cannot see a keyword, nor tell what keyword generated an advertisement, the court concludes that the mere purchase of a trademark as a keyword cannot alone result in consumer confusion. Accordingly, the relevant inquiry here regarding consumer confusion is not just what keyword was purchased, but what was the language of the advertisement generated by that keyword.

(emphasis added).

With that, the court turned to the two types of impressions at issue – ones that did use Plaintiff’s mark and ones that did not. Regarding the ones that did not use Plaintiff’s mark or a similar variation in the advertisement, the court noted that the closest case was one ad that generated “1-800 -Discount Contacts” in the title. But the court found that the composite view of the advertisements were overwhelmingly dissimilar in both sight and sound. The only similarity was the use of “contact” or “contacts” which is unlikely to create consumer confusion because of the numerous sellers of contact lenses. This strongly weighed in favor of no confusion. Regarding the advertisements that did use Plaintiff’s mark, the court focused on the advertisements generated by Defendant’s affiliates (noted above) that expressly used “1800 Contacts” in the title. The court found this was use of Plaintiff’s mark and weighed in favor of a finding of likelihood of confusion.

Regarding the “intent to copy” factor, while the court acknowledged that Defendant’s own purchase of variant keywords could lead one to conclude that it was done to derive benefit from Plaintiff’s reputation or goodwill by generating an advertisement for Defendant, the court accepted Defendant’s evidence that any such benefit was a de minimus part of its business:
Defendant purchased over 8,000 keywords, of which only nine are complained about by Plaintiff. Those nine keywords generated about 1,600 impressions out of more than 112 million impressions that have been linked to Defendant between the years 2004 and 2008. This, too, demonstrates that Defendant was not targeting its marketing efforts to ride on Plaintiff’s reputation or goodwill. While all doubts must be construed against Defendant, there is insufficient evidence to create a doubt about Defendant’s actions. The court therefore concludes this factor is, at most, neutral with respect to Defendant.
But the factor favored Plaintiff with respect to the ads by the marketing affiliates who had directly used Plaintiff’s mark in their ads.

Plaintiff had presented no evidence of actual confusion, so this factor favored Defendant. As for similar marketing channels, the court made the observation that, focusing just on internet, both parties advertise through sponsored links and the fact that both links appear on the same search page would dispel rather than cause confusion because the websites are separate and distinct, suggesting two completely unrelated business entities [ed.—interesting way of looking at it]. Nonetheless, the court found sufficient similarity to have this factor weigh somewhat in favor of Plaintiff. The court also found that it was unlikely that consumers exercise a high degree of care in selecting contact lens providers, so this factor favored Plaintiff.

Finally, in analyzing the strength of Plaintiff’s mark, the court found the mark to be conceptually weak – putting together the two generic terms “Contacts” (“The strength of Plaintiff’s mark on the Internet is weakened by the very nature of how third parties use generic and descriptive words on search engines.”) and “1-800” (“others necessarily must use similar generic and descriptive phrases to market their product on-line or through a toll free number”). As for the commercial strength of Plaintiff’s mark, the court found several flaws in the survey evidence provided by Plaintiff to demonstrate the commercial strength of its mark (including not focusing just on Internet, the fact that it was not a double-blind survey, and the fact that the results were somewhat marginal). The court noted that while Plaintiff had shown about 2.5 million impressions were generated on the Internet specifically matching the keyword “1800Contacts” or a close variation over a six year period, it still only represented about 2.5% of the Plaintiff’s total internet impressions. The court concluded that the conceptual and commercial strength combined indicated that Plaintiff’s mark was only moderately strong. And because Defendant’s own sponsored ads did not include Plaintiff’s mark or a similar variation of it, then, given the moderate strength of Plaintiff’s mark, the court found there was little possibility that a consumer would confuse Defendant with Plaintiff. However, with respect to the advertisement by the marketing affiliates with did use Plaintiff’s mark in the advertisement, the court found that such use, given the moderate strength of Plaintiff’s mark, would likely confuse a consumer about the source of the affiliate’s advertisement.

Taking all of the factors together, the court concluded that there was insufficient evidence for a jury to conclude that Defendant infringed on Plaintiff’s mark for all advertisements that did not use Plaintiff’s mark in them, and accordingly, granted summary judgment in favor of Defendant on that issue. In contrast, the court found there was a likelihood of confusion for the marketing affiliate advertisements that did use Plaintiff’s mark. However, because the affiliates were not named as parties to the lawsuit, the court then turned to the issues of whether the affiliate’s action could be imputed to Defendant under a theory of contributory infringement or vicarious infringement.

The court rejected any vicarious liability on the basis of any lack of an agency relationship between Defendant and the affiliates with the infringing impressions. Plaintiff attempted to impute liability for its very participation in the affiliate marketing program whereby affiliates could purchase keywords. However, because it was the language of the impressions, and not the purchase of keywords themselves, that created a likelihood of confusion, it is only as to those impressions that Defendant could be vicariously liable. In this case, Defendant had little direct contact with affiliates (and had to work through Commission Junction). Defendant had no authority to monitor or supervise affiliate operations except with respect to the use by such affiliates of Defendant’s own marks. Defendant also was not in a position to exercise any degree of control over an affiliate’s website.

As for a theory of contributory infringement, the court found that Plaintiff had not presented any evidence that Defendant intentionally induced the affiliates to infringe on Plaintiff’s mark: “At most, Plaintiff has presented evidence that Defendant did not institute negative keywords and that it knew of some of the keywords that a few affiliates were using in their advertising efforts. As discussed above, however, trademark liability cannot attach from the mere use of a trademark as a keyword. Thus, none of the evidence presented by Plaintiff demonstrates that Defendant intentionally induced its affiliates to infringe on Plaintiff’s mark.”

Moreover, Plaintiff failed to show that Defendant knew about the specific impressions noted above generated by Defendant’s marketing affiliates and failed to take action or was willfully blind to such infringement. Specifically, in the screenshots that were attached to Plaintiff’s April 2007 correspondence, none of them demonstrated the impressions found by the court to be infringing – and instead, were of the non-infringing advertisements that the two marketing affiliates had generated. “Thus, in April 2007, Plaintiff did nothing more than provide general information to Defendant that a non-infringing advertisement was appearing upon entry of certain search terms. Defendant therefore cannot be charged with knowledge or willful blindness based on that information. Nor did the information impose a burden on Defendant to go search out all of its affiliates’ actions to make sure none of them were using Plaintiff’s mark.”

The court also noted that when Plaintiff included one of the infringing impressions it is August 2007 complaint, the screenshot by itself did not provide Defendant with sufficient information for it to determine immediately who the affiliate was (among Defendant’s 10,000 affiliates). “Because contributory trademark infringement does not require a defendant ‘to refuse to provide a product or service to those who merely might infringe the trademark,’ Lens.com had no obligation to cease licensing its name to all of its affiliates while it took steps to identify the one who generated this particular impression.”

The court found that “there is insufficient evidence to show that Defendant failed to take appropriate action to stop McCoy from publishing the advertisements. There is no indication that Defendant intended to benefit from the Infringing Impressions, nor is there evidence of how many Infringing Impressions and clicks occurred during the relevant time period. Accordingly, the court concludes that Defendant cannot be held liable for contributory infringement.”

The remainder of the court’s decision involves Plaintiff’s claim for breach of contract (for which the court found no enforceable agreement on the part of Defendant to not purchase Plaintiff’s mark or variations thereof as a keyword), Plaintiff’s claim for unfair practices under state law (claims not supported by Plaintiff in its opposition), Plaintiff’s claim for common law trademark infringement and unfair competition (rejected for the same reasons as Plaintiff’s Lanham claims), and Plaintiff’s claim for unjust enrichment (since Plaintiff has not shown that use of its service mark as a keyword constituted infringement, then it is not entitled to any payment for such use – “Stated differently, while the law protects one’s property right in a trademark, the scope of that protection is not without its limits. Use outside of the scope of that property protection is not a use that is unjust to retain without payment. Indeed, if Plaintiff were able to obtain payment under unjust enrichment, common law would effectively expand the scope of Plaintiff’s statutory protection. Because one generally cannot extend legal rights beyond one’s property rights, the court grants summary judgment in Defendant’s favor on this claim.”).

In the end, the court gave the Plaintiff one small victory in granting summary judgment on Defendant’s defense that the purchase of keywords did not constitute a “use” in commerce; however, it was certainly overshadowed by the overwhelming victory given to Defendant by the court granting summary judgment in favor of Defendant and dismissing all of Plaintiff’s claims against Defendant.

1 comment:

Marshall said...

Great story! Tanks for posting Ryan! Love the blog!