Utah HB 450 Dies in Utah Senate Without a Vote

By Eric Goldman

After barely passing the Utah House, Utah HB 450–Utah’s third ill-fated attempt to regulate keyword advertising–died quietly last night when the Utah Senate failed to act on it before the Utah Legislature adjourned for the year. My understanding is that 1-800 Contacts, the bill’s principal advocate, stopped pushing the bill in the Senate earlier this week when it became clear that it couldn’t muster the votes.

On its face, this bill’s failure appears to be good news. While the bill was less ill-conceived than Utah’s past two anti-keyword advertising laws, it was still an ill-conceived anti-competitive law designed principally to advance the protectionist interests of a local Utah company. Laws like this should be rejected.

Nevertheless, I feel that there is no real good news here. If the law had died because the Utah Legislature had recognized the folly of thinking that it was uniquely well-positioned to improve keyword advertising, or had abandoned the quest because of its abysmal track record in regulating the Internet, we’d have good reason to celebrate. Unfortunately, I haven’t seen any evidence of such an epiphany.

Instead, I *guarantee* that the Utah legislature will revisit the topic of regulating keyword advertising for a fourth time. (I’m reminded of the fable of Ulysses and the Sirens; trying to “fix” keyword advertising appears to be simply irresistible to the Utah Legislature). One reason is that there remains a lot of hostility towards keyword advertising in the Utah Legislature. For example, Rep. S. Clark was quoted last week as opposing HB 450 (indeed, he voted no) because:

“We should be going after the Googles that are creating this problem. They’re the villains.” …. “If we’re going to use the strength and resources of the state to go after businesses, then we ought to go after the business that is causing the harm. … We ought to go after the Googles with the state’s resources and reputation.”

Nice. In addition to this ill-informed antipathy, companies like 1-800 Contacts and Overstock.com–both Utah-based web retailers with, at best, highly descriptive trademarks–are always interested in ways to reduce their competition. So, Utah’s legislative hubris plus local company rent-seeking creates a toxic brew that ensures repeat surfacing of bad policy proposals. Let’s reconvene here in February 2010 and see what the Utah bunch is cooking up for the 2010 legislative session. [UPDATE: Kate Kaye has a little more to say about the future.]

Meanwhile, even though 1-800 Contacts didn’t get its statutory shortcut to control keyword ads on its trademarks, I expect 1-800 Contacts will keep bringing traditional trademark lawsuits against competitive retailers who buy competitive keyword advertising. 1-800 Contacts has already been busy on this front; I don’t have a complete census of these lawsuits, but I pulled the following case list from PACER ()which is usually incomplete for a variety of reasons):

* 1-800 Contacts v. Lensworld.com, 2:2008cv00015 (filed 01/08/2008, closed 09/09/2008)

* 1-800 Contacts v. Drugstore.com, 2:2008cv00157 (filed 02/26/2008, closed 08/12/2008)

* 1-800 Contacts v. Lens.com Inc., 2:2007cv00591 (filed 08/13/2007)

* 1-800 Contacts v. Premier Holdings, 2:2007cv00946 (filed 12/06/2007, closed 05/16/2008)

* 1-800 Contacts v. Memorial Eye, 2:2008cv00983 (filed12/23/2008)

* 1-800 Contacts v. Lensfast, 2:2008cv00984 (filed 12/23/2008)

* 1-800 Contacts Inc v. Manila Industries Inc, 8:2007cv00102 (filed 01/26/2007, closed 04/07/2008) (note: the complaint wasn’t on PACER, so I couldn’t confirm that this was a keyword suit)

Given this level of activity, I doubt we’ve seen the last of these lawsuits (unless 1-800 Contacts has exhausted the universe of defendants).

One last point: I remain flabbergasted by the standards of acceptable conduct in the Utah Legislature. For example, as I mentioned before, I got a reliable tip (but I haven’t been able to confirm otherwise) that one house representative mistakenly voted yes on HB 450. Whoops! Subsequently, the Salt Lake Tribune reminded us that Rep. Jennifer “Jen” Seelig–who voted yes on HB 450, in case that wasn’t obvious–is a lobbyist-employee of 1-800 Contacts, the principal advocate for the bill. (This page describes her title as “Associate Director of Governmental Relations” for 1-800 Contacts). What??? Rep. Seelig explained that she doesn’t lobby for 1-800 Contacts in the Utah Legislature, but I would think any representative with such obvious conflicts would necessarily abstain from voting on bills advocated by her employer. (Or perhaps there should be rules against legislators also being employed as lobbyists, but I digress…). Apparently not in the Utah Legislature. Utah residents, I just don’t get it–why are you not demanding better practices from your elected representatives???