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November 2012

Did Adwords Translate Into Sadwords For Rosetta Stone?

Will anyone ever obtain a final ruling that Google Inc.’s AdWords campaign constitutes trademark infringement? Just last month in one of the latest AdWords disputes, Rosetta Stone Inc. and Google submitted a joint stipulation of dismissal (with prejudice), having entered into a confidential settlement agreement. This settlement comes on the heels of a decision in Rosetta’s favor finding sufficient evidence to survive summary judgment as to likelihood of confusion, perhaps the missing link in the cases against Google AdWords.

On July 10, 2009, Rosetta sued Google in the Eastern District of Virginia alleging direct, contributory, and vicarious trademark infringement, trademark dilution, and unjust enrichment. Google moved to dismiss the unjust enrichment claim and for summary judgment on the trademark claims. The District Court granted all of Google’s motions. Rosetta Stone Ltd. v. Google Inc., 730 F.Supp.2d 531 (E.D. Va. 2010). Rosetta appealed.

On April 9, 2012 the U.S. Court of Appeals for the Fourth Circuit issued its holding. The Court affirmed the dismissal of the unjust enrichment and vicarious infringement claims, but vacated and remanded the direct infringement, contributory infringement, and dilution claims. Rosetta Stone v. Google, 676 F.3d 144, (4th Cir. 2012).

AdWords & Keyword Suggestion Tool

What are AdWords and how do they relate to trademark infringement? AdWords is the name of Google’s advertising program in which an advertiser pays Google in order to have the advertiser’s ad appear when a user types in a certain term (whether a federally-protected trademark or not). Take a semi-hypotehtical example: Spangler Candy Company (the maker of Dum Dums lollipops) is a competitor of Tootsie Roll Industries. Assume that, through the AdWords program, Spangler pays Google to have the “TOOTSIE ROLL” terms (or keywords) link to Spangler’s advertisements. The result is that when a user of Google’s Internet search engine enters “TOOTSIE ROLL” as a search term (presumably searching for Tootsie Rolls or Tootsie Roll Pops), Spangler’s advertisements—with links to Spangler’s webpage—for Dum Dums lollipops will appear on the same page as the relevance-driven results.

AdWords is often used in conjunction with Google’s Keyword Suggestion Tool program. In this program, Google not only “sells” the trademarks of one company to another, but will actually recommend them. So when Spangler “buys” the “TOOTSIE ROLL” AdWord for its advertising, Google might also suggest “CHARMS” and “BLOW POPS” (also federally-protected trademarks of Tootsie Roll Industries) to Spangler, as being relevant terms in the lollipop industry.

Beyond the described “transactions” in trademarks, it is Google’s placement of the AdWords-generated advertisements with respect to the relevance-driven results that has ruffled so many feathers. In many instances, the AdWords-generated advertisement will appear in a horizontal bar at the very top of the search results page. These advertisements are set off from the relevance-based result links by appearing in a just-slightly-more-beige box than the white background and have the tagline “Ad related to Tootsie Roll” (for example) in small, greyed font. Otherwise, however, they look and function much like their relevance-based counterparts below. As users have come to expect Google’s relevance-driven results to be displayed with most relevant results first, having a competitive ad before the first relevant result might just be confusing for some users.

Whether this display of AdWords-generated ads proximate to relevance-generated results confuses consumers seems to be the last question in the cases against Google’s AdWords. And this is precisely the question on which the Fourth Circuit just granted Rosetta Stone (and all others similarly placed). But then Rosetta Stone entered into a settlement with Google and voluntarily dismissed its case.


This is not the first time Google has enticed a plaintiff to give up early. In 2003, Rescuecom Corp., a national computer service franchising company offering on-site computer services and sales, sued Google. Rescuecom alleged that Google’s recommendation and sale of Rescuecom’s trademark to its competitors through its Keyword Suggestion Tool and AdWords programs caused consumers searching for Rescuecom to mistakenly believe that a competitor’s advertisement was affiliated or franchised by Rescuecom. Google responded with a 12(b)(6) motion to dismiss asserting that Google’s Keyword Suggestion Tool and Adwords programs did not constitute “use in commerce,” an essential element of Rescuecom’s trademark infringement claim.

Relying on the Second Circuit’s 2005 1-800 Contacts decision,1 the District Court for the Northern District of New York granted Google’s motion. Rescuecom Corp. v. Google Inc., 456 F. Supp. 2d 393 (N. Dist. NY 2006). On Rescuecom’s appeal, the Second Circuit distinguished the facts before it from its earlier 1-800 Contacts holding, and determined that Google’s Keyword Suggestion Tool and Adwords indeed constituted “use in commerce” and remanded the case to the District Court for further consideration. Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2nd Cir. 2009).

With a major victory in its pocket, Rescuecom seemed poised to litigate the remaining element of infringement (that Google’s use of Rescuecom’s trademarks create a likelihood of confusion among Rescuecom’s consumers and potential consumers). But then Rescuecom and Google entered into a settlement. Rescuecom dropped its suit, presenting it as a victory:

Rescuecom can finally declare victory in its effort to protect how its trademark ‘Rescuecom’ is treated on Google’s search engine.. . . Google has recently confirmed to Rescuecom that it has removed Rescuecom’s trademark from its Keyword Suggestion Tool. ‘We have obtained two of the three things we initially sought in our complaint against Google.’ Says Rescuecom CEO, David Milman, explaining the computer repair and support company’s recent agreement to discontinue the lawsuit.

The last of the three issues, which remains to be resolved another day, is how trademarks may be used as keywords to trigger the sponsored links themselves in a way that does not confuse consumers.2

While Rescuecom declared victory, over “Googleiath,” Rosetta Stone has declared friendship:.

Rosetta Stone Inc. and Google have agreed. . . to meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet. . . . By working together, Google and Rosetta Stone hope to improve detection methods, and better protect from abuse brands like Rosetta Stone, advertising platforms like Google AdWords, and ultimately consumers on the Internet.

Did Rosetta just say they want to collaborate to protect AdWords from “abuse”? This seems a strict departure from Rosetta Stone’s complaint—painting AdWords as inherently infringing3— as well as Rosetta’s earlier statement: “Google's search engine is helping third parties to mislead consumers and misappropriate the Rosetta Stone marks by using them as 'keyword' triggers for paid advertisements and by using them within the text or title of paid advertisements.”

AdWords: Invincible or One Foot in The Grave?

Although Google has faced several trademark infringement lawsuits against AdWords, there has yet to be a final judgment of infringement. But Rosetta Stone establishes—for the first time— that the AdWords-sponsored links may be confusing to consumers. Together with the Rescuecom holding, this decision may well open the door for more companies to sue Google on these grounds.

But will anyone be better poised than Rosetta? Aside from having a famous trademark and adequate resources, Rosetta had evidence of actual consumer confusion: consumers who purchased counterfeit Rosetta Stone software from sponsored links on Google that they mistook for the genuine brand. Further, there was an internal Google study finding that even sophisticated consumers were sometimes unaware that sponsored links were advertisements. Finally, Rosetta had the support of many amici, including industry giants INTA, Chanel, Coach, Tiffany, Swarovsky, Rolls-Royce, Viacom, TiVo, Ford Motor Co., Geico, Carfax, 1-800 Contacts, PetMed, Oakley, NFL, PGA, and the list goes on. But with its deep pockets and obvious strategy, Google may simply continue to co-opt plaintiffs to ensure the continued revenue of AdWords.

So while the case against Google AdWords may be slowly mounting, for now trademark owners are left with uncertainty. Regardless of the eventual resolution of Google’s liability, trademark owners still have recourse against the purchasers of the competitive AdWords advertising, for which plaintiffs have met with some concrete successes.

1 1-800 Contacts, Inc. v., Inc., 414 F.3d 400 (2d Cir. 2005).
3 “These targeted ‘Sponsored Link’ results are not meaningfully or conspicuously identified to consumers as paid third-party advertisements. Google posts its ‘Sponsored Link’ advertisements in a color, typeface, and font size that are not appreciably different than the "organic search results" that Google generates. On information and belief, even the designation of these keyword-triggered ‘results’ as ‘Sponsored Links’ is confusing to many consumers, because Google does not inform consumers who has done the ‘sponsoring.’”

Intellectual Property

Intellectual Property