Question Of Whether It’s Legal To Use Trademarks As Keywords Revived On Appeal in Rosetta Stone/Google Case

The U.S. Court of Appeals for the Fourth Circuit today revived part of Rosetta Stone’s trademark lawsuit against Google, meaning the search giant’s permitting the use of trademarked terms in AdWords is still legally questionable in the United States. It’s the first time an appellate court has ruled in a case of this kind.

Previously, a federal court in the Eastern District of Virginia issued a summary judgment in the case in 2010, essentially saying that the language software maker didn’t have a valid trademark infringement claim against Google. Rosetta Stone appealed.

The company had accused Google of trademark infringement, contributory and vicarious trademark infringement, trademark dilution and unjust enrichment — all related to Google allowing advertisers to use Rosetta Stone’s trademarks as either keywords or ad text in its AdWords program.

Though the appeals court affirmed the lower court’s decision with respect to the vicarious infringement and unjust enrichment claims, the judges said the direct infringement, contributory infringement and dilution claims need to be sent back to the Virginia court for further action.

In the direct infringement matter, the appellate court believes the lower court didn’t properly or fully consider some of the evidence, especially where a likelihood of confusion is concerned. Additionally, though the district court applied the “functionality doctrine” in the case, saying that Rosetta Stones trademarks became a part of the function of Google’s technology, the appeals court said the functionality doctrine doesn’t apply.

On the subject of contributory infringement, at issue is whether Google knew or should have known that people using its service were infringing on Rosetta Stone’s trademarks. The court of appeals said this question deserves a closer look, rather than a summary judgment.

Additionally, the court of appeals found that the lower court hadn’t properly applied the legal precedents with regard to trademark dilution, so that matter needs to be reconsidered.