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Rosetta Stone and Google Settle Lawsuit; Will Join to ‘Combat' Trademark Abuse

Thursday, November 8, 2012

Rosetta Stone Inc. announced Nov. 1 that it has agreed to dismiss its three-year old trademark infringement lawsuit against Google Inc. and to “meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet.”

The two companies “will also work together to help law enforcement officials around the world go after counterfeiters at the source,” according to a Rosetta Stone press release. By working together, the two companies “hope to improve detection methods, and better protect from abuse brands like Rosetta Stone, advertising platforms like Google AdWords, and ultimately consumers on the Internet.”

Trademark Sales Challenged; Google Prevails at Trial.

The lawsuit began when Rosetta Stone Ltd., a company that sells language education programs, sued Google, arguing in part that the internet service, through its sale of Rosetta Stone trademarks to third parties as keyword ad triggers, directly infringed and diluted its marks.

The U.S. District Court for the Eastern District of Virginia in August 2010 granted Google's motion for summary judgment, holding that Google was not directly, vicariously, or contributorily liable for its sale of trademarks as advertising keywords, because the keywords serve an essential function in the Google search engine. Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531, 97 USPQ2d 1855 (E.D. Va. 2010) (80 PTCJ 512, 8/13/10).

In so ruling, the court applied the trademark law's functionality doctrine. The trial court also held that Google's sale of keywords containing marks owned by the plaintiff, which offers relatively high-priced products, was unlikely to confuse sophisticated consumers searching for those products.

Fourth Circuit Reverses.

The U.S. Court of Appeals for the Fourth Circuit in April reversed the summary judgment, ruling that Google Inc. may have intended to create confusion by selling trademarks as advertising keywords, based on the record in the AdWords infringement litigation. Rosetta Stone Ltd. v. Google Inc., 676 F3d 144, 102 USPQ2d 1473 (4th Cir. 2012) (83 PTCJ 861, 4/13/12)

The appellate court said that the functionality doctrine did not apply because Rosetta Stone used its mark as a brand identifier. Google's use of it as a keyword did not take the mark outside the realm of trademark protection, according to the court.

With respect to intent, a review of the record in Rosetta Stone's favor weighed against summary judgment, according to the appellate court. Google had shifted its trademark policies, which could indicate an intent to confuse, the court said. Before 2004, it did not allow the use of trademarks at all. In 2004, it decided to allow the use of trademarks as invisible ad triggers--a reason that appeared to be financially motivated, the court found.

Making all reasonable inferences in Rosetta Stone's favor, a reasonable fact-finder could conclude that Google intended to cause confusion, the court held.

The same was true for evidence of actual confusion. The court pointed to evidence that Rosetta Stone had received 123 complaints from individuals who had purchased pirated software believing it to be genuine, and that it was reasonable to infer that a great number of those individuals were confused by the apparent relationship between Rosetta Stone and a sponsored link.

As to Google's fair use claim, however, the appellate court said that Google might ultimately prevail. The district court “erroneously required Rosetta Stone to demonstrate that Google was using the ROSETTA STONE mark as a source identified for Google's own products,” The fair use inquiry turns on good faith, the court added, a factor the district court should have explored.

Google could ultimately prevail in this litigation, according to Chief Judge William B. Traxler Jr. But it had not won yet.

Jordan S. Weinstein of Oblon Spivak McClelland Maier & Neustadt, Alexandria, Va., told BNA in April that the Fourth Circuit's decision was a “very narrow” one that did not give anything away in the overall litigation. It was to be expected, Weinstein said, given that it came during the summary judgment stage of the proceedings.

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