January 2011 Issue

Civil Cases

1-800 Contacts.com, Inc. v. Memorial Eye, P.A.,
2010 WL 5149269 (D. Utah Dec. 13, 2010)

ABSTRACT
Defendant purchased keywords incorporating plaintiff’s 1-800 CONTACTS trademark that linked to sponsored advertisements for defendant’s competing products, and plaintiff sued for trademark infringement.  Defendant argued that plaintiff’s claim was barred by the equitable doctrine of unclean hands because plaintiff itself had purchased other competitors’ trademarks as search-engine keywords to advertise its competing products.  But the court held that the unclean hands defense did not apply when the plaintiff’s conduct was not related to the trademark at issue, i.e., plaintiff’s 1-800 CONTACTS trademark.

CASE SUMMARY

FACTS
Plaintiff 1-800 Contacts.com, Inc., the market leader in the field of replacement contact lenses, sold its products online under the federally registered trademark 1-800 CONTACTS.  Defendant Memorial Eye, P.A., which also sold replacement contact lenses online, purchased keywords incorporating the 1-800 CONTACTS mark from Google and other search engines.  When users searched for 1-800 CONTACTS, the search results displayed defendant’s advertisements in the paid sponsored links.  Plaintiff objected to defendant’s actions several times over a period of a few years, but defendant continued to purchase the disputed keywords. 

Plaintiff sued defendant for trademark infringement.  Defendant asserted both an affirmative defense and a counterclaim based on the alleged unclean hands of plaintiff.  Defendant’s unclean hands allegations were based in large part on plaintiff’s own acts of purchasing competitors’ trademarks (but not defendant’s trademarks) as search-engine keywords.  Plaintiff filed a motion for summary judgment on defendant’s unclean hands defense and counterclaim.

ANALYSIS
The district court granted plaintiff’s motion for summary judgment.  Defendant’s affirmative defense simply pleaded that “[Defendant] asserts the defense of unclean hands,” and its counterclaim alleged that plaintiff itself purchased keywords incorporating competitors’ trademarks, the same activities for which it was suing defendant.  In response, plaintiff argued that defendant could not benefit from the unclean hands defense because plaintiff’s alleged misconduct was not related to the 1-800 CONTACTS trademark at issue in this case.

The threshold issue before the court was thus whether an unclean hands defense may be based on a plaintiff’s conduct regarding marks unrelated to those the plaintiff asserted in its complaint.  The court sided with plaintiff, citing the Tenth Circuit’s rule from Worthington v. Anderson that the inequitable conduct must be related to the plaintiff’s cause of action.  The district court noted that two kinds of “related conduct” may support application of the unclean hands defense in a trademark case:
(1) inequitable conduct toward the public, such as deception in or misuse of the trademark itself; or
(2) inequitable conduct toward the defendant in relation to the trademark at issue.  The court also noted the Tenth Circuit’s decision in Utah Lighthouse Ministry v. Discovery Computing, which held that the unclean hands doctrine “requires that the inequitable conduct on the part of the plaintiff be related to the plaintiff’s cause of action.”  The court further cited Professor McCarthy’s treatise on trademarks and unfair competition, in which he states that “[t]he plaintiff’s alleged infringement of a different trademark does not furnish grounds for an unclean hands defense.”

Applying this precedent to the facts of this case, the court held that defendant’s unclean hands allegations were not sufficiently related to plaintiff’s claims regarding the infringement of its 1-800 CONTACTS mark, i.e., plaintiff’s keyword activities did not involve its 1-800 CONTACTS mark.  Defendant argued that unclean hands conduct did not need to relate to the mark asserted by plaintiff if the defense lies in inequitable conduct towards the public, as opposed to the other party.  The court held, however, that Worthington required that the inequitable conduct be related to plaintiff’s cause of action, even where the inequitable conduct was toward the public.

CONCLUSION
This decision appears to be the first to specifically address the merits of an unclean hands defense in keyword cases.  However, it is consistent with decisions in other types of Internet-related trademark cases in which courts have rejected the unclean hands defense cases where the alleged wrongdoing did not directly relate to the trademark rights asserted by the plaintiff.  For example, in People for Ethical Treatment of Animals v. Doughney, the Eastern District of Virginia rejected the defendant’s unclean hands defense, even though the plaintiff had also registered and used domain names containing the trademarks of others in connection with websites criticizing the trademark owners, because the alleged wrongful conduct did not relate specifically to plaintiff’s trademark rights at issue in the case.  The Court of Appeals for the Fourth Circuit affirmed the decision.  Similarly, the Western District of Washington found that the plaintiff’s use of the defendant’s trademark in its metatags did not constitute unclean hands in Flow Control Industries v. AMHI.   Because the plaintiff’s use involved defendant’s trademark and not its own, unclean hands was not applicable.