Antitrust Law Daily Wrap Up, ANTITRUST—D. Utah: Trademark suit against competitor was not “sham litigation” constituting monopolization, (Mar 4, 2014)

By Cheryl Beise, J.D.

Contact lens seller 1-800 Contacts, Inc. did not engage in “sham litigation” constituting an illegal act of monopolization by filing a trademark infringement action against online competitor Lens.com, Inc., the federal district court in Salt Lake City has decided (Lens.com, Inc. v. 1-800 Contacts, Inc., March 3, 2014, Sam, D.). Because 1-800 Contacts’ underlying trademark suit stemming from Lens.com’s purchase of Internet search engine advertising “keywords” was not baseless, the current action was dismissed with prejudice.

In 2007, 1-800 Contacts filed suit against Lens.com in the federal district court in Salt Lake City (Civil Action No. 2:07-cv-591 CW), asserting that Lens.com infringed 1-800’s registered trademarks by purchasing identical or similar terms as keywords used to trigger search engine advertising. The court granted Lens.com’s motion for summary judgment on December 14, 2010. 1-800 Contacts filed an appeal in the U.S. Court of Appeals in Denver.

In 2012, Lens.com initiated the instant litigation against 1-800 Contacts in the district of Nevada. Lens.com alleged that the 1-800Contacts’ Utah trademark suit was “sham litigation” that amounted to an illegal act of monopolization under the antitrust laws. Lens also alleged that 1-800 Contacts’ settlement of trademark disputes with other contact lens retailers harmed those retailers’ ability to compete with 1-800 Contacts and Lens.com. In March 2013, the Nevada court transferred the case to the federal district court in Salt Lake City. 1-800 Contacts moved to dismiss Lens.com’s complaint, but the case was stayed pending resolution of the trademark claims by the Tenth Circuit.

On July 16, 2013, the Tenth Circuit affirmed the district court’s grant of summary judgment in favor of Lens.com on the issues of direct and vicarious trademark infringement, but reversed the grant of summary judgment on 1-800 Contacts’ claim for contributory infringement. The Tenth Circuit also affirmed the district court’s denial of Lens.com’s motion for attorney fees which found that 1-800 Contacts’ claims in the underlying action were not objectively baseless.

Before the court was 1-800 Contacts’ motion to lift the stay and for a decision its pending motion to dismiss.

1-800 argued in its motion to dismiss that Lens.com’s claims failed as a matter of law because (1) Lens.com lacked standing to challenge 1-800 Contact’s settlements with other contact lens retailers; (2) 1-800 Contacts’ exercise of its constitutionally protected right was protected by the Noerr-Pennington immunity doctrine; (3) Lens.com failed to plead a cognizable “relevant product market” in which 1-800 Contacts held market power; and (4) Lens.com was attempting to adjudicate matters that were expressly at issue in the trademark lawsuit.

To overcome 1-800 Contacts’ immunity under the Noerr-Pennington doctrine, Lens.com would have to allege specific facts that, if proven, would show that 1-800 Contact’s trademark litigation was both objectively and subjectively baseless, according to the court.

However, the district court in the underlying action declined to find the case exceptional for the purpose of awarding attorneys’ fees. The district court expressly found that 1-800 Contacts’ trademark claims had a “legal and factual basis” and such findings were affirmed by the Tenth Circuit.

Concluding that 1-800 Contacts did not engage in sham litigation, the court dismissed all of 1-800 Contacts’ claims with prejudice.

The case is No. 2:12CV00352 DS.

Attorneys: Gregory D. Phillips (Phillips Ryther & Winchester) for Lens.com, Inc. Aaron S. Lowenstein (Munger Tolles & Olson LLP). Michael Douglas Rawlins (Durham Jones & Pinegar). Robert S. Clark (Parr Brown Gee & Loveless ) for 1-800 Contacts, Inc.

Companies: Lens.com, Inc.; 1-800 Contacts, Inc.

Cases: Antitrust UtahNews