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May 19, 2010
How Much Does 1-800 Contacts Hate Competitive Keyword Advertising? $1.1M Worth!?
By Eric Goldman
Rader Fishman & Grauer PLLC v. 1-800 Contacts, Inc., 2:10-cv-00191-TS-DN (redacted complaint filed March 30, 2010; answer and counterclaim filed March 25, 2010; counterclaim answer filed April 19, 2010)
1-800 Contacts has been a repeated guest star on this blog, principally for their duplicitous attitudes towards keyword advertising. 1-800 Contacts has used competitive keyword advertising in the past and was part of a coalition that helped scuttle Utah's second attempt at regulating keyword advertising. On the other hand, 1-800 Contacts was a major player in Utah's third attempt to regulate keyword advertising, and it has been an aggressive plaintiff in numerous lawsuits against competitive keyword advertisers, including the infamous 1-800 Contacts v. WhenU case and numerous obscure lawsuits that no one is closely watching.
We get an inside look at 1-800 Contacts' litigation against competitive advertisers through the filings in Rader Fishman v. 1-800 Contacts. Rader Fishman was one of 1-800 Contacts' "go to" law firms until a key partner switched to a different law firm (Holland & Hart), and 1-800 Contacts made the switch with him. This left the small matter of 1-800 Contacts' outstanding bills, totaling over $650,000. An amount that size is enough to get a law firm to bring a collections action, even if malpractice counterclaims are inevitable.
What really catches my attention, however, is the fee agreement between Rader Fishman and 1-800 Contacts in the Lens.com enforcement action, one of numerous 1-800 Contacts' lawsuits against competitive keyword advertisers. Although the number is redacted in the complaint, 1-800 Contacts' answer (para. 33) reveals that the law firm agreed to cap fees in that litigation at $1.1M.
Wait a minute...what??? How much for a keyword advertising enforcement action? Either the contact lens business is extraordinarily lucrative, or 1-800 Contacts made a really bad business call. As I have repeatedly said, trademark owners should view competitive keyword advertising lawsuits as an investment and measure their ROI accordingly. I haven't seen the numbers, but I'm super-skeptical that the value of the consumers "diverted" (whatever that means) by Lens.com's competitive keyword advertising is more than $1.1M--especially after 1-800 Contacts avails itself of the search engine trademark policies. Of course some or all of this difference could be made up by a damages award from Lens.com--if it wins and can collect--but even then I'm skeptical that the total expected value of this litigation was, or is, cost-justified.
Meanwhile, 1-800 Contacts could have taken the same $1.1M and poured it into advertising for itself. It could have invested the money to improve its products/services, which would enhance its overall competitiveness. 1-800 Contacts could have reduced its prices by $1.1M and stimulated more consumer demand. Heck, 1-800 Contacts could have used the $1.1M to select and switch to a more defensible trademark than its current crummy one. Instead, they've spent more than enough money to buy their outside lawyers a very, very nice new boat (...if the outstanding bills ever get paid...). And with $1.1M on the line for just one of several enforcement actions, it makes more sense why 1-800 Contacts flip-flopped on the Utah legislature and advanced protectionist legislation that would make its life easier--and cheaper.
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