IP Law Daily, TRADEMARK—2d Cir.: 1-800 Contacts loses appeal over competitor using keywords in ads, (Oct 9, 2024)

By Brian Craig, J.D.

Purchasing a search engine keyword that is a competitor’s trademark does not alone, in the context of keyword search advertising, constitute trademark infringement.

In a dispute between competitors in the online contact lens marketplace, the U.S. Court of Appeals for the Second Circuit has held that 1-800 Contacts, Inc., (1-800 Contacts) failed to plausibly allege trademark infringement against a competitor, Warby Parker, for using keywords in online advertising. In affirming the district court in New York’s judgment on the pleadings and dismissal, the Second Circuit held that the mere act of purchasing a competitor’s trademarks as keywords in the search advertising context does not constitute trademark infringement or unfair competition. The court observed that the resulting advertisement itself and landing webpage linked within do not display 1-800-Contact’s trademarks to support infringement (1-800 Contacts, Inc. v. Jand, Inc., No. 22-1634-cv (2d Cir. Oct. 8, 2024)).

1-800 Contacts, Inc. (“1-800 Contact”) is an online retailer of contact lenses. JAND, Inc., d.b.a. Warby Parker (“Warby Parker”) is an online and physical retailer of eyeglasses and a recent entrant into the online contact lens marketplace. 1-800 Contacts brought suit in the Southern District of New York for trademark infringement and unfair competition alleging that Warby Parker sought to confuse and mislead consumers searching for 1-800 Contacts’ online store, 1-800Contacts.com. Specifically, 1-800 Contacts alleges Warby Parker bids for advertisements on search engine results using trademarks belonging to 1-800 Contacts. When a consumer conducts an online search for “1-800 Contacts” or other trademarks belonging to the company, the search results page will display paid search results for Warby Parker’s website at or near the top of the results page—often above the search results linking to the 1-800 Contacts website. The links, labeled as “Ad” and displaying Warby Parker’s website address, directs the consumer to a specific landing page for contacts lenses. The district court granted Warby Parker’s motion for judgment on the pleadings and dismissed all claims. 1-800 Contacts appealed.

Factors supporting confusion. The Second Circuit examined the likelihood of consumer confusion factors and affirmed the district court’s findings on factors that weigh in favor of confusion. The Second Circuit affirmed the district court’s findings that the strength of the marks, the products’ competitive proximity, the products’ relative quality, and good faith all favored 1-800 Contacts.

Similarity of marks. Next, the Second Circuit agreed with the district court that the marks at issue are substantially different. 1-800 Contacts does not allege that Warby Parker used 1-800 Contact’s marks in any components aside from the preliminary keyword purchase. Warby Parker used the keywords “1800 Contacts,” “1 800 Contacts,” “1800contacts.com,” and “1800contacts” in the keyword bidding process. 1-800’s own pleadings show that the word “Ad” is displayed directly next to Warby Parker’s domain name at the top of its paid search ad in bold; the linked URL contains only the www.warbyparker.com domain name. Warby Parker’s own marks do not contain any reference to numbers, phone numbers, or a 1-800 Contacts branded product. Thus, the similarity-of-the-marks factor entirely favors Warby Parker.

Actual confusion. The Second Circuit also found the actual confusion factor favors Warby Parker. Generally, a lack of consumer survey data is evidence that actual confusion cannot be shown. Given the absence of allegations of actual confusion, a comparison of the website screenshots does not lead to a plausible inference that an appreciable number of consumers who reach Warby Parker’s Deep Linked Ad Page would actually be confused by a partial light-blue color and a discount offer (15% as opposed to 1-800’s 20%) into thinking Warby Parker’s webpage is sponsored by or affiliated with 1-800 Contacts.

Consumer sophistication. The Second Circuit concluded the consumer-sophistication factor slightly favors 1-800 Contacts. The allegations from 1-800 Contacts about the sophistication of consumers engaged in navigational searches raised a plausible inference that the relevant consumer base could be susceptible to initial-interest and affiliation confusion. The appeals court concluded that the district court erred in the consumer sophistication analysis.

Weighing factors. Viewing the relevant likelihood of confusion factors as a whole, 1-800 Contact’s complaint fails to plausibly allege that consumers are likely to be confused by any portion of Warby Parker’s search advertising plan. The pleadings failed to plausibly allege that Warby Parker used the marks owned by 1-800 Contacts anywhere during the search advertising process outside of its purchase at the initial, permissible keyword auction Warby Parker did not use the marks in the paid advertisement displayed on the search results page, in the domain name of the URL linked in the paid advertisement (www.warbyparker.com), or on the landing webpage displayed to consumers who clicked on the URL in the paid advertisement.

The Second Circuit held the mere act of purchasing a competitor’s trademarks as keywords in the search advertising context does not constitute trademark infringement or unfair competition. Thus, the Second Circuit affirmed the district court’s judgment on the pleading and dismissal of all claims.

The Case is No. 22-1634-cv.

Judge: Lee, K.

Attorneys: Stephen Fishbein (Allen Overy Shearman Sterling US LLP) for 1-800 Contacts, Inc. L. Danielle Toaltoan (Davis Wright Tremaine LLP) for Jand, Inc. d/b/a Warby Parker.

Companies: 1-800 Contacts, Inc.; Jand, Inc. d/b/a Warby Parker

MainStory: TopStory TechnologyInternet Trademark GCNNews ConnecticutNews NewYorkNews VermontNews