In a closely watched battle, the Fourth Circuit breathed life back into Rosetta Stone Ltd.’s trademark infringement and dilution claims against Google, Incorporated stemming from its AdWords program. Google’s AdWords program allows advertisers to purchase “keywords” that trigger the advertiser’s ads when the keyword is entered as a search term in Google. In a series of changes in policy, Google permitted the use of trademarks as search triggers and later in the title or text of ads in certain circumstances. Rosetta Stone filed a complaint against Google in 2009 alleging that Google’s policies created a likelihood of confusion, as well as actual confusion, leading internet users into buying counterfeit ROSETTA STONE products. The district court ruled in favor of Google on all counts in 2010. Numerous well-known brands filed amicus briefs in this case including Ford, Viacom, Coach, NFL, Rolls Royce, Tiffany, Tivo, Tumi and others. On Monday, the Fourth Circuit vacated the district court’s order with respect to Rosetta Stone’s direct trademark infringement, contributory infringement and dilution claims. (Click here for a longer summary and discussion of the case.)
The appellate court reasoned that there were still issues of material fact with respect to whether or not Google’s use of the ROSETTA STONE mark was likely to cause confusion among consumers. One remaining factual issue in the confusion analysis was whether or not Google intended to create confusion by permitting advertisers to use trademarked terms. The record showed that Google’s underlying reason for changing its policy with respect to trademark terms was “largely for financial reasons” and its own internal study suggested that there was significant confusion as to the source of ads among internet users when trademarks were used in the title or text of ads.
A key issue in the district court’s decision watched particularly closely by the trademark community was its secondary ruling on infringement that held that the functionality doctrine alone would protect Google’s use of the ROSETTA STONE marks as keywords. The district court reasoned that trademarked keywords are functional when entered into the Google AdWords program in that they serve a role in Google’s indexing function and, therefore, such use of trademarked terms was non-infringing as a matter of law. However, the appellate court held that the functionality doctrine “simply does not apply in these circumstances.” This doctrine is not applicable where Rosetta Stone’s use of its mark is not functional, and any usefulness of the mark to Google in its software program is irrelevant. The appellate court noted that Google may very well be able to establish that its use of trademarked terms is non-infringing, but summarily rejected any attempt to use the functionality doctrine to do so.
The reversal of the functionality doctrine in this case breathes new life into the hunt for brand protection in keyword advertising, but the battle is far from over. The case is now remanded to the trial court for further proceedings where the parties will continue to wage war over keyword advertising.