Trademarks & Keyword Advertising: Courts Rule No Infringement in Buying Competitor Marks

Key Takeaways

• The US Courts of Appeals for the Second and Ninth Circuits recently held that purchasing a competitor’s trademark for keyword search advertising does not, by itself, constitute trademark infringement.
• The decisions emphasized that the plaintiffs did not sufficiently demonstrate that the defendants’ marketing strategies were likely to cause consumer confusion, which is a requirement under federal trademark law.

The Court of Appeals for the Second Circuit issued a decision in 1-800 Contacts, Inc. v. JAND, Inc. DBA Warby Parker (No. 22-1634, 2d Cir. Oct. 8, 2024) affirming that Warby Parker’s purchase of 1-800’s trademarks as keyword search advertisements does not itself constitute trademark infringement. Similarly, the Court of Appeals for the Ninth Circuit ruled in Lerner & Rowe PC v. Brown Engstrand & Shely, LLC dba Accident Law Group (No. 23-16060, 9th Cir. Oct. 22, 2024) that the Accident Law Group’s purchase of keywords for “Lerner & Rowe” did not infringe Lerner & Rowe PC’s rights.

Background: Keyword Advertising

When online shoppers search for terms (or keywords) in a search engine, they receive two main types of search results:

1. Natural results:  Natural results, or organic results, are listings on a search engine results page that appear based on their relevance to the searched keywords. They are generated based on algorithms that assess the content and quality of the pages and do not require payment for placement.
2. Paid results: Paid results are listings that appear as a result of advertisers bidding on specific keywords. Those who pay the highest amounts often have their ads displayed more prominently, for example, at the top of the search results page. Most search engines, such as Google, do not impose restrictions on the keywords that advertisers can bid on.

1-800 Contacts, Inc. v. JAND, Inc. DBA Warby Parker

1-800 Contacts, Inc. (“1-800”) sued Warby Parker for trademark infringement and unfair competition under federal and state law, alleging that Warby Parker purchased search engine keywords consisting of 1-800’s trademarks. 1-800 argued that this practice led to consumer confusion, as users searching for its marks would encounter Warby Parker’s ads and be redirected to Warby Parker’s site, which mimicked the appearance of 1-800’s site. However, the district court disagreed and granted summary judgment in favor of Warby Parker.

On appeal, the Second Circuit clarified that, to establish trademark infringement under federal law, a plaintiff must show the defendant’s use of a valid protectable mark is likely to cause confusion. The Court acknowledged that 1-800’s marks are federally registered and protected and that Warby Parker’s purchase of the keywords established a use in commerce. However, the Court made clear that “the mere fact of purchasing a competitor’s trademarks as keyword in the search advertising context does not constitute trademark infringement or unfair competition.” It is also necessary to show that Warby Parker’s use caused customer confusion.

The Second Circuit examined the likelihood of consumer confusion factors and concluded that 1-800 failed to sufficiently plead that Warby Parker used their marks beyond buying them as keywords in search engine auctions. Since such use alone does not create a likelihood of customer confusion, the Court affirmed the district court.

Lerner & Rowe PC v. Brown Engstrand & Shely, LLC dba Accident Law Group

In a similar case, the Accident Law Group (ALG) purchased the term “Lerner & Rowe” as a search engine keyword. Lerner & Rowe PC, the plaintiff, subsequently sued ALG for federal trademark infringement, among other grounds. The district court granted summary judgment in favor of ALG on the trademark infringement claim.

The Ninth Circuit affirmed the district court’s decision. Like the Second Circuit, the Court examined the factors influencing the likelihood of consumer confusion factors and stated that, while the strength of the mark weighed in favor of Lerner & Rowe, the lack of evidence of actual consumer confusion weighed in favor of ALG. Ultimately, the court concluded that Lerner & Rowe failed to establish that ALG’s purchase of the mark for keyword advertising, without more, was likely to cause consumer confusion.