1-800 Contacts, Inc. v. Lens.com

Addressing the issue of whether an advertiser’s use of competitive keywords that resembled a competitor’s service mark violates the Lanham Act, the U.S. Court of Appeals for the Tenth Circuit ruled that, absent evidence of initial-interest confusion, there was no direct infringement under the Act. 1-800 Contacts, Inc. v. Lens.com, Case No. 11-4114 (10th Cir., July 16, 2013) (Hartz, J.).

The plaintiff, 1-800 Contacts, filed a complaint alleging that Lens.com had purchased sponsored ads from Google for AdWords keywords that resembled the plaintiff’s service mark, “1800Contacts.” The plaintiff later added claims for secondary liability, as well as for vicarious and contributory infringement, alleging that Lens.com’s affiliates had infringed on the mark by bidding on and using the mark.

The district court granted summary judgment to Lens.com on all claims, concluding there was no likelihood of initial-interest confusion (and therefore no direct infringement), and insufficient evidence to establish liability for any misconduct of affiliates (and therefore no secondary liability). The plaintiff appealed.

On appeal, the 10th Circuit affirmed on direct and vicarious liability, but reversed the denial of liability for contributory infringement. As the court explained, initial-interest confusion occurs when a consumer in search of the plaintiff’s product “is lured to the product of a competitor,” citing Australian Gold. The 10th Circuit explained that initial-interest confusion would have arisen had there been evidence 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 the plaintiff was the source, or that there was a business association with the plaintiff. However, the data from AdWords showed that initial-interest confusion occurred at most 1.5 percent of the time that a Lens.com ad was generated by one of the challenged keywords over an eight-month period. This was insufficient to support an inference that Lens.com’s keyword activity was likely to lure consumers away from the plaintiff. A survey was also submitted to show actual confusion; however, the survey was excluded on the grounds that methodological flaws undermined its reliability.

Insufficient evidence also plagued the plaintiff’s secondary liability claims with respect to the acts of Lens.com’s affiliates. First, the affiliates use of the “1800Contacts” keywords generated thousands of “impressions” (or display of a sponsored link in response to a search results) that did not display the service mark, and far fewer (approximately 1 percent) resulted in clicks by consumers. Second, there was insufficient evidence of an agency relationship to support vicarious liability for the affiliate’s publication of ads that featured variations of the service mark. Moreover, the affiliate admitted that he never believed Lens.com authorized him to place challenged advertisements.

However, on the issue of contributory infringement the 10th Circuit reversed, finding that a rational juror could find that Lens.com knew at least one of its affiliates was using the mark but did not take reasonable steps to halt that practice. Lens.com argued that it was working with Commission Junction (CJ) (a company that received reimbursements from Lens.com for commissions paid to Lens.com’s affiliates) to identify the culpable affiliate and absent such identification, the requisite knowledge required under Inwood did not exist. The Court disagreed explaining that Lens.com could have communicated with all of its affiliates at once through an email blast from CJ to promptly halt the use.