INTELLECTUAL PROPERTY ALERT
April 26, 2012
Fourth Circuit Gives Rosetta Stone Another
Chance to Prove its AdWords Case
T
he Fourth Circuit recently issued its widely anticipated ruling in Rosetta Stone Ltd. v. Google, Inc.,1
more than six months after oral arguments were held in the case. Rosetta Stone, the producer of
language-learning products, sued Google based on its AdWords service, which allows third parties
to purchase keywords such as “Rosetta Stone” that then trigger the display of third-party advertisements on the
Google search results page. Rosetta Stone alleged, among other things, that many of the advertisements triggered
by a Google user’s input of the keyword “Rosetta Stone” promote counterfeit Rosetta Stone products.
The U.S. District Court for the Eastern District of
Virginia had granted summary judgment in favor of
Google, but the United States Court of Appeals for the
Fourth Circuit vacated several of the district court’s key
rulings, holding that its rulings on direct trademark
infringement, contributory trademark infringement
and trademark dilution were all in error. Notably, the
Fourth Circuit’s ruling was largely procedural in nature
and does not preclude Google from ultimately proving
that its AdWords program is non-infringing based on a
complete factual record presented to the district court.
A federal trademark infringement claim generally has
two key elements. A trademark owner must show both
that (1) the defendant used a trademark in commerce
and that (2) the defendant’s use causes a likelihood of
confusion among consumers. Here, the Fourth Circuit
assumed, and Google did not contest, that Google’s
policy allowing advertisers to employ trademarks
owned by others as keywords to trigger advertising
constitutes “use in commerce” for the purposes of
the first prong of the analysis.2 This is consistent with
the Second Circuit’s Rescuecom Corp. v. Google, Inc.
decision and is consistent with the general trend in
legal challenges to the keyword advertising programs,
which has been to focus the inquiry on the likelihood
of confusion prong, rather than on use in commerce.
With regard to likelihood of confusion, the Fourth
Circuit endorsed the district court’s consideration
of only three of the nine traditional confusion
factors, namely (1) Google’s intent with regard to the
ROSETTA STONE mark, (2) actual confusion and
(3) the sophistication of the relevant purchasers.3 In
doing so, the Fourth Circuit held that there is no rule
requiring a point-by-point analysis of all nine factors,
particularly whereas – like in this case – the trademark
in question is being used to refer to the trademark
owner’s own goods.4 However, the Fourth Circuit also
held that the district court committed reversible error
in finding no material question of fact in its analysis of
each of the three factors that were examined.
First, as to the question of intent, the appeals court
noted that Google’s own internal surveys showed that
Google knew that confusion would likely result from
allowing advertisers to employ third-party trademarks
in ad text, but that Google anticipated a boost in
revenue from allowing the practice. The Fourth Circuit
held that, viewed in the light most favorable to Rosetta
Stone, this was sufficient to permit a reasonable trier
of fact to conclude that Google intended to cause
confusion.5 Second, the appeals court held that the
lower court had failed to properly consider Rosetta
Stone’s substantial evidence of actual consumer
confusion, including deposition testimony, evidence of
consumer complaints to Rosetta Stone and a consumer
survey. 6 Third, with regard to the sophistication of the
relevant purchasers, the court held that the evidence
of the relatively high price of Rosetta Stone’s software
(up to $579 for certain bundles) was not necessarily
dispositive with regard to the sophistication of Rosetta
Stone’s customers. 7
Neal, Gerber & Eisenberg LLP • Two North LaSalle Street Chicago, IL 60602-3801 • 312.269.8000 • www.ngelaw.com
2
Additionally, the Fourth Circuit held that the district
court misapplied the functionality doctrine, which
prevents trademark plaintiffs from enjoining useful
product features.8 The district court had held that,
because the term “Rosetta Stone” – when used as a
keyword – allowed Google to more usefully index the
Internet, the term was functional. The Fourth Circuit
reversed, holding that because the mark ROSETTA
STONE is not essential for the functioning of its
language-learning products, and indeed is a classic
source identifier, the functionality doctrine did not
apply.9
With regard to the contributory infringement
claims, the Fourth Circuit held that the district court
inappropriately shifted to Rosetta Stone the burden of
showing that Google’s actions in addressing complaints
of counterfeiting were inappropriate.10 Finally, the
Fourth Circuit held that the lower court erred with
regard to the trademark dilution claims, which allege
that Google’s conduct will weaken the ability of the
ROSETTA STONE mark to identify a source.11 In
particular, the Fourth Circuit held that the district
court inappropriately collapsed the dilution analysis
into the question of whether Google was using the
ROSETTA STONE trademark to identify Google’s
own goods and services.12
This decision signals that future disputes over keyword
advertising will continue to focus heavily on the
likelihood of confusion analysis, and, in our view, a
question remains concerning what set of facts need to
be present for a court to find that Google’s AdWords
policies (or other keyword-triggered advertising
practices) result in a likelihood of confusion (and
ultimate liability).
Slip Op. No. 10-2007 (4th Cir. April 10, 2012.)
Id. at 11.
3
Id. at 15.
4
Id. at 13-14.
5
Id. at 17.
6
Id. at 17-23.
7
Id. at 24.
8
Id. at 26.
9
Id. at 28.
10
Id. at 32.
11
Id. at 36.
12
Id. at 40.
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2
Should you have any questions concerning this or any other issue concerning trademark usage and protection
online, do not hesitate to contact Lee Eulgen (312.269.8465, [email protected]), Kate Dennis Nye
(312.827.1455, [email protected]), or another member of Neal Gerber & Eisenberg’s Intellectual Property
Group.
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4
Neal Gerber Eisenberg Intellectual Property Practice Group
Neal Gerber Eisenberg
Two North LaSalle Street, Chicago, IL 60602
(312) 269-8000 | www.ngelaw.com
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