In a highly-anticipated ruling on keyword advertising, on April 9, 2012, the U.S. Court of Appeals for the Fourth Circuit issued its opinion in Rosetta Stone Ltd. v. Google, Inc., reversing the district court’s grant of summary judgment to Google. In doing so, the appellate panel adopted arguments INTA made as  amicus, citing legal errors by the lower court.

Rosetta Stone sued Google in 2009 over the search engine’s sale of advertising space “keyed” to searches on the ROSETTA STONE trademark through its AdWords program, claiming direct and contributory trademark infringement and trademark dilution, among other claims. The maker of the popular language-learning software offered the district court anecdotal evidence that consumers were confused by the AdWords advertisements into believing that Rosetta Stone was behind ads that in fact were for counterfeit Rosetta Stone software or competitors’ products.

Rosetta Stone also submitted survey evidence showing that consumers were confused, and pointed to internal Google studies acknowledging that consumers were confused about the source or sponsors of AdWords advertisements.

Despite this evidence, the district court rejected Rosetta Stone’s claims and granted summary judgment to Google, holding that: (1) Google’s keyword ad practices were protected by the “functionality” doctrine of trademark law, (2) Google could not be liable for dilution because it did not compete with Rosetta Stone and, because Rosetta Stone’s mark became more well known during the period at issue, it couldn’t show actual dilution, and (3) Rosetta Stone’s anecdotal, survey, and documentary evidence of confusion was de minimis and could not support a finding of confusion at trial.

The appellate court reversed the lower court on each of these points.

INTA’s amicus brief argued that the lower court misunderstood and misapplied the functionality doctrine in granting judgment for Google that because trademarks used in the AdWords program are “functional.” INTA explained that the doctrine protects functional product design features, not the use of internal workings of a search engine.

The Court of Appeals agreed, saying “it is irrelevant whether Google’s computer program functions better by use of Rosetta Stone’s nonfunctional mark.”

INTA also argued that the lower court erred in ruling for Google on the grounds that it did not use the ROSETTA STONE mark on its own products and that Rosetta Stone’s brand awareness dramatically grew over the relevant timeframe.

U.S. trademark dilution law, INTA noted, applies even where the parties do not compete. INTA also pointed out that since the enactment of the U.S. Trademark Dilution Revision Act of 2006, the law does not require proof of actual harm, but rather only a likelihood of dilution.

The Fourth Circuit adopted both of INTA’s arguments in reversing the lower court, holding that the statute does not require that the defendant use the mark on its products, but only “in commerce,” nor that the plaintiff suffer actual economic loss or harm to reputation.

The appeals court also found error in the district court’s treatment of the “fair use” exclusion to dilution. It said that the lower court in effect presumed that any non-trademark use was necessarily fair use, and instructed it to “reexamine the nominative fair use defense” on remand, keeping in mind that Google has the burden to prove it.

The court also held that the lower court’s “truncated analysis” of the dilution question focused too much on Rosetta Stone’s increase in brand awareness, and that it should consider “whichever additional factors might apply to inform its determination” on the issue.

The appeals court also instructed the lower court to consider when Google first used the ROSETTA STONE mark and whether that was before or after the mark became famous.

Lastly, the Fourth Circuit held that the district court erred in rejecting Rosetta Stone’s evidence of confusion, holding that it had presented fact questions requiring a trial.

In sum, the Fourth Circuit corrected the various legal errors in the lower court’s opinion that INTA cited, and gave the court plenty of direction for its consideration of the evidence on remand. But although Rosetta Stone won the appeal, whether it will be able to meet the tests set out by the appeals court remains to be seen.

INTA’s brief was authored by International Amicus Committee Vice Chair David H. Bernstein (Debevoise & Plimpton—New York, New York), Kurt E. Anderson (Giordano, Halleran & Ciesla, P.C.—Red Bank, New Jersey) and A. Justin Ourso III (Jones Walker—Baton Rouge, Louisiana). Laurence K. Nodine (Ballard Spahr LLP—Atlanta, Georgia) and Pamela Kilby (Microsoft Corporation—Redmond, Washington) also worked on the brief, with support by other members of the U.S. Subcommittee of the International Amicus Committee.


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© 2012 International Trademark Association