Big keyword advertising decision today: the Fourth Circuit decided Rosetta Stone v. Google.
The court did the right thing. It vacated the district court’s exceedingly Google-friendly decision incorporating sloppy analysis and incorrect application of trademark law, and remanded for the Eastern District of Virginia to reconsider the case in light of proper standards.
In the end, I think the result will be the same — on re-examination, Google won’t be directly or indirectly liable for counterfeiters’ purchase of Rosetta Stone’s trademark as a search engine keyword. But this time, the analysis won’t be tortured and misleading.
For example, the district court found Google wasn’t liable for selling Rosetta Stone’s trademark as a keyword because its use of the mark was functional. That finding stood the functionality doctrine on its ear. The proper place for functionality analysis is to examine the plaintiff’s trademark (or, more commonly, trade dress) for whether it serves a useful purpose. (A trademark isn’t protectable as a trademark if it serves a useful purpose other than identifying the product’s source.) The district court instead examined the defendant’s use of the trademark, which was strange, wrong, and not helpful.
The Fourth Circuit left no room for the district court to get it wrong on remand.
“The functionality doctrine simply does not apply in these circumstances. The functionality analysis below was focused on whether Rosetta Stone’s mark made Google’s more product more useful, neglecting to consider whether the mark was functional as Rosetta Stone used it. Rosetta Stone uses its registered mark as a classic source identifier in connection with its language learning products. 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. Once it is determined that the product feature — the word mark ROSETTA STONE in this case — is not functional, then the functionality doctrine has no application, and it is irrelevant whether Google’s computer program functions better by use of Rosetta Stone’s nonfunctional mark.
“As the case progresses on remand, Google may well be able to establish that its use of Rosetta Stone’s marks in its AdWords program is not an infringing use of such marks; however, Google will not be able to do so based on the functionality doctrine. The doctrine does not apply here, and we reject it as a possible affirmative defense for Google.”
The Fourth Circuit similarly vacated the district court’s dismissal of Rosetta Stone’s claims for direct trademark infringement, contributory trademark infringement, and dilution. It affirmed the district court’s dismissal of Rosetta Stone’s claims for vicarious trademark infringement and unjust enrichment.
The decision is what I had expected, and what I had hoped for. It requires district courts to apply trademark principles with rigor and gives the non-moving party on summary judgment the benefit of the reasonable inferences that can be drawn from the evidence presented, in accordance with established summary judgment principles.
The case cite is Rosetta Stone Ltd. v .Google, Inc., No. 10-2007 (4th Cir. April 9, 2012).