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Preventing Trademark Infringement or Stifling Healthy Competition? A Look at 1-800 Contacts and its Keyword Advertising Battle

Published onNov 25, 2021
Preventing Trademark Infringement or Stifling Healthy Competition? A Look at 1-800 Contacts and its Keyword Advertising Battle

Do keyword search terms promote or stifle healthy competition? It is difficult to remember a time when keyword advertising did not dominate the internet. Most search engines, such as Google, Bing, and Yahoo, maintain keyword advertising programs which allow advertisers to bid on search terms and keywords that drive customers searching for a particular product or service to their website. This targeted advertising is a uniquely powerful tool for companies because it attracts consumers to their website at the exact time they are expressing interest in the product or service. Selecting a keyword search term is a strategic endeavor for many businesses because such keywords can be used to lure consumers away from competitors’ products or services.

A glaring issue with this practice is that many search terms in keyword advertising programs are already trademarked, and trademark owners have an affirmative duty to enforce their trademark rights. Trademark owners have sued both search engines and advertisers who purchase the keywords, alleging that the use of their trademark in this capacity creates a likelihood of confusion among consumers. 1-800 Contacts, Inc. is a contact subscription retailer that has been fighting this exact battle for years. The Company has used its federally registered “1-800 Contacts” mark in connection with internet search advertising for well over a decade. Starting in 2004, the Company began issuing cease-and-desist letters to competitors, demanding that they prevent their search ads from appearing in response to the keyword “1-800 Contacts.”

In June 2021, the Second Circuit overturned a decision by the Federal Trade Commission (“FTC”) that 1-800 Contacts violated antitrust laws by enforcing its trademark rights against online competitors. The FTC had accused 1-800 Contacts of crushing competition with settlement agreements that barred contact lens retailer rivals from purchasing keywords for search engine advertising. The FTC asserted that any trademark infringement claims by 1-800 Contacts were meritless, but the Second Circuit held that “forcing companies to be less aggressive in enforcing their trademarks is antithetical to the procompetitive goals of trademark policy.”

Likely riding a wave of confidence after this decision, 1-800 Contacts sought to protect its intellectual property against Warby Parker, its most recent competitor. Warby Parker is primarily known in the eyewear industry for selling high-quality, stylish prescriptive eyewear online at a reasonable price for consumers. The brand thrived by pioneering a “Home Try-On” program which allows customers to select five frames to be shipped to them for free, and then the customer has five days to try out the frames before returning them to the company. However, in the fall of 2019, Warby Parker became a direct competitor of 1-800 Contacts by entering the contact lens market. Notably, 1-800 Contacts has also started selling glasses, specifically launching an “In-Home-Try-On” program in partnership with Liingo Eyewear, Inc.

In August 2021, 1-800 Contacts filed a complaint against Warby Parker alleging trademark infringement over search engine ads. Traditionally, the purchase of a competitor’s trademark as a keyword search term, without more, is not sufficient for a claim of trademark infringement. Therefore, 1-800 Contacts complaint against Warby Parker states that their trademark is being infringed upon because Warby Parker has purchased the “1-800 Contacts” keyword to misdirect customers to its website instead of 1-800 Contacts’ website. This means that when consumers search for “1-800 Contacts” on Google or another search engine, an advertisement for Warby Parker’s website is the top result. 1-800 Contacts also claims that Warby Parker copied its website design to “intentionally deceive and confuse” consumers. The company alleges that instead of developing a branding strategy for its online sale of contacts, Warby Parker has opted to mimic 1-800 Contacts’ already successful model.

The ruling in this lawsuit is likely to have a significant impact on this developing area of trademark law and raises thought-provoking questions for brands seeking to protect their trademarks from unfettered third-party use. How likely is a consumer to be confused by a keyword that directs them to a competitor’s website? Will consumers be hurt if they are blocked from seeing ads that may offer the product or service they are looking for at a lower price than their competitors? Alternatively, should trademark owners have a responsibility to aggressively protect their intellectual property? The court’s answer to these inquiries will provide insight into how our legal system values healthy competition among businesses versus upholding the goals of trademark law: preventing unfair competition, and providing rights and remedies to trademark owners.

Michaela Cappucci is a second-year law student at Wake Forest University School of Law. She holds a Bachelor of Science in Industrial and Labor Relations from Cornell University, with two minors in Law & Society and Anthropology. Michaela intends to pursue a career as an entertainment attorney in the music industry.

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