Case On Point
In this month's case, the court considers the antitrust implications of trademark settlement agreements.
1-800 Contacts, Inc. v. Federal Trade Commission
(U.S. Ct. of App. for the 2d Cir. 2021)
Plaintiff is the leading online vendor of contact lenses. To compete, other online vendors purchased the rights to have their advertisements appear when customers conducted searches that included plaintiff's trademarks. Plaintiff objected, sent cease and desist letters, and entered into settlement agreements in which the other vendors agreed not to use plaintiff's trademarks to promote their own products. The Federal Trade Commission found that such agreements violated the antitrust laws, and plaintiff sought judicial review.
The Court of Appeals reversed, finding that trademarks and agreements protecting them from infringement are inherently pro-competitive. The Court also found that the challenged agreements were no broader than necessary to protect the trademarks. For example, competing vendors could still purchase at auction the rights to have their ads appear when certain generic terms such as "contacts" or "contact lenses" were used by consumers in internet searches.