Beginning within the mid-2000s, 1-800 Contacts sought to regulate how its rivals purchased search engine promoting triggered by its (so-called) emblems, a course of I name aggressive key phrase promoting. To do that, 1-800 Contacts sometimes sued its rivals after which rapidly entered right into a no-money settlement settlement that required every social gathering to cease bidding on every others’ emblems.
To property maximalists, 1-800 Contacts’ efforts could sound like run-of-the-mill trademark enforcement. Nevertheless, the scheme was really extraordinarily uncommon (few, if any, different trademark homeowners did something comparable), and it had a number of pernicious results. The settlements disadvantaged customers of extra useful info from aggressive promoting. The settlements distorted the key phrase advert auctions that the major search engines have been making an attempt to conduct. Most significantly, the settlements helped 1-800 Contacts keep away from competing on worth, which has allowed 1-800 Contacts to systematically cost larger costs to customers (a degree 1-800 Contacts freely admits).
1-800 Contacts’ rivals “voluntarily” entered into the settlement agreements, however they have been goaded partially by 1-800 Contacts’ risk to wage lawfare in opposition to them in the event that they didn’t. This risk wasn’t idle. 1-800 Contacts probably spent $1M+ suing a holdout to its settlement “deal,” Lens.com, regardless that Lens.com made solely $21 of revenue from aggressive key phrase promoting. (Lens.com claimed it incurred not less than $1.4M of protection prices). In different phrases, 1-800 Contacts proved to the business that it will have interaction in economically irrational litigation to punish any rivals who tried to compete in opposition to it on worth.
5 years in the past, the FTC initiated an administrative criticism in opposition to 1-800 Contacts. The FTC received on the preliminary administrative listening to after which on the Fee degree.
Final week, the Second Circuit reversed and dismissed the FTC’s administrative criticism, saying that the FTC misapplied the relevant antitrust customary and didn’t make a powerful sufficient evidentiary displaying of an antitrust violation. This opinion is generally antitrust inside-baseball, however I wish to spotlight a couple of issues.
The courtroom treats trademark settlement agreements as nearly immune from antitrust scrutiny. Some examples:
- “Agreements to guard emblems, then, mustn’t instantly be assumed to be anticompetitive – the truth is, Clorox tells us as an alternative to presume they’re procompetitive.” I believe many trademark lecturers would vigorously contest that pro-competition presumption, particularly in gentle of the intensive literature on trademark bullying. On this case, 1-800 Contacts used lawfare as a bullying risk.
- “The Challenged Agreements, subsequently, usually are not so clearly anticompetitive to customers that somebody with solely a fundamental understanding of economics would instantly acknowledge them to be so.” For causes that Mark Lemley and I defined in an amicus transient on this case, aggressive key phrase promoting is clearly a Prisoner’s Dilemma the place rivals have an incentive to collude with one another. I believe any Econ 101 scholar would acknowledge that instantly.
- “trademark agreements that ‘solely marginally advance trademark insurance policies’ could be procompetitive. Below Clorox, ‘[e]fforts to guard emblems, even aggressive ones, serve the aggressive function of furthering trademark insurance policies.’ That doesn’t imply that each trademark settlement has a authentic procompetitive justification. If the ‘provisions referring to trademark safety are auxiliary to an underlying unlawful settlement between rivals,’ or if there have been different distinctive circumstances, we might assume twice earlier than concluding the challenged conduct has a procompetitive justification.” The agreements themselves have been bid-rigging agreements. The unlawful function wasn’t auxiliary, it was central. Extra usually, it looks like we must query the Clorox precedent. Whereas it’s theoretically potential that trademark agreements could be pro-competitive after they “solely marginally advance trademark insurance policies,” most occasions I wager one or each events to these agreements are partaking in sanctionable conduct.
- “Whereas trademark agreements restrict rivals from competing as successfully as they in any other case would possibly, we owe important deference to arm’s size use agreements negotiated by events to these agreements….forcing corporations to be much less aggressive in implementing their emblems is antithetical to the procompetitive objectives of trademark coverage.” The settlement agreements have been “arms-length” as a result of the events have been unrelated, however they have been hardly voluntarily. They have been coerced by means of bullying and the specter of lawfare. Most of 1-800 Contacts’ rivals by no means wished to comply with the restrictions demanded by 1-800 Contacts, and the rivals left important cash on the desk doing so. These are precisely the sorts of agreements that ought to NOT get “important deference.” And I believe many trademark lecturers imagine that much less aggressive trademark enforcement would the truth is be pro-competitive, given how usually trademark homeowners misuse their trademark rights to advance illegitimate objectives. That is very true among the many homeowners of super-weak emblems (…like “1-800 Contacts”…), who far too usually develop into unreasonably pugnacious to masks the weak point of their possession claims.
The courtroom depends on a flawed assumption about aggressive key phrase advert auctions. It says “An absolute ban on aggressive bidding, or bid rigging, could be anticompetitive on its face and will justify an abbreviated rule of cause evaluation. It isn’t clear to us, nonetheless, that the restrictions represent such a ban. The Challenged Agreements don’t stop the events from collaborating in key phrase auctions, solely from bidding on trademarked phrases. Whether or not restrictions on advertisers’ use of specific phrases results in general hurt to the major search engines just isn’t apparent.” Significantly? Even when it’s not an entire ban on collaborating within the key phrase advert auctions, 1-800 Contacts’ scheme nonetheless constituted horizontal bid-rigging. To increase the courtroom’s analogy, the scheme mentioned public sale rivals have been free to attend a physical-space public sale, however they pre-agreed to not bid in opposition to one another on particular objects obtainable on the public sale. As a result of that deal removes bidders from the public sale course of for particular objects, the courtroom shouldn’t want a lot extra proof to indicate how the vendor was harmed within the course of.
In bringing the enforcement motion initially, the FTC took the place that aggressive key phrase promoting has at all times been authorized, together with through the mid-2000s, which made 1-800 Contacts’ litigation calls for unreasonable from the start. The FTC has at all times been right on this, however this courtroom unnecessarily and unhelpfully says that is nonetheless a contestable concern: “On the time the agreements have been entered into, the legislation concerning the validity of Petitioner’s trademark claims was unsettled, and it stays so on this Circuit.” Are we actually doing this once more? As a courtroom mentioned in 2021, “Nearly no courtroom has held that, by itself, a defendant’s buy of a plaintiff’s mark as a key phrase time period is adequate for legal responsibility.” Alzheimer’s Illness and Associated Problems Affiliation, Inc. v. Alzheimer’s Basis of America, Inc., 2021 WL 1918618 (S.D.N.Y. Apr. 20, 2021). A number of different courts since have echoed this sentiment. It’s unlucky for the Second Circuit to counsel it’s nonetheless a dwell concern.
Whereas the FTC flamed out on this enforcement in opposition to 1-800 Contacts, 1-800 Contacts paid $15M to settle non-public antitrust claims in opposition to it. So 1-800 Contacts didn’t precisely escape accountability. For that cause, I doubt different trademark homeowners will contemplate this ruling as a green-light to interact in schemes like 1-800 Contacts’. Then once more, from 1-800 Contacts’ perspective, $15M is a small worth to pay for the flexibility to cost supra-competitive costs to customers for 15+ years. With the Second Circuit’s assist, they might very nicely get away with it. Perhaps en banc or Supreme Courtroom evaluate will right this.
Case quotation: 1-800 Contacts, Inc. v. Federal Commerce Fee, 2021 WL 2385274 (second Cir. June 11, 2021)
1-800 Contacts v. FTC Case Library
The FTC maintains a web page with public filings on this case (final up to date Oct. 2021). A particular library of supplies (together with some not on the FTC web page):
* Second Circuit determination. Weblog put up.
* Second Circuit Attraction. 1-800 Contacts’ appellant transient. Amicus briefs from AIPLA, USCIB, WLF/Lecturers. FTC Answering Transient. Amicus transient from IP/Web/Antitrust professors.
* FTC opinions: majority by Commissioner Simons, concurrence by Commissioner Slaughter, dissent by Commissioner Phillips. Closing order. Weblog put up: Limiting Aggressive Key phrase Advertisements Is Anti-Aggressive–FTC v. 1-800 Contacts
* ALJ opinion. Weblog put up: Attention-grabbing Tidbits From FTC’s Antitrust Win In opposition to 1-800 Contacts’ Key phrase Advert Restrictions.
* Some knowledgeable studies and associated materials: Howard Hogan. Dr. William Landes. Rebecca Tushnet’s rebuttal report. Prof. Rebecca Tushnet Slides. Dr. Evans’ Slides. Dr. Susan Athey’s slides (see the exhibit).
* Respondent’s Second Corrected Pretrial Transient. Weblog put up: 1-800 Contacts Fees Greater Costs Than Its On-line Rivals, However They Are OK With That–FTC v. 1-800 Contacts
* Grievance Counsel’s Corrected Pre-Trial Transient and Reveals. Weblog put up: FTC Explains Why It Thinks 1-800 Contacts’ Key phrase Advert Settlements Have been Anti-Aggressive–FTC v. 1-800 Contacts
* FTC Grievance from Aug. 2021. Weblog put up: FTC Sues 1-800 Contacts For Limiting Aggressive Key phrase Promoting
Extra Posts About Key phrase Promoting
* Promoting Key phrase Advertisements Isn’t Theft or Conversion–Edible IP v. Google
* Aggressive Key phrase Promoting Nonetheless Isn’t Trademark Infringement, Until…. –Adler v. Reyes & Adler v. McNeil
* Three Key phrase Promoting Selections in a Week, and the Trademark House owners Misplaced Them All
* Competitor Will get Pyrrhic Victory in False Promoting Go well with Over Search Advertisements–Harbor Breeze v. Newport Fishing
* IP/Web/Antitrust Professor Amicus Transient in 1-800 Contacts v. FTC
* New Jersey Legal professional Ethics Opinion Blesses Aggressive Key phrase Promoting (…or Does It?)
* One other Aggressive Key phrase Promoting Lawsuit Fails–Dr. Greenberg v. Excellent Physique Picture
* The Florida Bar Regulates, However Doesn’t Ban, Aggressive Key phrase Advertisements
* Rounding Up Three Latest Key phrase Promoting Instances–Comphy v. Amazon & Extra
* Do Adjoining Natural Search Outcomes Represent Trademark Infringement? Of Course Not…However…–America CAN! v. CDF
* The Ongoing Saga of the Florida Bar’s Angst About Aggressive Key phrase Promoting
* Your Periodic Reminder That Key phrase Advert Lawsuits Are Silly–Passport Well being v. Avance
* Limiting Aggressive Key phrase Advertisements Is Anti-Aggressive–FTC v. 1-800 Contacts
* One other Failed Trademark Go well with Over Aggressive Key phrase Promoting–JIVE v. Wine Racks America
* Unfavourable Key phrases Assist Defeat Preliminary Injunction–DealDash v. ContextLogic
* The Florida Bar and Aggressive Key phrase Promoting: A Tragicomedy (in 3 Components)
* One other Courtroom Says Aggressive Key phrase Promoting Doesn’t Trigger Confusion
* Aggressive Key phrase Promoting Doesn’t Present Dangerous Intent–ONEpul v. BagSpot
* Transient Roundup of Three Key phrase Promoting Lawsuit Developments
* Attention-grabbing Tidbits From FTC’s Antitrust Win In opposition to 1-800 Contacts’ Key phrase Advert Restrictions
* 1-800 Contacts Fees Greater Costs Than Its On-line Rivals, However They Are OK With That–FTC v. 1-800 Contacts
* FTC Explains Why It Thinks 1-800 Contacts’ Key phrase Advert Settlements Have been Anti-Aggressive–FTC v. 1-800 Contacts
* Amazon Defeats Lawsuit Over Its Key phrase Advert Purchases–Lasoff v. Amazon
* Extra Proof Why Key phrase Promoting Litigation Is Waning
* Courtroom Dumps Crappy Trademark & Key phrase Advert Case–ONEPul v. BagSpot
* AdWords Buys Utilizing Geographic Phrases Assist Private Jurisdiction–Rilley v. MoneyMutual
* FTC Sues 1-800 Contacts For Limiting Aggressive Key phrase Promoting
* Aggressive Key phrase Promoting Lawsuit Will Go To A Jury–Edible Preparations v. Present Commerce
* Texas Ethics Opinion Approves Aggressive Key phrase Advertisements By Legal professionals
* Courtroom Beats Down One other Aggressive Key phrase Promoting Lawsuit–Beast Sports activities v. BPI
* One other Murky Opinion on Legal professionals Shopping for Key phrase Advertisements on Different Legal professionals’ Names–In re Naert
* Key phrase Advert Lawsuit Isn’t Lined By California’s Anti-SLAPP Legislation
* Confusion From Aggressive Key phrase Promoting? Fuhgeddaboudit
* Aggressive Key phrase Promoting Permitted As Nominative Use–ElitePay World v. CardPaymentOptions
* Google And Yahoo Defeat Final Remaining Lawsuit Over Aggressive Key phrase Promoting
* Blended Ruling in Aggressive Key phrase Promoting Case–Goldline v. Regal
* One other Aggressive Key phrase Promoting Lawsuit Fails–Infogroup v. DatabaseLLC
* Damages from Aggressive Key phrase Promoting Are “Vanishingly Small”
* Extra Defendants Win Key phrase Promoting Lawsuits
* One other Key phrase Promoting Lawsuit Fails Badly
* Duplicitous Aggressive Key phrase Promoting Lawsuits–Fareportal v. LBF (& Vice-Versa)
* Trademark House owners Simply Can’t Win Key phrase Promoting Instances–EarthCam v. OxBlue
* Need To Know Amazon’s Confidential Settlement Phrases For A Key phrase Promoting Lawsuit? Merry Christmas!
* Florida Permits Aggressive Key phrase Promoting By Legal professionals
* One other Key phrase Promoting Lawsuit Unceremoniously Dismissed–Infostream v. Avid
* One other Key phrase Promoting Lawsuit Fails–Allied Interstate v. Kimmel & Silverman
* Extra Proof That Aggressive Key phrase Promoting Advantages Trademark House owners
* Suing Over Key phrase Promoting Is A Dangerous Enterprise Resolution For Trademark House owners
* Florida Proposes to Ban Aggressive Key phrase Promoting by Legal professionals
* Extra Affirmation That Google Has Received the AdWords Trademark Battles Worldwide
* Google’s Search Ideas Don’t Violate Wisconsin Publicity Rights Legislation
* Amazon’s Merchandising of Its Search Outcomes Doesn’t Violate Trademark Legislation
* Shopping for Key phrase Advertisements on Individuals’s Names Doesn’t Violate Their Publicity Rights
* With Its Australian Courtroom Victory, Google Strikes Nearer to Legitimizing Key phrase Promoting Globally
* But One other Ruling That Aggressive Key phrase Advert Lawsuits Are Silly–Louisiana Pacific v. James Hardie
* One other Google AdWords Advertiser Defeats Trademark Infringement Lawsuit
* With Rosetta Stone Settlement, Google Will get Nearer to Legitimizing Billions of AdWords Income
* Google Defeats Trademark Problem to Its AdWords Service
* Newly Launched Client Survey Signifies that Authorized Considerations About Aggressive Key phrase Promoting Are Overblown
Supply : weblog.ericgoldman.org