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The purchase of a competitor's trademark as a trigger for advertising through Google's AdWords program was unlikely to create confusion on the part of consumers and thus did not give rise to a claim of trademark infringement through initial interest confusion, the U.S. Court of Appeals for the Tenth Circuit ruled July 16 (1-800 Contacts, Inc. v. Lens.com Inc., 10th Cir., No. 11-4114, 7/16/13).
Affirming an award of summary judgment, the court also affirmed denial of some secondary liability claims but reversed a claim of contributory infringement based on the defendant's failure to properly police its affiliates' advertisements. According to the court, there was evidence of actual or constructive knowledge of the affiliate activity sufficient to prevent summary judgment.
Google Inc. operates the popular Google internet search engine. When executing searches, Google users are presented not only with their search results, but also with paid advertising. Through its AdWords program, Google permits advertisers to pay to have their advertisements triggered by certain keywords.
1-800 Contacts Inc. of Draper, Utah, which was founded in 1995, is the leading retail outlet for replacement contact lenses and takes orders by telephone, by mail, and over the internet. In 2003, it registered the service mark “1800Contacts” with the Patent and Trademark Office. Lens.com Inc. of Louisiana, Mo., also founded in 1995 is a direct competitor of 1-800 Contacts, but does business almost exclusively online.
In 2005, 1-800 Contacts discovered that Lens.com had purchased “1800Contacts” as a keyword trigger for its Google advertising. Lens.com asserted that it was the company's affiliates, not Lens.com, that were purchasing the ads. In 2007, 1-800 Contacts sued, alleging trademark infringement under a theory of initial interest confusion, as well as a theory of secondary liability, based on the actions of Lens.com's affiliates.
Judge Clark Waddoups of the U.S. District Court for the District of Utah awarded summary judgment of non-infringement in Lens.com's favor on all claims.
According to the district court, the purchase of a keyword could constitute a use in commerce under federal trademark law, but it did not necessarily create a likelihood of confusion. Specifically, the court said, if the actual text of the relevant ads did not use 1-800' Contacts' trademarks, then there was no likelihood of confusion.
Some of the affiliate advertising did indeed make such use, the court found. But it found no contributory infringement because of a lack of evidence that Lens.com had intentionally induced such uses or had reason to know and had failed to take action. 1-800 Contacts appealed.
Judge Harris L. Hartz noted that Australian Gold Inc. v. Hatfield, 436 F.3d 1228, 77 U.S.P.Q.2d 1968 (10th Cir. 2006), recognized a theory of initial-interest confusion 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.”
The court summarized the uses that Australian Gold found might lead to confusion:
In Australian Gold the defendants (1) used Australian Gold's trademarks on their own websites; (2) placed Australian Gold's mark in hidden codes associated with their websites (metatags), so that an Internet search for those trademarks would return links to the defendants; and (3) paid a website to list the defendants in a preferred position whenever a user searched for Australian Gold's marks.
Given that, the court applied a six-factor test for likelihood of confusion set forth in King of the Mountain Sports Inc. v. Chrysler Corp., 185 F.3d 1084, 51 U.S.P.Q.2d 1349 (10th Cir. 1999). Regarding the claims based on secondary liability, the court noted that vicarious infringement was possible under decisions such as Procter & Gamble Co. v. Haugen, 317 F.3d 1121, 65 U.S.P.Q.2d 1351 (10th Cir. 2003), and AT&T Co. v. Winback and Conserve Program Inc., 42 F.3d 1421 (3d Cir. 1994), and contributory trademark infringement was possible under Inwood Laboratories Inc. v. Ives Laboratories Inc., 456 U.S. 844, 214 U.S.P.Q. 1 (1982).
Applying these principles to the claim of direct infringement by 1-800 Contacts, the court agreed with the district court that there was no genuine outstanding question of material fact that Lens.com's purchase of AdWords would create a likelihood of initial-interest confusion.
The court particularly focused on the fact that the data generated by Google AdWords itself showed that at most a Google user clicked on a Lens.com affiliated ad 1.5 percent of the time when shown an ad triggered by a search for “1800Contacts.”
Furthermore, the court noted that when an internet user specifically entered a search using a trademark as a keyword, that consumer was likely to exercise some degree of care in determining whether the ad being clicked on was for 1-800 Contacts or for a competitor.
The court also stressed that the King of the Mountain factors must be applied with attention to context:
The specific issue before us is the likelihood that a consumer who conducts an Internet search for 1-800 Contacts and then sees an ad for Lens.com on the results page will be confused into thinking that Lens.com has a business association with 1-800. To begin with, even if consumers in general may not much care what retailer supplies their contact lenses, the consumers relevant to this suit are looking for a particular retailer. Presumably they have narrowed their search because they have already selected 1-800 as the preferred retailer and are searching for its website or perhaps commentary on its performance. Given the purpose of the search, the shoppers will be attentive to click on those results that will connect them with sites relating to 1-800. In addition, once the consumers see the results page, the substantial dissimilarity between “1-800 Contacts” and “Lens.com” (or its other websites) can be expected to greatly reduce the chance that the consumers will think that the parties are related enterprises; the similarity of the search term and 1-800's mark is of minor relevance.
This is particularly true when the displayed advertisement “is clearly labeled as an advertisement and clearly identifies the source,” the court said.
After rejecting certain survey evidence proffered by 1-800 Contacts as evidence of actual confusion, the court turned to the secondary liability claims.
The vicarious liability claims failed, the court said, because the affiliates were not acting on instructions from Lens.com when they placed their ads. However, with respect to the question of contributory liability, the court found that there was evidence in the record to show that in the period following the initiation of the infringement complaint, Lens.com knew of possible infringement on the part of its affiliates and could have taken action to direct them to cease.
Indeed, the court concluded that Lens.com did in fact know of at least one such case and did not take reasonable action in response. To this extent, the court reversed the summary judgment award and remanded the question for further proceedings at the trial level.
The court's opinion was joined by Judge Mary Beck Briscoe and Chief Judge Carlos F. Lucero.
1-800 Contacts was represented by Mark A. Miller of Holland & Hart, Salt Lake City. Lens.com was represented by Scott R. Ryther of Phillips Ryther & Winchester, Salt Lake City.
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