Rosetta Stone Ltd. v. Google, Inc.

676 F.3d 144 · Court of Appeals for the Fourth Circuit · 2012

Facts

Rosetta Stone, a language-learning software company, sued Google, alleging trademark infringement and dilution related to Google's AdWords program. Google's policy changes allowed third-party advertisers to bid on Rosetta Stone's trademarks as keywords and use them in ad text, leading to consumer confusion and the sale of counterfeit products. Rosetta Stone reported numerous instances of counterfeit ads to Google.

Issue

Did the district court err in granting summary judgment to Google on Rosetta Stone's claims of direct trademark infringement, contributory trademark infringement, and trademark dilution, and in dismissing the unjust enrichment claim? Specifically, were there genuine issues of material fact regarding likelihood of confusion, Google's knowledge of infringement, and the application of the functionality doctrine or fair use defense in dilution?

Holding

The Court of Appeals affirmed the district court's grant of summary judgment for Google on the vicarious infringement and unjust enrichment claims. However, it vacated the summary judgment orders for direct trademark infringement, contributory trademark infringement, and trademark dilution, remanding these claims for further proceedings.

Rule

For direct infringement, likelihood of confusion is a factual issue, and evidence of intent, actual confusion (including sponsorship confusion), and consumer sophistication must be properly weighed. The functionality doctrine applies to product features, not a trademark's use as a source identifier. Contributory infringement requires showing the defendant supplied services to identified individuals known to be infringing, and evidence of willful blindness can satisfy this. Trademark dilution requires a famous mark, and the defendant's use must commence *after* the mark became famous; fair use is an affirmative defense requiring good faith and non-source-identifying use.

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