Google Wins Major Victory on Sale of Trademarks as Keywords

13 August 2010 Publication
Authors: Andrew Baum

Legal News Alert: Trademark, Copyright & Advertising

A federal court recently held that Google’s auctioning of Rosetta Stone’s trademarks as triggers for paid advertisements — and the use of those trademarks within the advertisements — creates no likelihood of confusion and therefore does not infringe. It also held that Google’s use of the Rosetta Stone marks does not constitute dilution, contributory infringement, or vicarious infringement. The case is perhaps the first to explore in detail the issue of likelihood of confusion in the Internet search engine context, and is a major victory for companies bidding on trademarks of competitors in order to place targeted advertising on Web sites.

The decision in Rosetta Stone Ltd. v. Google Inc. (Case No. 09cv736, E.D. Va., 8/3/10) is notable because it does not address the issue of whether the sale of keywords constitutes trademark “use” — the issue that has dominated the legal debate over search engine keywords for the past 10 years. Rather, the decision assumes that Google’s actions constitute a potentially actionable trademark use, but grants summary judgment to Google because “no reasonable trier of fact could find that Google’s practice of auctioning Rosetta Stone’s trademarks as keyword triggers to third party advertisers for use in their sponsored link titles and text creates a likelihood of confusion as to the source or origin of Rosetta Stone’s goods.” The court found that users of Google’s search engine understand the difference between “organic” search results and the separately labeled “Sponsored Links.” The decision also is notable because it approves not only the sale of the Rosetta Stone marks as keywords, but the appearance of the marks themselves in the Sponsored Links.

In reaching this conclusion, the court characterized Rosetta Stone’s evidence of five instances of actual confusion since 2004, in comparison to the more than 1 million advertisement impressions triggered since then, as “de minimis.” With little discussion, it also characterized Rosetta Stone’s survey evidence as “unreliable” because the result contained a measure of whether respondents thought Google “endorsed” a sponsored link. According to the court, the perception of endorsement is a “non-issue” since it is not the same as confusion as to the “source or origin of the products.” This holding may be subject to attack if there is an appeal, since substantial case law holds that confusion of any kind — not just confusion as to source or origin — is actionable under the Lanham Act.

The court also made new law by holding that Google’s use of Rosetta Stone’s trademarks was protected by the functionality doctrine. The doctrine “prevents trademark law, which seeks to promote competition by protecting a firm’s reputation, from instead inhibiting legitimate competition by allowing a producer to control a useful product feature” (quoting Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164 (1995)). A feature is functional “if it is essential to the use or purpose of the article or if it affects the cost or quality of the article” (quoting Traffix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001). The court held that Google keywords serve an “essential indexing function” and also affect the cost and quality of Google’s AdWords program because, without it, Google would have to create a less-efficient system for targeting advertisements to the desired audience on its Web site.

On the issue of contributor infringement, Rosetta Stone claimed that Google knew that many of those bidding on the Rosetta Stone trademarks were doing so in order to direct purchasers to Web sites selling counterfeit products, pointing to approximately 200 such incidents in a six-month period. In each case, Google took down the advertisements upon notification by Rosetta Stone. Citing the recent decision in Tiffany Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010), the court held that Google’s generalized knowledge that counterfeiters bid on trademarks to place advertisements does not amount to the sort of “specific contemporary knowledge” warranting a finding of contributory infringement. It found that Google has no mechanism for detecting which vendors are genuine, and that “there is little Google can do beyond expressly prohibiting advertisements for counterfeit goods, taking down those advertisements when it learns of their existence, and creating a team dedicated to fighting advertisements for counterfeit goods.”

The vicarious infringement claim failed because Rosetta Stone failed to show that Google exercises “joint ownership or control over the infringing product,” as required by Perfect 10, Inc. v. Visa Int’l Serv. Assoc., 494 F.3d 788, 807 (9th Cir. 2007). The court held that a mere financial relationship is insufficient to establish joint ownership and control. Google is not in the business of selling goods; rather, it sells space on a search page — just like the owner of a billboard in Times Square — and there was no evidence that Google controls the appearance and content of the Sponsored Links.

Finally, the court gave short shrift to Rosetta Stone’s dilution claim, since Google does not sell language-learning software and does not use the mark to identify any of its own goods or services. It also held that because Rosetta Stone’s brand awareness had increased since 2004 (when Google began implementing its policy allowing the purchase of trademarks as keywords), it could not show any dilution by blurring as a result of Google’s actions.

This decision may mark the beginning of the end of the long debate over the sale of trademarks as keywords for search engines. While trademark owners appear to have won the battle over whether such activity constitutes actionable trademark use (as confirmed most recently by the Second Circuit in Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009)), they have yet to win a final decision holding that such use creates a likelihood of confusion and is therefore an infringement. Google’s AdWords program has become a fact of business life during the past five years, and Internet users have become ever more familiar with the distinction between organic search results and paid advertisements triggered by their search queries. It would appear that trademark owners have an uphill fight in trying to stop this practice in the United States.

Click here to view the full decision.

 


Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Andrew Baum
Partner
New York, New York
212.338.3527
abaum@foley.com

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Andrew Baum

Retired Partner

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