This case involved Rosetta Stone's appeal from the district court's grant of Google's motion to dismiss and motion for summary judgment on Rosetta Stone's trademark-related claims. (The district court's order on the motion to dismiss is found here; its order on the motion for summary judgment is found here.)
Rosetta Stone in essence alleged that Google's policies allowing advertisers both to purchase keywords, including trademarks, that trigger the advertiser's ad and link when the keyword is searched and to use trademarks in the ad text itself created a likelihood of confusion and actual confusion that misled consumers to purchase counterfeit ROSETTA STONE software.
Rosetta Stone sued Google for direct, contributory, and vicarious trademark infringement, trademark dilution, and unjust enrichment.
As noted, Google's motion to dismiss Rosetta Stone's unjust enrichment claim was granted as was its summary judgment motion on all remaining claims. The Fourth Circuit reversed the district court's order on the direct infringement, contributory infringement, and dilution claims but affirmed it on the vicarious infringement and unjust enrichment claims.
First, the issues on which the Fourth Circuit reversed the district court.
As to Rosetta Stone's direct trademark infringement claim, the Fourth Circuit concluded that the district court had erred both in finding that there was no genuine issue of material fact as to whether Google's use of the ROSETTA STONE mark created a likelihood of confusion and in concluding that the functionality doctrine shielded Google from liability.
On the likelihood of confusion issue, the Fourth Circuit concluded that the district court had inappropriately viewed the evidence as it would in a bench trial and that there was sufficient evidence of three of the likelihood of confusion factors--intent, actual confusion, and consumer sophistication--to create a genuine issue of fact precluding summary judgment.
As to the district court's conclusion that the use of the ROSETTA STONE marks as keywords was protected by the functionality doctrine and therefore non-infringing, the Fourth Circuit held that the district court had improperly focused on whether the marks made Google's product more useful when the appropriate question was whether the marks were functional as Rosetta Stone used them. Because there was nothing functional about Rosetta Stone's use of its own marks, the Fourth Circuit rejected the functionality doctrine as an affirmative defense available to Google.
On contributory infringement, the Fourth Circuit concluded that there was sufficient evidence "to establish a question of fact as to whether Google continued to supply its services to known infringers," and thus reversed the district court's decision to the contrary.
As to the dilution claim, the Fourth Circuit concluded that neither basis for the district court's decision supported a grant of summary judgment.
The Fourth Circuit concluded that the district court had erred in requiring Rosetta Stone to establish, as part of its prima facie case, that Google was using the ROSETTA STONE marks as source identifiers for Google's own products and basing that requirement on the fair use defense available under the Federal Trademark Dilution Act ("FTDA").
Not only was it Google's rather than Rosetta Stone's obligation to establish fair use, the Fourth Circuit concluded that the district court had erred in making "nontrademark use coextensive with the 'fair use' defense." Specifically, the Fourth Circuit held that the FTDA's fair use defense required a showing both "that defendant's use was 'other than as a designation of source'" and that "defendant's use . . . qualif[ied] as a 'fair use.'"
The Fourth Circuit likewise concluded that the district court had improperly focused only on the fact that Rosetta Stone's brand awareness had increased since Google had revised its trademark policy in finding that Rosetta Stone had failed to show that use of the marks was likely to impair the distinctiveness or harm the reputation of its marks. On remand, the Fourth Circuit stated that the district court should address other factors that may inform its determination of that question.
The Fourth Circuit also directed the district court on remand to reconsider whether Rosetta Stone's mark was famous for purpose of its dilution claim, which required a determination of when Google made its first allegedly diluting use of the mark and whether the mark was famous at that point.
Second, the two issues on which the Fourth Circuit affirmed the district court's decision.
On the vicarious infringement question, the Fourth Circuit concluded that Rosetta Stone's evidence that Google jointly controls the appearance of ads or sponsored links on its search-results page was not evidence "that Google acts jointly with any of the advertisers to control the counterfeit ROSETTA STONE products" and therefore summary judgment in favor of Google was proper.
And as to the unjust enrichment claim, the Fourth Circuit concluded that Rosetta Stone's allegations were insufficient to withstand even a motion to dismiss and thus affirmed the district court's order. Specifically, the Fourth Circuit held that "Rosetta Stone failed to allege facts showing that it 'conferred a benefit' on Google for which Google 'should reasonably have expected' to repay."
Rosetta Stone alleged that Google's keyword auctions of the ROSETTA STONE marks was an involuntary benefit that it conferred on Google and that Google is therefore "knowingly using the goodwill" established by those marks to derive revenues. But the Fourth Circuit concluded that Rosetta Stone had not "alleged facts supporting its general assertion that Google 'should reasonably have expected' to pay for the use of marks in its keyword query process."
The case cite is Rosetta Stone Ltd. v. Google, Inc., No. 10-2007 (4th Cir. Apr. 9, 2012).