Sweater company Tipsy Elves has filed a trademark infringement lawsuit against the rival business Ugly Christmas Sweater.
Tipsy Elves, which secured funding from investor Robert Herjavec after appearing on Shark Tank in 2013, alleges that Ugly Christmas Sweater uses the phrase "Tipsy Elves" to trigger search ads on Google. Ugly Christmas Sweater's ad copy also allegedly include the words "Tipsy Elves" in the headline.
The search ad "gave the consuming public the false impression that clicking on the associated links would take them to either the Tipsy Elves website or another website where they could purchase Tipsy Elves apparel," the company alleges in a complaint filed in U.S. District Court for the Southern District of California. "This advertising tactic was highly likely to confuse, mislead, and deceive consumers."
Tipsy Elves also alleges that the founder of Ugly Christmas Sweaters previously sold "knockoff copies" of at least one sweater design. That matter was resolved, according to the lawsuit.
Tipsy Elves isn't the only company that has sued a rival for allegedly infringing trademark in search ads. But many of those cases have resulted in losses for the company that brought the suit, according to Santa Clara University law professor Eric Goldman, who has followed the disputes.
Tipsy Elves, however, may have a stronger case than some of the other companies that have sued, because it alleges that its trademark is being used in the ad copy -- not just as a trigger for the ads.
A recent Federal Trade Commission complaint against contact lens seller 1 800Contacts could affect how judges view Tipsy Elves' complaint. The FTC argues in its case that 1 800Contacts violated antitrust laws by preventing other companies from using the term 1-800Contacts in ads. The agency's complaint suggests that using a trademark to trigger a search ad is legitimate, and that efforts to prevent a competitor from doing so may violate antitrust principles.