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Purchasing Keywords that are Marks of Another Company

A retailer of replacement contact lenses brought Lanham Act trademark-infringement action against competitor that used Internet advertising in which search engines displayed competitor's advertisement when customers performed a search using keywords that resembled retailer's registered service mark.

In 1-800 Contacts, Inc. v. Lens.com, Inc., a retailer of replacement contact lenses, brought Lanham Act trademark-infringement action against a competitor that used Internet advertising in which search engines displayed competitor's advertisement when customers performed a search using keywords that resembled retailer's registered "1800CONTACTS" service mark. 2013 WL 3665627 (US Court of Appeals for the Tenth Circuit, July 16, 2013)

Background and Lower Court Ruling

Plaintiff 1-800 Contacts, Inc. ("1-800") dominates the retail market for replacement contact lenses. It owns the federally registered service mark 1800CONTACTS. Defendant Lens.com, Inc. is one of 1-800's competitors. When 1-800 found that several searches generated paid ads for Lens.com's websites, it concluded that Lens.com had reserved the mark as a keyword.

1-800 sued Lens.com for service-mark infringement. Its primary claim was that Lens.com itself had infringed the 1800CONTACTS mark by purchasing keywords resembling the mark. According to 1-800, this conduct had directed potential customers for 1-800 to Lens.com by creating what is known as "initial-interest confusion," which can be actionable under the Lanham Act. As the case progressed, 1-800 supplemented its claim of direct infringement by alleging that certain third-party marketers hired by Lens.com, known as affiliates, had also purchased keywords resembling the mark and that at least one affiliate was using the mark in the text of its online ads. 1-800 sought to hold Lens.com secondarily liable for its affiliates' conduct. The district court awarded summary judgment to Lens.com on all claims.

Decision by the Court of Appeals

The 10th Circuit found that Lens.com did not violate the Lanham Act through its use of AdWords by purchasing keywords similar to 1-800's service mark. In its decision the court upheld the lower court ruling that plaintiff's claim for direct-infringement fails for adequate evidence of initial-interest confusion. In affirming the decision the court stated that there was a low-likelihood of confusion based on the information known to customers prior to the Internet search and that evidence of actual confusion showed that such incidents were very infrequent.

The court also upheld the lower court's finding that Lens.com was not liable for secondary infringement for Lens.com's affiliates purchasing keywords that were similar to plaintiff's service mark but did not include plaintiff's actual service mark in any advertising text because such action does not rise to the level of direct infringement on the part of such affiliates. Worth noting the 10th Circuit reversed and remanded the summary judgment granted by the lower court on the issue of Lens.com's contributory infringement with respect to the company's affiliate including the plaintiff's service mark in its ad copy because a rational juror could find that Lens.com knew of such action but did not take reasonable efforts to stop it.

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