Last year, the FTC filed an administrative complaint against 1-800 Contacts, the largest online contact lens retailer in the United States, challenging 14 bidding agreements between the company and its competitors. The agreements prevented 1-800 Contact’s competitors from bidding on the “1-800 Contacts” trademark in keyword advertising auctions. The FTC alleged that the agreements harm competitors, consumers, and search engines by restraining competition and reducing the number of relevant, non-misleading advertisements available to consumers. Complaint Counsels Corrected Pre-Trial Brief and Exhibits at 12-13, In the Matter of 1-800 Contacts, Inc., No. 9372 (2017). The FTC’s position follows from case law trends indicating that the use of keywords does not constitute trademark infringement under the Lanham Act. These trends may influence when and how trademark owners attempt to protect their trademarks from use by their competitors in keyword advertising.
Most search engines maintain programs that allow advertisers to bid on search terms, or keywords, that may attract customers searching for the products or services offered by the advertiser. The FTC explained the value of keyword advertising in its 1-800 Contact Complaint: “Search advertising is uniquely valuable to advertisers because it puts an advertisement in front of a consumer at the precise moment the consumer is signaling her interest or intent by telling the search engine what she is seeking: it is literally the right ad, for the right user, at the right time.” Id. at 10.
Some search terms in keyword advertising programs are trademarked, and trademark owners have sued both the search engines that sell their trademarked terms and the advertisers that purchase them. Trademark owners claim that the use of their trademarks in keyword advertising creates a likelihood of confusion among consumers.
A Recent Appellate Decision
The Ninth Circuit recently addressed keyword advertising and trademark infringement in Multi Time Mach., Inc. v. Amazon.com, Inc., 804 F.3d 930 (9th Cir. 2015). In that case, plaintiff sued Amazon for trademark infringement because Amazon’s website produced a list of competitors’ products when a consumer searched for plaintiff’s trademark, even though plaintiff did not sell its trademarked product on Amazon. The district court granted summary judgment for Amazon, and the Ninth Circuit affirmed. The court held that, “[i]n light of the clear labeling Amazon uses on its search results page, no reasonable trier of fact could conclude that Amazon's search results page would likely confuse a reasonably prudent consumer accustomed to shopping online as to the source of the goods being offered.” Multi Time Mach., Inc., 804 F.3d at 938.
While trademark owners may state a cognizable claim for trademark infringement over keyword ads and survive a motion to dismiss, see, e.g., Romeo & Juliette Laser Hair Removal, Inc. v. Assara I LLC, 2014 WL 4723299, at *3 (S.D.N.Y. Sept. 23, 2014) (denying motion to dismiss trademark owner’s infringement claim), they may have more difficulty substantiating those claims on the merits. See, e.g., EarthCam, Inc. v. OxBlue Corp., 49 F. Supp. 3d 1210, 1241 (N.D. Ga. 2014) (granting summary judgement in favor of an alleged infringer); Coll. Network, Inc. v. Moore Educ. Publishers, Inc., 378 F. App'x 403, 414 (5th Cir. 2010) (upholding a jury verdict in favor of an alleged infringer). No claim based the use of keywords alone has been resolved in favor of the trademark owner on summary judgment or at trial. See 2 E-Commerce and Internet Law 9.11 (2016 update). However, courts have held that keyword advertising combined with trademark usage in other contexts, such as domain names or advertisement text, can cause a likelihood of confusion. See, e.g., Digby Adler Grp. LLC v. Image Rent a Car, Inc., 79 F. Supp. 3d 1095, 1102 (N.D. Cal. 2015) (granting summary judgement for a trademark owner where defendants registered a domain name with plaintiff’s mark and purchased the mark as a keyword).
Even when courts hold parties liable for the use of trademarks as keywords, they are reluctant to award damages or injunctive relief. See, e.g., Mary Kay, Inc. v. Weber, 661 F. Supp. 2d 632, 645 (N.D. Tex. 2009) (refusing to permanently enjoin the purchase of trademarked keywords). For some parties, the relatively low value of keyword advertisements as compared with the high cost of litigation makes settlement an attractive option. Trademark owners have settled with search engines as well as with private companies. In 2012, for example, Google and Rosetta Stone, the education technology company that develops language-learning software, reached a settlement agreement after the Fourth Circuit reversed a summary judgement ruling in favor of Google. Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144 (4th Cir. 2012). Rosetta Stone’s general counsel called the settlement “a significant victory for consumer protection” that “goes a long way toward advancing our goal to strengthen the Rosetta Stone brand and trademarks around the world.” See Ronald C. Goodstein et. al., Using Trademarks As Keywords: Empirical Evidence of Confusion, 105 Trademark Rep. 732, 755 (2015). Though the terms of the settlement are confidential, a Google search for “Rosetta Stone” now only reveals an advertisement for the official Rosetta Stone website.
We may learn more about the continuing viability of settlement in keyword cases through the FTC’s 1-800 Contacts suit. Closing arguments in that case are set for July 27, 2017.