Case No. 10-2007 (4th Cir.), Rosetta Stone Ltd v. Google Inc.

Between October and December 2010, briefs by the parties and over 30 amici were filed in Rosetta Stone's appeal to the Fourth Circuit Court of Appeals of a decision of the U.S. District Court for the Eastern District of Virginia, which granted a motion for summary judgment by defendant Google Inc. against plaintiff Rosetta Stone Ltd on the grounds that Google's sale of "Rosetta Stone" keywords for use in Google "AdWords" advertisements did not constitute direct or secondary trademark infringement or dilute Rosetta Stone's marks.

In an opinion issued on August 3, 2010, the District Court held that "no reasonable trier of fact could find that Google's practice of auctioning Rosetta Stone's trademarks as keyword triggers to third party advertisers creates a likelihood of confusion as to the source and origin of Rosetta Stone's products." The court also held that "because Google uses Rosetta Stone's trademark to identify relevant information to users searching on those trademarks, the use is a functional and non-infringing one."

On appeal, Rosetta Stone argued that the District Court failed to analyze each of the nine confusion factors, even those that were undisputed, and that as to those where a dispute existed, the district court impermissibly resolved them in favor of Google. As part of its argument that confusion is likely, Rosetta Stone pointed to previously redacted information indicating that Google's internal studies showed the confusion rate to be "very high," in addition to complaints from other brand owners and instances of actual confusion. Rosetta Stone has also argued that the functionality doctrine has no application to keyword advertising, but rather applies to characteristics of the trademark owner's product (such as particular colors or other product features or trade dress).

Over two dozen amicus parties, including INTA and several brand owners, filed five amicus briefs in support of Rosetta Stone's request to vacate the District Court's decision. In addition to generally supporting Rosetta Stone's lead arguments on appeal, the collective briefing provided in-depth discussion of the application of initial interest confusion, functionality, dilution and secondary liability through inducement in the area of trademark law. The United Kingdom Intellectual Property Law Society filed a brief in support of neither party regarding the district court's construction and application of the functionality doctrine and its relationship with principles of fair use.

Google's response generally argues that its customers' uses of Rosetta Stone's marks made to describe or compare Rosetta Stone products are insulated from infringement by principles of fair use. It has also pointed out that to the extent Google has been made aware of uses by counterfeiters, it has not acted in conjunction with these bad actors but rather has taken action. Google argued that, moreover, the evidence offered to show consumer confusion was minimal.

Five amici have filed three briefs in support of Google. Yahoo! and eBay argued that online services have a right to engage in keyword advertising pursuant to nominative fair use principles, inducement secondary liability does not apply to Google's activities, and that monitoring for infringing uses without brand-owner assistance would be prohibitively difficult if not impossible. The organizations Public Knowledge and the Electronic Frontier Foundation have argued that use of keywords was not "trademark use" - notwithstanding that virtually all courts to consider the issue have held that such use is "use in commerce" - and that Google is not secondarily liable because its customers' uses are fair uses. Finally, Public Citizen has taken a free speech approach to its main arguments in support of the district court's decision in favor of Google, putting forth the position that keyword advertising and the sale of keywords are forms of commercial speech that must be interpreted consistent with the free speech rights granted under the First Amendment to the U.S. Constitution.

Additional briefing on reply is to come from Rosetta Stone, followed by oral argument and an ultimate decision from the Fourth Circuit Court of Appeals. We will keep you apprised of developments in this important and closely watched case.