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Rosetta Stone v. Google Reversal – Dilution and Confusion of Trademarks by Google in Adwords

On April 9, the Fourth Circuit Court of Appeals reversed a large portion of the District Court for the Eastern District of Virginia’s ruling in Rosetta Stone Ltd. v. Google, Inc.  Rosetta Stone sued Google for trademark infringement of certain key phrases.  Google has an advertising program, AdWords, that allow third parties to buy certain phrases, so that when someone types in that phrase, that third party’s website will be at or near the top of the search list.  Rosetta Stone argued that not only did Google do this without permission, but sold key phrases to competitors as well as companies making counterfeit Rosetta Stone products, which is misleading to some consumers.

The District Court ruled that Google did not infringe on any protected material, stating that Google did not intend to deceive people, there was no actual confusion, and people are sophisticated enough to know the difference between a “real” site and one that is producing counterfeit products.  The Fourth Circuit reversed this, citing Google’s own internal studies that AdWords might cause confusion, and testimony of actual customers that bought counterfeit products due to confusion.  The Court ruled that there is a material issue of fact that should be heard by a jury.

Several very prominent companies have voiced support for Rosetta Stone, asserting that they, like Rosetta Stone are worried about their trademark being diluted and confusion arising in their customers.  This case could potentially have huge ramifications on Google; it is the first case where a Court has opened the door to infringement suits against Google based on customer confusion.  If the jury finds in favor of Rosetta Stone, this could potentially affect any company that has a website, because they could all assert that customers are being misled by Google’s AdWords program, and bring a similar suit.  If the Court rules in favor of Rosetta Stone it will have a significant impact on Google’s business model.

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