• by Wendy Davis  @wendyndavis, December 19, 2010

A federal judge has dismissed a lawsuit by contact lens retailer 1-800-Contacts alleging that its trademark was infringed by competitor Lens.com's search ads.

Lens.com and its affiliates allegedly arranged for its ads to appear in search engines' sponsored results in response to searches for 1-800-Contacts and variations of that term. After unsuccessfully asking Lens.com to cease and desist, 1-800-Contacts filed a trademark infringement suit in August of 2007 in the U.S. District Court in Utah, Central Division.

In a ruling this week, U.S. District Court Judge Clark Waddoups cleared Lens.com of trademark infringement. He ruled that using 1-800-Contacts to trigger search ads for Lens.com did not confuse consumers. Waddoups specifically rejected 1-800-Contacts' theory that showing a Lens.com ad for the query term 1800Contacts is similar to "a consumer asking a pharmacist for Advil and the pharmacist handing the consumer Tylenol."

That analogy, Waddoups wrote, "mischaracterizes how search engines function."

He added: "A more correct analogy is that when a consumer asks a pharmacist for Advil, the pharmacist directs the consumer to an aisle where the consumer is presented with any number of different pain relievers, including Tylenol. If a consumer truly wants Advil, he or she will not be confused by the fact that a bottle of Tylenol is on a shelf next to Advil because of their different appearances."

Waddoup also ruled that if 1-800-Contacts was able to prevent competitors from appearing in search results when consumers searched for its name, the result would be "an anti-competitive, monopolistic protection, to which it is not entitled."

Although Waddoups held that using a trademark to trigger an ad does not constitute infringement, he also ruled that some ads for Lens.com went too far because they used 1-800-Contacts in the ad copy itself. Those ads, he ruled, caused a likelihood of confusion. Even so, Waddoups ruled in favor of Lens.com because the company itself did not place the ads, but relied on an affiliate.

1-800-Contacts, Waddoups wrote," has failed to show that [Lens.com] knew about the infringement and failed to take action or was willfully blind to it."

Waddoups' ruling appears to mark the first time a court has addressed in detail whether retailers can be held legally responsible for affiliates' online ad buys, says Eric Goldman, director of the High Tech Law Institute at Santa Clara University. "The opinion shows it's possible that marketers aren't liable for their affiliates' actions in a number of circumstances," he says.