Troutman Sanders LLP: Rosetta Stone Opinion Clarifies Standard for Trademark Infringement Claim in Keyword Advertising Context

Troutman Sanders LLP: Rosetta Stone Opinion Clarifies Standard for Trademark Infringement Claim in Keyword Advertising Context

By Douglas "Doug" D. SalyersJames Moore BollingerMark S. VanderBroek and Michael "Mike" D. Hobbs Jr.

In Rosetta Stone v. Google [enhanced version available to subscribers], the U.S. Court of Appeals for the Fourth Circuit recently clarified the legal standard to be applied in a trademark infringement claim based on purchase and use of another's trademark as a keyword to trigger sponsored link advertising on search engine websites. The Court held that the likelihood of confusion analysis in these cases is governed by traditional trademark legal standards, rather than by specialized standards adopted by the district court, which, among other things, had held that use of a trademark as an advertising keyword was protected by the "functionality doctrine."  

This precedent will apply to trademark infringement claims filed against a competitor who purchases a plaintiff's trademark as a keyword to trigger sponsored advertising links, as well as to claims against a search engine provider.

Rosetta Stone's lawsuit alleged claims of direct, contributory and vicarious trademark infringement, complaining that Google permitted sponsors to purchase the Rosetta Stone trademark as a keyword to trigger the appearance of the sponsor's advertisement and link when the keyword was entered as a search term. The district court granted summary judgment to Google, concluding that: (1) there was no evidence to support a likelihood of confusion of consumers, in part because the search engine provider was not attempting to pass off its goods or services as Rosetta Stone's; and (2) that the use of marks as search engine advertising keywords was protected by a functionality defense, because the keywords served an indexing function in pulling up sponsored advertising links. 

The Fourth Circuit disagreed with these conclusions. It explained that trademark law protects against likelihood of confusion of consumers as to the source or sponsorship of goods or services, and held that the evidence created disputed questions of fact to be tried on whether there was a likelihood of confusion. This evidence included: (1) actual consumer confusion caused by use of the Rosetta Stone marks in the text of sponsored advertising links (which caused at least some consumers to purchase counterfeit Rosetta Stone software); and (2) survey evidence reflecting a 17% confusion rate. The court also held that the functionality defense applied only if the trademark consists of functional features of a plaintiff's product or packaging, and not based on the manner in which a defendant uses a mark. 

Accordingly, the Court reversed summary judgment on the direct and contributory infringement claims and remanded to the district court for further proceedings. (The Court affirmed summary judgment on the vicarious infringement claim.)

Take-Away Points

The Fourth Circuit's opinion clarifies that trademark infringement analysis in a keyword advertising context will follow traditional trademark standards applicable to likelihood of confusion, rather than specialized standards. These standards will apply not only for trademark claims filed against search engine providers, but also for the more common situation in which these claims are filed against a competitor who purchases a plaintiff's trademark as a keyword from the search engine provider and uses them to trigger sponsored advertising links. 

Proving likelihood of confusion in these cases is a fact-specific inquiry, which will require evidence (survey or otherwise) suggesting that consumers are likely to be confused by the manner in which a trademark is used as a keyword to trigger advertising links and/or in the text of the links themselves.

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