Rosetta Stone’s Keyword Advertising Claims Against Google Given New Life

In a much anticipated decision, the Fourth Circuit has revived Rosetta Stone’s trademark infringement claims against Google.  Rosetta Stone Ltd. v. Google Inc., No. 10-2007 (4th Cir. Apr. 9, 2012)  The claims are based on Google’s AdWords program, commonly referred to as “keyword advertising.”  The AdWords program allows advertisers to bid on certain “keywords.”  When a user searches for those keywords, links to the advertisers’ websites appear in the non-organic or “Ads” section of the search results.

Rosetta Stone asserted trademark infringement claims alleging Google’s AdWords program enabled and encouraged counterfeiters to purchase the “ROSETTA STONE” mark as a keyword.  Rosetta Stone claims it advised Google of more than 200 instances of keyword advertising for websites offering counterfeit Rosetta Stone products.  Further, Google allegedly allowed such sites to continue to use “ROSETTA STONE” as a keyword despite being notified of the counterfeiting.

The trial court awarded Google a complete victory, reasoning that, “[N]o 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 Fourth Circuit disagreed and revived Rosetta Stone’s infringement claims.  While the opinion failed to break new legal ground, it is noteworthy for the Court’s reliance on and characterization of certain facts universal to Google’s AdWords program.  Specifically, the Court determined that Rosetta Stone had created a genuine issue of material fact on the issue of “likelihood of confusion” based in large measure on: 1) Google’s changes to its formal trademark policy; and 2) Google’s internal studies acknowledging such changes created a risk of consumer confusion.

By way of background, prior to 2004 Google’s policy precluded both the use of trademarks in the text of an advertisement and the use of trademarks as keywords upon request of the trademark owner.  Google loosened its policy in 2004 to allow the use of third-party trademarks as keywords even over the objection of the trademark owner.  Google continued to block the use of trademarks in the actual advertisement text at the request of a trademark owner.  Google’s reason for allowing trademarks as keywords over the trademark owner’s objection was financial. Specifically, Google’s research showed that “[a]bout 7% [of its] total revenue [was] driven by [trademark]ed keywords.”

Google’s policy precluding the use of third-party trademarks in ad text was based in part on Google’s own studies suggesting such use was likely to confuse internet users.  Specifically, Google conducted studies “to analyze user confusion (if any) associated with ads using [trademark] terms.”  One study revealed that “the likelihood of confusion remains high” when trademark terms are used in ad text.  According to the study, “94% of users were confused at least once” with “[n]o difference between strong and weak trademarks.”  Based on this evidence, the authors of the study recommended “that the only effective [trademark] policy . . . is: (1) [to] [a]llow [trademark] usage for keywords; (2) [but] not allow [trademark] usage in ad text – title or body.”

Despite such internal studies, Google changed its policy in 2009 to allow the use of trademarks in advertising text in four limited situations: 1) the sponsor is a reseller of a genuine trademarked product; 2) the sponsor makes or sells component parts for a trademarked product; 3) the sponsor offers compatible parts or goods for use with the trademarked product; or 4) the sponsor provides information about or reviews a trademarked product.  According to Rosetta Stone, it was this 2009 decision to allow third party trademarks in ad text which resulted in the “proliferation of sponsored links to pirate/counterfeit [Rosetta Stone] sites.”

Based on this backdrop, the Fourth Circuit determined that Google was not entitled to summary judgment on the infringement claims.  The Court explained, “Viewing the evidence and all reasonable inferences in a light most favorable to Rosetta Stone, as we are required to do on a motion for summary judgment, we conclude that a reasonable trier of fact could find that Google intended to cause confusion in that it acted with the knowledge that confusion was very likely to result from its use of the marks.”

The key facts relied upon by the Court included: 1) Google’s election to loosen its trademark policy in 2004 to allow the use of third-party trademarks as keywords largely for financial reasons; 2) Google’s understanding and knowledge that the new policy would create “a slight increase in risk that [Google] and [its] partners [would] be the subject of lawsuits from unhappy trademark owners.”; 3) Google’s decision to loosen its trademark policy further in 2009 to allow the use of trademarks in ad text in certain circumstances; and 4) Google’s knowledge based on its own internal studies that allowing such use of trademarks in ad text created a significant risk of source confusion.

The Rosetta Stone decision is arguably insignificant from a legal standpoint.  However, from a practical standpoint, the decision could result in new claims against Google or other similarly situated service providers relating to AdWords or comparable programs.  The decision also emphasizes the importance of potential plaintiffs documenting: 1) instances of its trademarks being used as keywords with unauthorized or counterfeit sites; and 2) formal notice of such conduct being provided to the applicable search engine.  For a more detailed discussion of the Rosetta Stone decision, see the national discussion outline for the ABA’s May 2012 IP Roundtable authored by Briggs and Morgan.

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Posted on May 2, 2012, in Trademark and tagged , . Bookmark the permalink. Comments Off on Rosetta Stone’s Keyword Advertising Claims Against Google Given New Life.

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