1-800 Contacts, Inc., an online retailer of contact lenses, sued JAND, Inc., doing business as Warby Parker, alleging trademark infringement and unfair competition under the Lanham Act and New York common law. The dispute arose after Warby Parker entered the online contact lens market in 2019. 1-800 alleged that Warby Parker purchased 1-800's trademarks, such as '1-800 Contacts' and '1800contacts.com,' as keywords in Google's advertising auctions. 1-800 claimed this strategy was designed to divert consumers searching for 1-800's website to Warby Parker's site. Specifically, 1-800 argued that Warby Parker's paid advertisements were source-ambiguous and that the landing pages linked from those ads mimicked the look and feel of 1-800's website to create 'initial-interest confusion.' The district court granted Warby Parker's motion for judgment on the pleadings, ruling that the complaint failed to plausibly allege a likelihood of consumer confusion. 1-800 appealed, challenging the district court's application of the Polaroid likelihood-of-confusion test.
The Second Circuit, in an opinion by Circuit Judge Eunice C. Lee, affirmed the district court's judgment. The court began by reiterating that the mere act of purchasing a competitor's trademarks as keywords in search engine auctions does not constitute trademark infringement. The court emphasized that for a Lanham Act violation, there must be a showing that the defendant's use caused consumer confusion. The court then applied the eight-factor Polaroid test to the remaining components of Warby Parker's campaign: the search advertisement itself and the landing webpage. The court found that the 'similarity of the marks' factor was dispositive. While 1-800 argued that the comparison should be between the keyword typed by the consumer and the keyword purchased by Warby Parker, the court held that the relevant comparison is between the marks displayed to the consumer in the ad and on the landing page. The court noted that the Warby Parker ads clearly displayed the word 'Ad' and the domain name 'www.warbyparker.com,' and the landing pages prominently displayed the 'Warby Parker' mark. Because Warby Parker did not use 1-800's marks in the visible ad copy, URL, or landing page, the marks were substantially different. The court also addressed the 'actual confusion' factor, noting that 1-800 failed to provide survey data or specific factual allegations of actual confusion, relying instead on conclusory statements. Regarding 'consumer sophistication,' the court corrected the district court's error in assuming consumers were highly sophisticated, acknowledging that navigational searchers could be susceptible to initial-interest confusion. However, even with this correction, the court concluded that the overall pleadings failed to plausibly allege that an appreciable number of consumers would be confused given the clear identification of Warby Parker in the ad and on the landing page. The court stated, '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.'
The decision affirms the district court's judgment in favor of Warby Parker, leaving the dismissal of 1-800's complaint intact. This ruling solidifies the legal consensus that using a competitor's trademark as a search keyword is a permissible marketing strategy under the Lanham Act, provided the resulting advertisements and landing pages do not use the plaintiff's marks in a way that creates a likelihood of consumer confusion. The decision clarifies that for a plaintiff to succeed in such cases, they must plausibly allege that the defendant used the plaintiff's marks in the visible components of the ad campaign, such as the ad text or the destination webpage, rather than relying solely on the keyword purchase. No remand instructions were issued as the case was dismissed at the pleadings stage.
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