Unauthorized Use of Trademarks in Keyword Advertising

Unauthorized Use of Trademarks in Keyword Advertising

Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144 (4th Cir. 2012) [enhanced version available to lexis.com subscribers] presented the Fourth Circuit with challenging questions involving federal trademark infringement and dilution claims in the context of Google's keyword advertising program. The court squarely addressed several of these questions, while leaving others for future resolution. In this Analysis, Mary LaFrance addresses the issues covered as well as those left unanswered. She writes:

I. Background

     Rosetta Stone, a maker of language-learning software, sued Google for federal trademark infringement and trademark dilution, plus unjust enrichment under Virginia law. The claims arose from Google's use of Rosetta Stone's well-known federally registered trademarks in Adwords, Google's keyword advertising program.

     The Adwords program allowed Rosetta Stone's competitors to "purchase" Rosetta Stone's trademarks so that, when a user entered one of those marks as a search term in Google's search engine, the competitor's advertisement and link would appear in as "Sponsored Links," which were displayed separately from the natural search results, but on the same page. Advertisers bid competitively for their desired keywords in order to obtain the most prominent placement among the Sponsored Links.

     Beginning in 2009, Google also permitted advertisers to use third-party trademarks in the text of their sponsored ads, but only where: (1) the sponsor was a reseller of the trademarked product; (2) the sponsor made or sold parts for the trademarked product; (3) the sponsor offered compatible parts or goods for use with the trademarked product; or (4) the sponsor provided information or reviews relating to the trademarked product. Rosetta Stone contended that some of the advertisers who took advantage of this policy were selling counterfeit Rosetta Stone software.

     The District Court dismissed the unjust enrichment claim and granted summary judgment to Google on all the other claims. Rosetta Stone appealed.

II. The Fourth Circuit's Analysis

A. Direct Infringement

     The question of trademark infringement in Rosetta Stone presents two especially interesting questions - whether there is a functionality defense to infringement of a valid trademark, and whether the sale of trademarks as keyword triggers for online advertising involves a "use" of those marks which is actionable under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1). The Fourth Circuit answered the first of these questions, but not the second.

1. Are Functional Uses Non-Infringing?

     The most controversial aspect of the District Court's trademark infringement analysis was its ruling that Google's use of the plaintiff's trademarks was protected by the doctrine of functionality. It is settled law that a feature is functional, and therefore ineligible for trademark protection, "if it is essential to the use or purpose of the article or if it affects the cost or quality of the article." Ordinarily, an infringement defendant invokes the functionality doctrine to establish that the plaintiff does not own a valid mark, by demonstrating that the plaintiff's putative mark is unprotectable because it is a functional feature of the plaintiff's product. However, the District Court in this case held that a defendant's unauthorized use of a plaintiff's nonfunctional (and thus protectable) mark may be non-infringing if the defendant uses the mark in a functional manner.

(citations omitted)

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