We haven’t discussed Google AdWord trademark cases much here lately. For the most part, the courts had determined that using a trademark term to trigger an ad was a use in commerce. Google has generally prevailed, however, because the trademark owners have had trouble proving consumer confusion.
The Fourth Circuit Court of Appeals may have provided trademark owners a little hope in its decision in Rosetta Stone v. Google yesterday. Before we get to the specifics and you go off and file lawsuits against Google, know that you are probably not as famous or as well-funded as Rosetta Stone. Most of the decision dealt with the use of the term Rosetta Stone in the text of the ads and not simply to trigger ads. Nevertheless, the case provides some interesting thoughts on Google’s treatment of trademarks over the years and may re-open the floodgates to suits against Google.
Pre 2004 (I know, way back then)
According to the opinion, 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 trademark usage policy to allow the use of third-party trademarks as keywords even over the objection of the trademark owner. Google later even introduced a trademark-specific keyword tool that suggested relevant trademarks for Google’s advertising clients to bid on as keywords. Google, however, continued to block the use of trademarks in the actual advertisement text at the request of a trademark owner. At that time, Google’s internal studies suggested the unrestricted use of trademarks in the text of an advertisement might confuse Internet users.
Finally, in 2009, Google changed its policy to permit the limited use of trademarks in advertising text in four 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.
Google’s policy shift came after it developed the technology to automatically check the linked websites to determine if the sponsor’s use of the trademark in the ad text was legitimate. This change in policy was used against Google to show it knew there was risk in infringement, but proceeded anyway.
Rosetta Stone sued Google claiming Google’s policies concerning
the use of trademarks as keywords and in ad text created not
only a likelihood of confusion but also actual confusion as well, misleading Internet users into purchasing counterfeit software, especially since 2009.
Basic Trademark Law
To establish trademark infringement under the Lanham Act, a plaintiff must prove: (1) that it owns a valid mark; (2) that the defendant used the mark “in commerce” and without plaintiff’s authorization; (3) that the defendant used the mark (or an imitation of it) in connection with the sale, offering for sale, distribution, or advertising” of goods or services; and (4) that the defendant’s use of the mark is likely to confuse consumers.
To determine the whether there is consumer confusion for a direct infringement claim, there is a list of nine factors courts are generally suppsoed to consider. The trial court focused on three: (1) defendant’s intent; (2) actual confusion; and (3) the consuming public’s sophistication.
The trial court then ruled on a summary judgment that all three “disputed” factors favored Google. The court of appeals said that perhaps there were sufficient factual issues that should be determined by the jury rather than through a summary judgment.
Google argued its burden was lessened when they used the Rosetta Stone marks for a nominative use. A nominative use is one in which the defendant uses the plaintiff’s trademark to identify the plaintiff’s own goods, and “makes it clear to consumers that the plaintiff, not the defendant, is the source of the trademarked product or service.” This usually applies to comparison or review sites.
Google argued the use of the Rosetta Stone marks in the ad text was the same — it was clear the sites were not the official Rosetta Stone sites. Rosetta Stone countered with evidence of purchasers who believed they were purchasing Rosetta Stone software on the sites of authorized resellers, but received counterfiet programs instead. The court determined that raised a question of whether Google used the trademarked term in a way that caused confusion as to “affiliation, connection or sponsorship.”
In an interesting discussion about us, Google succesfully argued to the trial court it was entitled to summary judgment because Rosetta Stone users are sophisticated and should not be confused in light of the cost of the software and the type of audience interested in it. The trial court inferred that Rosetta Stone consumers “would tend to demonstrate that they are able to distinguish between the Sponsored Links and organic results displayed on Google’s search results page.” The court of appeals said the inference may very well be correct, but there needed to be evidence to support it and perhaps a trial to prove it.
The court rejected Google’s argument that the mark was more one of functionality. The functionality doctrine is more commonly considered in the trade dress context. Coca-Cola, for example, can’t get trade dress protection for a 12 ounce can because a 12 ounce aluminum can is a matter of function. Coca-Cola can get protection in a red can with a large white mark going through it with white cursive writing. That is a matter of trade dress and not functionality of the can.
The trial court, however, suggested Rosetta Stone, to trigger a keyword was functional. The trial court wrote:
The keywords . . . have an essential indexing func-
tion because they enable Google to readily identify
in its databases relevant information in response to
a web user’s query . . . [T]he keywords also serve an
advertising function that benefits consumers who
expend the time and energy to locate particular infor-
mation, goods, or services, and to compare prices.
The court of appeals nixed the functionality defense for search engine cases. The court of appeals ruled functionality does not depend on how Google uses the trademark (to trigger ads), but on how the trademark owner uses it (to market language software).
In alarming news for Google, the court of appeals reversed the trial court’s dismissal of the contributory infringement claim. Under contributory infringement, a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorily responsible for any harm done as a result of the deceit. It usually applied in the counterfeit market.
It is not enough to have general knowledge that some percentage of the purchasers of a product or service is using it to engage in infringing activities; rather, the defendant must supply its product or service to “identified individuals” that it knows or has reason to know are engaging in trademark infringement.
Rosetta Stone argued the use of the trademark to trigger ads, a practice of which Google knew about and allowed, was sufficient to hold Google liable. You could see how Google would be concerned about a negative ruling on this claim. The court said that the trial court placed the burden on Rosetta Stone during the summary judgment proceedings rather than simply asking if there were fact issues that needed to be tried. Unfortunately, for the rest of us, the court failed to state exactly what evidence Rosetta Stone presented other than its claim that triggering an ad could amount to contributory infringement.
Google does have a process that allows mark owners to complain and request the delisting of counterfeit makers. That may be enough to ultimately prevail on this claim, but for now, a jury may have to decide this. A similar program was sufficient for eBay to avoid a contributory claim by Tiffany’s, but that was only after a full trial.
Finally, the court of appeals revived the federal trademark dilution claim. The Federal Trademark Dilution Act currently provides:
[T]he owner of a famous mark . . . shall be entitled
to an injunction against another person who . . . com-
mences use of a mark or trade name in commerce
that is likely to cause dilution by blurring or dilution
by tarnishment of the famous mark, regardless of the
presence or absence of actual or likely confusion, of
competition, or of actual economic injury.
The court of appeals said that Rosetta Stone would need to prove its mark was famous when Google first began engaging in any allegedly diluting behavior. If Rosetta Stone prevails, it may be entitled to an injunction.
What does it all mean?
The ruling is bad for Google, but not necessarily the end of a war. The court of appeals simply sent the case back to the trial court allowing Rosetta Stone to prove its case — a still difficult hurdle. As I mentioned before, most plaintiffs aren’t Rosetta Stone. While Google will have to spend much more in legal fees to fight this and the likely copycat lawsuits, Rosetta Stone clearly invested a lot of money as well.
Professor Goldman in his Technology and Marketing Law Blog wrote:
In this sense, the opinion reminded me of last week’s Viacom v. YouTube ruling–both opinions were soulless omnibus rulings that give superficial (but ultimately false) hope to plaintiffs while remanding the case to an almost certain defense win (just at a much higher cost).
He adds that the court of appeals was forced to fix some “cut corners” by the trial court. By doing so, however, the court of appeals missed the big picture and only prolonged the eventual death of AdWords trademark suits.
It is clear this is a setback for Google. The interesting part will be to see how trademark owners use this case for future suits against Google and competitors.