Google’s AdWords is a powerful advertising platform. But what happens when a competitor bids on your trademark, or slips your mark and brand name into its website’s metatags in order to lure away a potential customer searching for your business?
Not surprisingly, companies who lost the placement wars weren’t too happy and commenced trademark infringement lawsuits against the competitor and the search engine that sold the keyword bids and advertising placement. However, suits against Google and similar search engines died in August 2010, after a District Court’s opinion in Rosetta Stone Ltd. v. Google, Inc., 2010 WL 3063152 (E.D. Va. August 3, 2010). But the flood gates may soon be opened.
The 4th Circuit in Rosetta Stone Ltd. v. Google, Inc., 2012 WL 1155143 (4th Cir. April 9, 2012) gave Rosetta Stone another chance. The bulk of the District Court’s decision was reversed, allowing Rosetta Stone to proceed to trial. Although the Rosetta Stone litigation will not be resolved relatively soon, the 4th Circuit’s decision is significant because (1) it clarifies that trademark infringement analysis in a keyword advertising context will follow the traditional legal standard applicable to likelihood of confusion; and (2) it establishes that a company can bring a trademark infringement action against Google, and similar search engines, on the basis that the sponsored links are confusing to the customers.
At the District Court level, Google argued that it legitimately used trademarks as keyword triggers to help make consumers make more informed choices, and its use of the trademarks are “functional” to its business, thus making it immune to trademark infringement claims. The District Court agreed and concluded that (1) there was no evidence to support a likelihood of confusion of consumers, in part because the search engine provider was not attempting to pass off its goods or services as Rosetta Stone’s; and (2) that the use of marks as search engine advertising keywords was protected by a functionality defense, because the keywords served an indexing function in pulling up sponsored advertising links.
In reversing the decision, the Fourth Circuit held that trademark law protects against likelihood of confusion of consumers as to the source or sponsorship of goods or services, and held that the evidence created disputed questions of fact to be tried on whether there was a likelihood of confusion. The court also held that the functionality defense applied only if the trademark consists of functional features of a plaintiff’s product or packaging, and not based on the manner in which a defendant uses a mark.
Accordingly, traditional trademark standards of likelihood of confusion apply in keyword advertising, rather than specialized standards. These traditional standards are not only applicable to trademark claims filed against search engine providers, but also to the more common situation in which these claims are filed against a competitor who purchases a plaintiff’s trademark as a keyword from the search engine provider and uses them to trigger sponsored advertising links.
The Rosetta Stone lawsuit and its outcome will be closely watched by both search engine providers and the business community. No doubt, Google will be aggressively defending this action given that Google’s Adwords raked in $32 billion last year, or 97% of the company’s total revenue. Knowing this, many large companies have lined-up their support to Rosetta Stone and some have even filed similar suits against Google. No doubt, the Rosetta Stone decision has opened the door wide for companies to not only sue their competitor for trademark infringement, but also the search engine giants that sold the keyword bids and advertising placement.