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Who Is Using Your Trademark? (Google II)

New Legal Developments in Keyword Advertising

Go ahead: after you google yourself, google your company name. We’ll wait. Hold on – did you see that? Above your company name is an ad from someone pretending to be a reseller of your product – but you’ve never heard of them. Can they do that? Can companies use your company name as a keyword when advertising with Google? A recent appellate decision from Virginia casts doubt about that.

The company that makes the language software “Rosetta Stone” sued Google in Virginia, contending that Google allowed competitors to use the term “Rosetta Stone” as an advertising keyword: whenever someone typed “rosetta stone” into the Google search engine, sponsored links featuring Rosetta Stone’s competitors popped up above or to the right of the actual search results. Rosetta Stone does not get any revenue for the sponsored link – Google gets all that.

According to the Fourth Circuit Court of Appeal,

“Prior to 2004, Google’s policy precluded both the use of trademarks in the text of an advertisement and the use of trademarks as keywords upon request of the trademark owner. In 2004, Google loosened its trademark usage policy to allow the use of third-party trademarks as keywords even over the objection of the trademark owner. Google later even introduced a trademark-specific keyword tool that suggested relevant trademarks for Google’s advertising clients to bid on as keywords. Google, however, continued to block the use of trademarks in the actual advertisement text at the request of a trademark owner. At that time, Google’s internal studies suggested the unrestricted use of trademarks in the text of an advertisement might confuse Internet users.

“Finally, in 2009, Google changed its policy to permit the limited use of trademarks in advertising text in four situations: (1) the sponsor is a reseller of a genuine trademarked product; (2) the sponsor makes or sells component parts for a trademarked product; (3) the sponsor offers compatible parts or goods for use with the trademarked product; or (4) the sponsor provides information about or reviews a trademarked product. Google’s policy shift came after it developed the technology to automatically check the linked websites to determine if the sponsor’s use of the trademark in the ad text was legitimate.”

Since 2009, Rosetta Stone had complained to Google that companies had been advertising as resellers of Rosetta Stone products when they were not associated with Rosetta Stone. Indeed, Rosetta Stone had received many complaints about “resellers” selling counterfeit products.

The District Court in Virginia awarded judgment to Google two years ago, finding that there was no chance of confusion, despite the deposition testimony of five consumers who had relied upon Google’s sponsored links to buy what turned out to be pirated Rosetta Stone software, and hundreds of complaints to Rosetta Stone about counterfeit software purchased online.

The Fourth Circuit reversed, finding that the district court ignored the substantial evidence that Google’s trademark use policy could harm owners of legitimate trademarks. Google itself had earlier concluded that many Google users were confused when trademarks were included in the title or body of advertisements, but elected to risk that confusion, because about 7% of its total revenue was because of trademarked keywords.

If Google Can’t Figure It Out . . . . The most devastating evidence came from two of Google’s own trademark lawyers, who testified on behalf of Google. They “were shown a Google search results page for the keyword phrase ‘Rosetta Stone,’ and they were unable to determine without more research which sponsored links were authorized resellers of ROSETTA STONE products.” The Fourth Circuit found that such uncertainty “is quintessential actual confusion evidence.”

No Help for Google at Function Junction. The appellate court also rejected a novel use the functionality doctrine. While Coca-Cola might be able to trademark the shape of the traditional Coca-Cola bottle, it cannot trademark the functionality of the bottle – the concept of a container. Google claimed that trademarks became mere functionaries when used for a keyword search. While the trial court bought that argument, the appellate court did not:

“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 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.”

Had Google prevailed on that argument, it would have had free run to use anyone’s trademarks any way Google chooses.

What It Means. This case will go back to the trial court for a trial, unless Google and Rosetta Stone settle the case. While Google no doubt appreciates that 7% of revenue derived from the searching for trademarks, getting entangled with counterfeiters is not in the company’s long-term interest. Expect a quiet settlement that gives more control to trademark owners about the use of their trademarks in search engines.

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