Tenth Circuit Rejects Infringement Claim Against Use of Competitor's Trademark as Search Engine Keyword

18 July 2013 Publication
Author(s): Andrew Baum

Legal News Alert: IP Litigation

The practice of using a competitor’s trademark as a keyword to trigger sponsored links in Internet search engines received a boost this week from the U.S. Court of Appeals for the Tenth Circuit. In 1-800 Contacts, Inc. v. Lens.com, Inc., the Court rejected 1-800 Contacts’s claim that the practice created “initial interest confusion” among search engine users. In particular, the Tenth Circuit found that the mere purchase of a competitor’s trademark as a keyword to trigger sponsored links ― where the link itself does not incorporate the competitor’s trademark ― is unlikely to be deemed trademark infringement. The unanimous 54-page decision is a significant step in clarifying the law concerning use of trademarks as keywords.

The parties are competitors in the sale of contact lenses over the Internet. The plaintiff, 1-800 Contacts, owns the trademark 1800CONTACTS. Through Google’s AdWords program, the defendant, Lens.com and its affiliates (who act, in effect, as brokers), bid on terms which either incorporated or were similar to 1-800 Contacts’s trademark. These keywords, when entered by the search engine user, trigger “sponsored links” which are physically separated from the “organic” search results produced by Google’s algorithms, and are labeled as such.

The facts regarding the actions of Lens.com itself on the one hand, and its affiliates on the other, were somewhat different. Lens.com bid on nine keywords which were similar (but not identical) to 1-800 Contacts’s trademark. The links triggered by these “challenged keywords” mentioned only Lens.com and did not incorporate the 1800CONTACTS trademark.

In its claim for direct infringement against Lens.com, 1-800 Contacts contended that consumers would likely be diverted to the Lens.com Web site through these links, believing ― at least initially ― that the companies must be related in some way. Affirming the district court’s dismissal of this claim, the Court of Appeals held that the evidence failed to support it.

In doing so, the Court relied heavily on Lens.com’s empirical evidence showing the lack of any such diversion. According to Lens.com’s expert, the challenged keywords yielded 1,626 sponsored links. In only 1.5 percent of those instances did the user click on the ad for Lens.com. The Court noted that these users may not have been confused; they may merely have wished to look at the offerings of a competitor. But even if every one of those users was confused, a confusion level of 1.5 percent is too low to support an infringement claim.

The survey evidence presented by 1-800 Contacts did not aid its case. Apart from being criticized as unduly leading, the survey purported to demonstrate net confusion of only 7.4 percent, well below the level of confusion usually held by courts to be probative of likelihood of confusion.

The lack of persuasive evidence led the Court to conclude: “Perhaps in the abstract, one who searches for a particular business with a strong mark and sees an entry on the results page will naturally infer that the entry is for that business. But that inference is an unnatural one when the entry is clearly labeled as an advertisement and clearly identifies the source, which has a name quite different from the business being searched for.” In reaching this conclusion, the Court agreed with the Ninth Circuit in Network Automation v. Advance Sys. Concepts, 638 F.3d 1137, 1154 (9th Cir. 2011), which had also rejected an infringement claim where sponsored links were triggered by keywords.

1-800 Contacts fared somewhat better on the secondary liability prong of its case, which arose out of the actions of two of its affiliates. These affiliates, in some cases, had arranged for the appearance of sponsored links which included the 1800CONTACTS trademark ― contrary to the instructions of Lens.com. The district court had dismissed claims against Lens.com on both contributory and vicarious liability theories. The Court of Appeals affirmed the dismissal on vicarious liability grounds, since the affiliates were acting outside the scope of their authority, and Lens.com never expressly ratified their actions. But the Court reinstated the contributory liability claim, since according to the Court a rational juror could find that Lens.com knew about this practice and failed to take action to stop it.

Regardless of whether that claim is litigated further, the Tenth Circuit has made clear that the mere purchase of a competitor’s trademark as a keyword to trigger sponsored links ― where the link itself does not incorporate the competitor’s trademark ― is unlikely to be deemed trademark infringement. The decision ratifies what is now a common business practice in Internet marketing, and should make Internet advertisers more comfortable about buying competitor’s trademarks in order to drive traffic to their own Web sites.

A copy of the decision may be found online at http://www.ca10.uscourts.gov/opinions/11/11-4114.pdf

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Andrew Baum
New York, New York