Talisman or Touchstone? Fourth Circuit Polishes Internet Trademark Law

May 14, 2012, 3:58 PM

Does the newness of internet technology excuse a company from using a competitors trademark as a keyword for a sponsored ad link to lure customers to its internet pages? Apparently not. In Rosetta Stone Ltd v. Google Inc., (4th Cir., No. 10-2007, 4/9/12), the Fourth Circuit Court of Appeals overturned the special internet trademark rules imposed by a District Court and clarified that the likelihood of confusion analysis within the internet context should follow traditional trademark standards.

Maker of the now famous foreign language learning products, Rosetta Stone, complained that Google was allowing Rosetta Stone competitors to use its federally registered trademarks as key words that triggered the competitors advertisements to appear on the internet when the trademark was entered as a search term on Googles search engine. Google had included several Rosetta Stone trademarks, including language library, global traveler and Rosetta Stone, in its AdWords sponsored advertisement program. Rosetta Stone alleged that Googles sale of itstrademarks to unrelated third parties for use in sponsored advertising caused consumers to followthe unaffiliated sponsored link advertisementsbased on the mistaken belief that the associated links/websites were owned by or affiliated with Rosetta Stone when, in fact,they arenot. The Eastern District of Virginia Court (Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531 (E.D. Va. 2010), granted Googles motion for summary judgment holding in part that no reasonable trier of fact could find that Googles practice of auctioning Rosetta Stones trademarks as keyword triggers to third party advertisers creates a likelihood of confusion as to the source and origin of Rosetta Stones products The Court also found that the use of the marks as search engine keywords was protected under the functionality defense as the keywords served an indexing function to pull up the advertisements.

In reversing this decision, the Fourth Circuit pushed aside the District Courts internet based analysis and held that the case raised triable issues of fact under traditional likelihood of confusion principles. The Court explained that evidence of actual confusion - in house studies of confusion, expert reports and survey evidence - was not properly considered on this issue. The Court also reversed the district court's approval of a functionality defense emphatically stating that: "it is irrelevant whether Googles computer program functions better by use of Rosetta Stones nonfunctional mark." Clearly, there is nothing functional about Rosetta Stone's use of its own mark; use of the words Rosetta Stone is not essential for the functioning of its language-learning products, which would operate no differently if Rosetta Stone had branded its product SPHINX instead of ROSETTA STONE.

Similarly, the appellate court also reversed the District Courts grant of summary judgment and dismissal of Rosetta Stones dilution claim finding that the lower court had improperly applied Louis Vuitton Malletier S.A. v. Haute Diggity Dog LLC, 507 F.3d 252 (4th Cir. 2007). The District Court had dismissed the claims because Rosetta Stone failed to present evidence to show that Google was using the trademarks to identify its own goods and services and failed to demonstrate that Googles use was likely to impair the distinctiveness or reputation of the Rosetta Stone trademarks. The Fourth Circuit rejected both of these contentions, holding that the trademark statue (15 U.S.C. 1125(c)(3)(A)) requires Googlenot Rosetta Stoneto establish as a defense that it made fair use of the trademarks in a manner other than as an identifier of source. Thus, the district court erroneously required Rosetta Stone to demonstrate that Google was using the ROSETTA STONE mark as a source identifier for Google's own products. The appeals court further held that the district court mistakenly read the Haute Diggity Dog decision to require proof of actual economic loss or reputational injury, rather than a likelihood of dilution.

Stephen E. Noona is the head of Kaufman & Canoles Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group. In his 26 years of practice, he has been counsel in hundreds of intellectual property cases in federal courts across the nation, including over ninety (90) patent cases in the Eastern District and is Fellow in the American College of Trial Lawyers. He regularly appears before the judges in all four Divisions of the Eastern District on intellectual property matters. -Stephen E. Noona