Rosetta Stone, a leading language-learning software producer, sued Google for trademark infringement and dilution based on Google’s sale of Rosetta Stone’s marks as keywords. In 2010, the District Court for the Eastern District of Virginia entered summary judgment against Rosetta Stone’s trademark claims (direct, contributory, and vicarious trademark infringement; dilution), and dismissed Rosetta Stone’s unjust enrichment claim. See Rosetta Stone Ltd. v. Google, Inc., 730 F. Supp. 2d 531 and 732 F. Supp. 2d 628 (E.D. Va. 2010).
Rosetta Stone appealed. On April 9, 2012, the Fourth Circuit issued its long-awaited decision. See Rosetta Stone Ltd. v. Google, Inc., — F.3d –, No. 10-2007, 2012 WL 1155143 (4th Cir. April 9, 2012). The Court reversed the district court’s summary judgment rulings in Google’s favor on Rosetta Stone’s three most important claims – for direct infringement, contributory infringement, and dilution. The decision is notable for the Court’s frank criticism directed at the district court’s orders, finding substantial flaws in the district court’s analysis of both the factual record and the applicable legal doctrine. The Fourth Circuit’s analysis contains a number of important assessments of actual confusion evidence, a defendant’s level of knowledge necessary to prove contributory infringement, the possibility of a plaintiff’s proving dilution when recognition of the plaintiff’s mark actually increased during the relevant time period, and several other matters. In light of these determinations, the Fourth Circuit’s affirmance of summary judgment on Rosetta Stone’s claims for vicarious infringement and dismissal of Rosetta Stone’s unjust enrichment claim provides scant comfort for Google.
The Fourth Circuit’s decision may well influence the approach to keyword advertising cases under U.S. trademark law. With this decision, the law would seem to have become more favorable to trademark owners whose marks are being sold and used as keywords. Search engines may reconsider some of their keyword advertising practices. Parties who use others’ trademarks as keywords for their own sponsored links may wish to assess whether any of their practices may be affected by the Fourth Circuit’s analysis. This is particularly true for situations in which the trademarks used as keywords also appear in the text of a sponsored link. In the meantime (and barring a settlement), the fate of Google’s current keyword advertising model stands to be determined by a jury.
II. A Circuit Split in the Making?
The Fourth Circuit’s evaluation of the evidence of actual and likely consumer confusion stands in contrast to two recent decisions from the Ninth Circuit, Toyota Motor Sales, USA, Inc., v. Tabari, 610 F.3d. 1171 (9th Cir. 2010) and Network Automation, Inc., v. Advanced System Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011). The Ninth Circuit premised these decisions on its finding that consumers have become sophisticated in exploring search engine results, including sponsored links. According to the Ninth Circuit, consumers understand what sponsored links are, recognize them by their labels and graphic set-offs on search results pages, and are “ready to hit the back button whenever they’re not satisfied with a site’s contents.” Tabari, 610 F.3d at 1179; see also Network Automation, 638 F.3d at 1152. Moreover, “consumers don’t form any firm expectations about the sponsorship of a website until they’ve seen the landing page – if then. This is sensible agnosticism, not consumer confusion.” Tabari, 610 F.3d at 1179.
Contrast this with the Fourth Circuit’s observation in Rosetta Stone that “even well-educated, seasoned Internet consumers are confused by the nature of Google’s sponsored links and are sometimes even unaware that sponsored links are, in actuality, advertisements. At the summary judgment stage, we cannot say on this record that the consumer sophistication factor favors Google as a matter of law.” In fact, the Court noted, such uncertainty constitutes “quintessential actual confusion evidence.” Rosetta Stone at *10.
“Sensible agnosticism” versus “quintessential actual confusion evidence” – these are rather different, and potentially outcome-determinative, evaluations of rather similar states of mind. It remains to be seen how these two different approaches will play out in the evolution of trademark law as it relates to keywords and sponsored links. (more…)