PUBLIC UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION 02 07 2017 OFFICE OF ADMINISTRATIVE LAW JUDGES 585578 In the Matter of 1-800 CONTACTS, INC., Docket No. 9372 a corporation. RESPONDENT’S OPPOSITION TO COMPLAINT COUNSEL’S MOTION TO BAR PRESENTATION OF TESTIMONY AND ARGUMENTS CONTRADICTING CERTAIN ISSUES RESPONDENT LITIGATED AND LOST IN 1-800 CONTACTS v. LENS.COM PUBLIC TABLE OF CONTENTS Page I. INTRODUCTION ........................................................................................... 1 II. ARGUMENT ................................................................................................... 3 A. The Findings in Lens.com Were Context-Specific ............................... 3 B. Complaint Counsel Have Not Sought Preclusion on Issues Identical to Issues That Were Actually Decided in Lens.com .............. 5 C. Changed Circumstances Also Bar Collateral Estoppel ......................... 9 i PUBLIC TABLE OF AUTHORITIES Page FEDERAL CASES 1-800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229 (10th Cir. 2013) .............................................................. 1, passim Arizona v. California, 530 U.S. 392 (2000) .............................................................................................. 5 Artukovic v. INS, 693 F.2d 894 (9th Cir. 1982) .............................................................................. 11 B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (2015) .......................................................................................... 7 Chew v. Gates, 27 F.3d 1432 (9th Cir. 1994) ................................................................................ 8 Clorox Co. v. Sterling Winthrop, Inc., 117 F.3d 50 (2d Cir. 1997) ................................................................................... 2 Comm’r of Internal Rev. v. Sunnen, 333 U.S. 591 (1948) .......................................................................................... 3, 6 First Nat’l Bank in Sioux Falls v. First Nat’l Bank S. Dakota SPC, No. CIV. 06-4101, 2008 WL 895931 (D.S.D. Mar. 31, 2008), aff’d, 679 F.3d 763 (8th Cir. 2012) ....................................................................... 9 Medtronic, Inc. v. Mirowski Family Ventures, LLC, 134 S.Ct. 843 (2014) ........................................................................................... 11 In re Microsoft Corp. Antitrust Litig., 355 F.3d 322 (4th Cir. 2004) ................................................................................ 3 Minarik Elec. Co., 223 F. Supp. 2d 334 (D. Mass. 2002) ............................................................. 9, 11 Miss Universe, Inc. v. Kidney Found. of New York, Inc., No. 80 CIV. 5690, 1981 WL 48176 (S.D.N.Y. Feb. 26, 1981) ............................ 9 ii PUBLIC TABLE OF AUTHORITIES (continued) Page Offshore Sportswear, Inc. v. Vuarnet Int’l, B.V., 114 F.3d 848 (9th Cir. 1997) ................................................................................ 7 Old Grantian Co. v. William Grant & Sons Ltd., 361 F.2d 1018 (C.C.P.A. 1966) .......................................................................... 11 Opryland USA Inc. v. Great American Music Show, Inc., 970 F.2d 847 (Fed. Cir. 1992) .............................................................................. 9 Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) .............................................................................................. 3 Plus Prods. v. Nat. Organics, Inc., No. CV 81-1798, 1984 WL 33 (E.D.N.Y. Feb. 3, 1984) ..................................... 9 Postlewaite v. McGraw-Hill, 333 F.3d 42 (2d Cir. 2003) ................................................................................... 5 Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144 (4th Cir. 2012) .............................................................................. 11 Tyler v. Harper, 744 F.2d 653 (8th Cir. 1984) ................................................................................ 9 United States v. Ruhbayan, 325 F.3d 197 (4th Cir. 2003) ................................................................................ 7 Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387 (5th Cir. 1998) ................................................................................ 3 Witkowski v. Welch, 173 F.3d 192 (3d Cir. 1999) ................................................................................. 8 FEDERAL STATUTES 15 U.S.C. § 1051 et seq. Lanham Act. .......................................................................................................... 5 iii PUBLIC TABLE OF AUTHORITIES (continued) Page TREATISES Restatement (Second) of Judgments § 24 .................................................................. 9 Restatement (Second) of Judgments § 28 ................................................................ 11 iv PUBLIC I. INTRODUCTION Complaint Counsel’s motion fails to meet the strict showings required for application of offensive collateral estoppel. The motion seeks preclusion as to abstract propositions that go beyond the fact-specific context that the Tenth Circuit made clear was essential to its decision in 1-800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229 (10th Cir. 2013). Complaint Counsel apparently seek to have the Court hold that because 1-800 Contacts, Inc. (“1-800”) lost one fact-specific trademark case, the Court should find, based on collateral estoppel, that 1-800 would have lost every other trademark case it brought or might have brought, including the cases that it settled. But each of those settled cases arose on its own particular facts and Lens.com did not decide the factual issues presented in any of those other cases. Complaint Counsel’s effort to pre-ordain the results in cases that were never litigated to finality is not just improper, it also is unfair. Complaint Counsel allege that the challenged settlements “exceed the scope of any property right that 1-800 Contacts may have in its trademarks. .” Cmplt., ¶ 32. Accordingly, the question here is not whether 1-800 would win every trademark case, but whether the relief it obtained through its settlement agreements was within the scope of the relief available to those whose trademarks are infringed (or who are otherwise injured by 1 PUBLIC tortious conduct). Far from proving Complaint Counsel’s allegation, Lens.com refutes it. The Tenth Circuit noted that “one who searches for a particular business with a strong mark and sees an entry on the results page will naturally infer that the entry is for that business.” 722 F.3d at 1245. This conclusion is consistent with extensive precedent recognizing that claims challenging advertising presented in response to searches for another firm’s trademark are proper and can be resolved by settlements of the very form challenged here. See Raphael Decl. ¶¶ 4-9 & Exhibits 2-40 (collecting precedents). As such, Complaint Counsel’s antitrust challenge to 1-800’s settlements reduces to questioning whether the settling parties should have fought on, rather than settling, or should have negotiated for a “better deal.” But, “it is usually unwise for courts to second-guess such decisions” because “the parties are in the best position to determine what protections are needed and how to resolve disputes concerning earlier trademark agreements between themselves.” Clorox Co. v. Sterling Winthrop, Inc., 117 F.3d 50, 60 (2d Cir. 1997). As explained below, well-settled preclusion law prevents Complaint Counsel from using one court’s fact-specific and decades-old decision to meet their burden of proof. 2 PUBLIC II. ARGUMENT Collateral estoppel applies only when an issue actually decided in a prior suit is “identical in all respects” to an issue presented in the instant case. Comm’r of Internal Rev. v. Sunnen, 333 U.S. 591, 599–600 (1948). Moreover, where, as here, a party seeks to make offensive use of collateral estoppel, these already stringent prerequisites must “be applied strictly.” In re Microsoft Corp. Antitrust Litig., 355 F.3d 322, 327 (4th Cir. 2004); see also Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 395 n.9 (5th Cir. 1998). Even then, application of offensive collateral estoppel is discretionary, and where it “would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel.” Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331 (1979).1 Collateral estoppel should not be applied here because (1) the findings in Lens.com were context-specific, (2) the issues from Lens.com identified for preclusion are not identical to issues here, and (3) circumstances have changed in material respects. A. The Findings in Lens.com Were Context-Specific In Lens.com, 1-800 alleged that, between 2005 and 2007, Lens.com 1 Complaint Counsel concede that collateral estoppel is not available if it would “work an unfairness,” Mot. at 6, but offer no explanation for their assertion that “[t]he standard unfairness claims are inapplicable here.” Id. n.30. 3 PUBLIC infringed by causing Lens.com advertisements to be displayed in response to searches for 1-800’s trademark. 722 F.3d at 1235-37. Although the district court dismissed 1-800’s infringement claim on the ground that, “as a matter of law,” such a “keyword use can generate a likelihood of confusion only in combination with the specific language of the resulting impressions,” the Tenth Circuit, reviewing de novo, expressly reserved decision on that issue, stating that it “need not resolve the matter because 1–800’s direct-infringement claim fails for lack of adequate