• by Wendy Davis  @wendyndavis, October 8, 2024

Siding against contact lens retailer 1-800 Contacts, a federal appellate court has refused to revive claims that Warby Parker wrongly used the phrase “1-800 Contacts” to drive search users to Warby Parker's website.

“We now join the consensus view and decide that the mere act of purchasing a competitor’s trademarks in the context of keyword search advertising does not constitute trademark infringement,” 2nd Circuit Court of Appeals Judge Eunice Lee wrote Tuesday in an opinion joined by Judges Denny Chin and Susan Carney.

The judges explicitly ruled that merely bidding on a competitor's trademark to trigger a search ad “is a permissible and standard industry practice.”

“This well-known marketing strategy -- standing alone -- cannot support a claim of trademark infringement absent additional use of 1-800’s marks,” the judges wrote in a 38-page opinion.

Santa Clara University law professor Eric Goldman, who has closely followed trademark litigation, says the opinion could discourage other litigation over the use of trademarks to trigger search ads.

The ruling “certainly gives plaintiffs lots of reasons to stop suing” over the practice, he says.

Tuesday's decision comes in a battle dating to August 2021, when 1-800 Contacts sued Warby Parker for trademark infringement based on search ads.

U.S. District Court Judge Kevin Castel in New York threw out 1-800 Contacts' case before either side presented evidence, ruling that Warby Parker's search ads weren't likely to have confused consumers.

1-800 Contacts appealed that ruling, arguing that Warby Parker was “siphoning off” consumers who searched for 1-800 Contacts.

The appellate panel rejected 1-800 Contacts' request to revive the claims, noting that 1-800 Contacts didn't allege its trademark was used for anything other than to trigger an ad.

“Notably, Warby Parker did not use 1-800’s 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,” Lee wrote. “Nor did 1-800 plausibly allege that Warby Parker used any other protectable marks in these remaining components of the search advertising campaign.”

1-800 Contacts has a long history of suing competitors over their search ads.

Between 2004 and 2013, the company sued or threatened to sue at least 14 other eyewear and contact lens companies for trademark infringement. Thirteen of those companies settled with 1-800 Contacts by agreeing to restrict the use of its trademark in search advertising.

Those prior settlements were at the center of an antitrust action by the Federal Trade Commission, which ruled several years ago that 1-800 Contacts acted anticompetitively by forging deals with rivals that limited their ability to advertise.

The 2nd Circuit later reversed the FTC's ruling, writing that courts should defer to settlement agreements in trademark cases, even if the deals limited competition.