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Sunstein Associate Comments on Federal Trade Commission's Reversed Decision

Sunstein Associate Erin E Connors concurs that the decision "makes a good deal of sense”

The Second Circuit has reversed a Federal Trade Commission (FTC) decision which held that a series of trademark agreements between online contact lens company 1-800 Contacts and its competitors, focusing on keyword advertising, restrained competition.

The court found that the FTC had improperly considered the agreements to be "inherently suspect" and had incorrectly concluded that they were a violation of the FTC Act under the "rule of reason" – expanding on the pro-competitive nature of trademark agreements. A legal expert told WTR: “The Second Circuit got it right.”

1-800 Contacts appealed and on June 11, 2021 in 1-800 Contacts v FTC (18-3848), the Court of Appeals for the Second Circuit had its say, rejecting the contention that trademark settlement agreements are immune from antitrust scrutiny.

Erin E Connors, associate at Sunstein, concurs that the decision “makes a good deal of sense”, expanding: “As the Second Circuit indicated, public policy strongly favours settlement agreements like the ones 1-800 Contacts entered into. While such agreements may limit fully effective competition, as the court stated, 'we owe significant deference to arm's length use agreements negotiated by parties to those agreements'. Forcing companies to be less aggressive in enforcing trademark rights would be ‘antithetical to the pro-competitive goals of trademark policy’”.

However, this may not be the end of the dispute. Connors notes: “The FTC has already indicated it is considering its options for proceeding, so this still may not be the last we’ve seen of this keyword controversy.” In fact, on August 26, 2021 the Second Circuit denied a petition from the FTC seeking a rehearing on this matter.

Read more on World Trademark Review here.

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