Learning the Language of Trademark LawRosetta Stone Ltd. v. Google, Inc., No. 10-2007 (4th Cir. 2012) (Chief Judge Traxler, Judges Keenan and Hamilton)

If you found this blog post, then you’re probably acquainted with Google™’s search engine. You might also know that Google lets advertisers bid on keywords, which trigger the ads that come up at the top and to the side of your Google search results (so-called advertising search results). And you might guess that trademark owners don’t like it when Google sells their mark to their competitors in a keyword sale.

This practice has been going on for several years, but in 2009, Google changed the way it handles keywords. Through its AdWords™ program, Google started to let advertisers put trademarked terms in the text of their ads. (Before, it had allowed advertisers to buy other people’s trademarked terms, but the terms couldn’t be used in the advertisement text.)

Well, this decision addresses how this change impacted Rosetta Stone (the company that provides language education software) and how well trademark law works (or doesn’t) as a remedy for unauthorized use of trademarked terms as keywords associated with Internet search results. The Fourth Circuit had to engage in some legal “course-correcting” efforts after the district court’s decision, but it’s hard to tell whether the Fourth Circuit opinion will significantly impact this substantive area of trademark law in the long run.

Bad Summary of Trademark Infringement

The case came to the Fourth Circuit after the district court granted summary judgment in Google’s favor on all trademark infringement issues, trademark dilution, and unfair competition. The Fourth Circuit, however, sent the direct infringement, contributory infringement, and dilution claims back to the district court. The court’s main fix was to remind the district court to review evidence through summary judgment goggles—not trial goggles. (A court can grant summary judgment if (1) there are no major fact questions, and (2) there’s no way the party who didn’t ask for summary judgment could win before a reasonable jury, even if the court looks at the evidence in a light that’s most beneficial to the nonmoving party.)

In this case, the district court marginalized a lot of the evidence that Rosetta Stone presented to show that the revised Google’s AdWords™ program created a likelihood of confusion (and led to trademark infringement). For example, Rosetta Stone offered the deposition testimony of 5 witnesses who bought what they believed were legitimate Rosetta Stone® language-learning products, but the products were counterfeit. The district court dismissed the evidence as anecdotal and de minimis, saying that these were the only 5 instances of confusion out of over 100,000 Internet “impressions” of the mark over 6 years. But the court itself had only allowed a maximum of 5 depositions related to the actual confusion issue, so it seemed unfair for it to turn around and use that limitation to support its de minimis conclusion. Plus, Rosetta Stone reported 123 complaints from individuals who’d bought pirated or counterfeit software after Google started to allow trademarked terms in advertising text. In another example, Google’s in-house counsel testified that they couldn’t tell which links in the Sponsored Link section of a search page were to legitimate Rosetta Stone® products and which linked to counterfeit products. The district court said this testimony indicated “mere uncertainty about the source of the product” rather than trademark-type confusion.

The district court’s weighing of evidence to determine what’s persuasive and what’s not is the correct approach to employ for trial. But at summary judgment, the nonmoving party simply has to show that there are fact issues, and that it could win based on those facts. The district court bypassed this important standard of review when it evaluated and weighed the evidence at the summary judgment stage.

Dys-Functional Trademark Doctrines

The Fourth Circuit also had to correct the district court’s misapplication of the trademark functionality doctrine. The district court held that Google’s use of “Rosetta Stone” in its AdWords™ program was protected by the doctrine of trademark functionality—that is, according to the district court, Google could continue to use the trademarked term because the use was essential to the functioning of Google’s keyword advertising. But this is a backwards application of functionality. The trademark functionality doctrine prohibits trademark owners from protecting aspects of their own products that are essential to the way the product works. In other words, the doctrine would only apply here if the term “Rosetta Stone” were necessary to making Rosetta Stone’s products work—not Google’s. The Fourth Circuit concluded that the district court’s application of the functionality was simply legally wrong.

The district court made a few other legal missteps, which you can read about in the Fourth Circuit’s opinion.

The Big Picture

There’s no question that the district court made some legal errors in its summary judgment opinion. But taking a step back, the district court’s difficulty might stem from the fact that trademark infringement may not be the correct legal doctrine to apply to keyword advertising on the Internet. Google’s AdWords™ program itself does not directly infringe Rosetta Stone’s mark—if there’s consumer confusion, it’s from the advertisements themselves, not from Google’s search services and algorithms. As law professor Eric Goldman pointed out in a blog post on this topic, Google is, at best, merely contributing to the advertiser’s infringing activities.

This keyword advertising brouhaha mirrors the legal issues that have come up in the online auction site arena. For instance, in Tiffany, Inc. v. eBay, Inc., the Second Circuit considered the question of whether eBay should be liable for third-party sales of counterfeit goods (that are knock-offs of trademarked goods) through its auction site. The court said no.

Also, this case doesn’t address the question of whether Google’s sale of trademarked terms is a “use in commerce” that gives rise to trademark infringement, a question that has been the focus of other keyword cases. Ultimately, perhaps Google’s use is “fair use” or a non-trademark use of trademarked terms. Under either analysis, that means it shouldn’t be held liable for keyword sales to advertisers under trademark law.

But that doesn’t mean that the legal standards of review can be sidestepped to speed up the journey to the final finding of no trademark infringement by a search engine provider. That’s why the Fourth Circuit sent the case back to the trial court for further analysis.

Stay tuned for more on this keyword advertising issue and how it interacts with traditional trademark law!