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.
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