Last month, the 10th Circuit issued its opinion in 1-800 Contacts v. Lens.com. This decision essentially establishes that using a competitor’s trademark in Keyword advertising will not constitute infringement, to the extent the competitor’s mark is not used within the sponsored link.
The 1-800-Contacts case arises out of advertising through AdWords, which is a program offered by Google. A company using AdWords pays Google to feature one of its ads within sponsored search results whenever a designated term (a “Keyword”) is used in a Google search. The issue before the Court was whether the Lanham Act was violated by an advertiser’s use of Keywords that resembled a competitor’s service mark. The Lanham Act prohibits the infringement of trademarks used to identify products, and of service marks used to identify services. 1-800-Contacts is a supplier of replacement contact lenses. It owns the federally registered service mark “1800CONTACTS”. One of its competitors is Lens.com. 1-800-Contacts sued Lens.com asserting that Lens.com infringed the 1800CONTACTS mark by purchasing Keywords resembling the mark. 1-800-Contacts alleged that Lens.com’s conduct directed potential customers to Lens.com under the theory of “initial-interest confusion”.
Before getting too far into the Court’s legal analysis, it is helpful to understand a little more about Google search and how the AdWords program fits into the marketing strategies of companies. As most everyone is aware, a typical Google search serves up two types of results: (1) organic results, and (2) sponsored links. Organic results are links generated by Google’s search algorithms and are sorted by relevance and quality. Google does not serve up advertisements among the organic results. However, through the AdWords program a company can pay Google to be displayed as a sponsored link. As you can see from the screenshot above, sponsored links (the first 3 results) include advertising copy and links to the advertisers’ websites.
For its ad to appear as a sponsored link, an advertiser bids to reserve a particular word or phrase (i.e., the Keywords) that triggers the display of its ad. The serving up of the ad based on a user’s search is referred to as an “Impression”. An advertiser pays Google only if the user actually clicks on its Impression. The per-click amount that the advertiser owes Google is based on the advertiser’s bid price for the Keyword underlying the Impression. Advertisers who bid higher amounts will generally receive greater visibility to consumers based on their higher placement among the sponsored link results. Essentially, a Google search for “1800CONTACTS” resulting in a sponsored link for Lens.com could occur only if Lens.com had bid on that exact term or on some phrase containing that exact term.
Putting aside search engine optimization and marketing and returning now to the law, the Lanham Act protects service marks, in addition to trademarks. A service mark is “any word, name, symbol, or device, or any combination thereof” that is used “to identify and distinguish the services of one person, including a unique service, from the services of others and to indicate the source of the services, even if that source is unknown.” The service mark “1800CONTACTS” is such a mark. To succeed on an infringement claim under the Lanham Act, a plaintiff must show:
- it has a protectable interest in the mark;
- the defendant has used an identical or similar mark in commerce; and,
- the defendant’s use is likely to confuse consumers.
With elements (1) and (2) easily satisfied, the only issue remaining for the Court was whether Lens.com’s use resulted in (3) the likelihood of confusion. 1-800-Contacts’ theory of confusion is based on initial-interest confusion. 1-800-Contacts argues that although Lens.com never published any ads containing a 1-800-Contacts mark in their text, Lens.com bid on Keywords causing its ads to appear in response to searches for the 1800CONTACTS mark. This, argues 1-800-Contacts, diverts customer interest away from 1-800-Contacts’ website and toward Lens.com’s website. The classic example of initial-interest confusion exists when a consumer seeks a particular company’s product, but is lured to the product of a competitor by that competitor’s use of the other company’s same or a similar mark. Improper confusion occurs even if the consumer becomes aware of the competitor’s actual identity before purchasing the product. The Court relied on a six-factor analysis, known as the King of the Mountain factors, to decide whether a likelihood of confusion exists:
- the degree of similarity between the marks;
- the intent of the alleged infringer in adopting its mark;
- evidence of actual confusion;
- the relation in use and the manner of marketing between the goods or services marketed by the competing parties;
- the degree of care likely to be exercised by purchasers; and
- the strength or weakness of the marks.
The Court emphasized that initial-interest confusion occurs when a consumer in search of the plaintiff’s product is lured to the product of the defendant, as in a bait-and-switch tactic, notwithstanding that the confusion is dispelled by the time of sale. The Court, on behalf of 1-800-Contacts, summarized the initial-interest confusion argument as follows:
A consumer enters a query for “1–800 Contacts” on Google; sees a screen with an ad for Lens.com that is generated because of Lens.com’s purchase of one of the nine Challenged Keywords; becomes confused about whether Lens.com is the same source as, or is affiliated with, 1–800; and therefore clicks on the Lens.com ad to view the site. Lens.com has exploited its use of 1–800’s mark to lure the confused consumer to its website.
While making a convincing, yet somewhat facetious argument, the Court ultimately found the actual data associated with Lens.com’s AdWords campaign to be more compelling. Citing the actual AdWords data, the Court detailed just how often consumers were lured by the Lens.com Impression. Specifically, Lens.com’s use of the 1800CONTACTS-like Keywords yielded 1,626 Impressions over an eight month period. Of these 1,626 instances, only 25 resulted in a user actually clicking on the ad for Lens.com. As the Court stated,
The users in those 25 instances may have been confused into thinking that Lens.com was affiliated with 1–800, or they may simply have wished to look at the offerings of those whom they knew to be 1–800’s competitors. What we can say, though, is that initial-interest confusion occurred at most 1.5% of the time that a Lens.com ad was generated by a Challenged Keyword in those eight months. This number cannot support an inference that Lens.com’s keyword activity was likely to “lure” consumers away from 1–800. It is thus insufficient to justify relief. We conclude that the factors other than evidence of actual confusion (even if we assume that 1–800’s mark is a strong one) firmly support the unlikelihood of confusion. This case is readily distinguishable from Australian Gold, in which the alleged infringer used its competitor’s trademarks on its websites.
Note: The Court refers to the Australian Gold case, in which the defendants used Australian Gold’s trademarks on their own websites and placed Australian Gold’s marks in hidden codes associated with their websites (i.e., metatags). These acts were found to create initial-interest confusion because they caused Internet searches for Australian Gold trademarks to return search results that contained the defendant’s links within a search engine’s organic listings.
The takeaway here is that while using the marks of a competitor to lure consumers into potentially purchasing competing products sounds a lot like a cause of action under the Lanham Act, the context and results of the underlying marketing campaign might show that such use did not actually cause confusion. Where context and data do not support a finding of actual confusion (and by apparent extension, a likelihood of confusion), then, at least in the 10th Circuit, the trademark owner will have an uphill battle under the theory of initial-interest confusion.