Rosetta Stone v. Google Decision Extends AdWords Battle

The legal campaign against Google's offering of trademarks as keywords in its AdWords program, including its policy of permitting third-party trademarks to be used in sponsored links, will continue as a result of the Fourth Circuit's decision this week in Rosetta Stone Ltd. v. Google, Inc. (April 9, 2012). This decision reversed, for the most part, the district court's summary dismissal of the plaintiff's trademark case. In remanding the plaintiff's trademark infringement and contributory infringement claims, the Court gave the plaintiff the opportunity to show that Google's use of ROSETTA STONE in its AdWords program creates a likelihood of consumer confusion.

The decision does not rule on the legality of Google's program, and nothing in the opinion suggests that the plaintiff is likely to succeed in establishing that the sale of trademarks as keywords simply to trigger sponsored links will be found to be infringing. However, the Court pointed to evidence on which Rosetta Stone will likely rely at trial to threaten Google's policy of allowing use of trademarks other than those of the sponsor within a sponsored link.

Until 2009, Google prohibited any use of any trademark, other than the sponsor's, in the header or text of a sponsored link. This policy was changed in 2009 to permit limited use when the sponsor is a reseller of a genuine trademarked product, or when it makes or sells component or compatible parts for a trademarked product, or when it provides information or reviews about the trademarked product. Notwithstanding this policy, however, Rosetta Stone reported to Google, within a five-month period after the policy was changed, 190 instances in which a sponsored link was marketing counterfeit ROSETTA STONE products.

In summarily dismissing the plaintiff's trademark infringement claim, the district court had disregarded this evidence, as well as the deposition testimony of five witnesses who claimed to be actually deceived by the sponsored links, on the ground that the deceptive links had not conformed to Google's policy. The Fourth Circuit reversed on this point, holding that the reaction of the consuming public — irrespective of Google's policy, to which the general public is not privy — is what counts.

The Court also focused on Google's own in-house studies, which appeared to acknowledge that allowing trademarks in the text of sponsored links could result in consumer confusion, as well as deposition testimony of Google in-house...