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NYLJ “Trademarks and the Digital Storefront: SDNY Analyzes Likelihood of Confusion in Search Ads”

By Steve Kramarsky & Jack Millson

Online advertising is among the largest and fastest growing areas of digital commerce. Unsurprisingly, consumer online spending substantially outpaces ad spending in raw dollars, but in terms of sector growth and technical innovation digital advertising is unsurpassed. Today’s Internet is a highly optimized machine for the delivery of targeted advertising and the techniques and technologies used to personalize and deliver ads grow more sophisticated every day. Hundreds of billions of dollars a year are poured into digital advertising, and at least two of the world’s most valuable companies—Alphabet (Google) and Meta (Facebook)—derive most of their revenue from that source. Consumers may not think of Google and Facebook as ad sales companies, but that’s unquestionably what they are.

Obviously, legal regulation of such an enormous and rapidly changing field presents substantial challenges, and over the past two decades (at least in the United States) that job has fallen primarily on courts. In the absence of a federal statutory scheme specifically aimed at digital advertising practices, the courts have focused on consumer-facing issues covered by existing law, such as privacy, transparency, and deceptive or misleading advertising practices. But digital advertising technology can also present new challenges in less obvious areas of the law, such as copyright and trademark protection.

Seventeen years ago, an online seller of contact lenses called 1-800 Contacts was at the center of these issues when the U.S. Court of Appeals for the Second Circuit wrote one of the earliest opinions on the trademark implications of “keyword advertising”—the use of trademarked terms as keywords to trigger pop-up ads on websites. In 1-800 Contacts v., 414 F.3d 400 (2d Cir. 2005), the Second Circuit held that the use of plaintiff’s mark as a keyword was not a “use in commerce” for purposes of the trademark law, because consumers never saw it—it was stored in a hidden list of terms inside a piece of ad tracking software.

In the years since 2005, the law in the Second Circuit and across the country has developed away from that initial opinion to be more protective of trademarks. It is now clear that keyword advertising can, in some cases, constitute trademark infringement. But under what circumstances? Seventeen years later, 1-800 Contacts once again finds itself on the losing end of that question in a recent case from the Southern District of New York that examines customer confusion and the developing law around the protection of digital intellectual property: 1-800 Contacts v. Jand, 21-cv-6966 (PKC) (S.D.N.Y. June 27, 2022).

This article first appeared in the New York Law Journal on July 18, 2022. Stephen M. Kramarsky, a member of Dewey Pegno & Kramarsky, focuses on complex commercial and intellectual property litigation. Jack Millson is an associate at the firm.


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