Unfortunate: Appeals Court Revives Misguided Rosetta Stone Lawsuit Against Google

Trademark

from the can't-we-get-this-straight-already?!? dept

There have been a number of silly lawsuits against Google for the fact that companies can buy AdWords ads based on trademarked terms. These lawsuits are problematic on a few different levels. First, using trademarked keywords to trigger ads isn’t infringement. It’s a perfectly reasonable use. In the same way that a supermarket often places coupons for certain brands/products near competing products, advertising competitors is perfectly reasonable. Second, even if there is trademark infringement, it should be limited to the advertiser itself, not to Google, who is merely the platform. Even though a few courts had more or less said this in the past, software company Rosetta Stone decided to sue anyway back in 2009. The lawsuit was dumped pretty quickly, with the court getting the big questions right (though it went a little weird on some of the finer points).

Rosetta Stone appealed, and basically got every company who hates Google to join in on the fun. Not only that, but Rosetta Stone even used its loss as a reason to support SOPA’s predecessor, COICA, saying that Google is “the gateway for criminals into America.”

No, I’m not joking. Rosetta Stone literally said the fact that Google allows competitors to put up ads based on trademarked keywords makes it the (not “a”, but “the”) “gateway for criminals into America.”

Unfortunately, rather than give the company the slap down it deserves, it appears that a somewhat confused appeals court is reviving the case and sending it back to the lower court to reconsider. The reasoning in this 7th Circuit ruling is extremely troubling on a variety of levels.

Quite amazingly, the court actually suggests that there’s a possibility that Google is guilty of direct infringement of Rosetta Stone’s trademarks. This makes no sense. Even if you somehow twisted things to make Google liable in some manner or another, the only possible liability has to be for secondary liability, because it’s not the one directly making use of the trademarks in the first place. It’s providing the platform and the advertisers are using the marks. This is pretty basic stuff, and it makes you wonder the technical literacy of the appeals court panel (or why they presume to judge a case where they clearly don’t understand what they’re talking about).

Another bizarre point is on the question of “intent.” The court accepts much of Rosetta Stone’s argument that because Google changed its policy over time to allow greater usage of trademarked terms, that it had intent to infringe. While that is one possible interpretation, there are much more sensible explanations that aren’t so nefarious. Google stopped allowing the use of trademarked terms early on because it was a waste of time and resources to fight stupid lawsuits like this one. As it continued to grow, it realized that there was no legal reason why it shouldn’t allow such uses, and it changed its policies. And, of course, it then gets hit with a stupid lawsuit… and the court seems to use the fact that Google changed its policy as potential evidence that it “intended to cause confusion”? That makes no sense at all. Google knows damn well that if it “intends to cause confusion” that it’s going to lose a trademark lawsuit. Why would it ever do that? The company made clear that it expected to get sued, but it was doing this because it believed the law was on its side. It’s quite a twist to claim “intent” to “cause confusion” based on that.

Next, the appeals court accepts as evidence of confusion, Rosetta Stone finding some guy who was confused by a counterfeit reseller’s site and bought a counterfeit version of their software. Note that the guy was not confused by Google, but by the third party site. The lower court smartly rejected this as anecdotal and properly pointed out that the confusion arose not from Google, but from the other site. But the appeals court rejects that argument and says that the testimony is valid.

After that, the court also moves on to the question of contributory (rather than direct infringement) and bizarrely argues that the reasonable standard set forth in the famous Tiffany v. eBay case cannot be applied at the summary judgment level. This was the ruling that found that eBay was not guilty of contributory trademark infringement for counterfeit goods sold on eBay, in part because eBay made reasonable efforts to remove the infringing content when it became aware of it. This is a reasonable standard, and one that it makes sense to use in this case also, as the lower court did. However, the appeals court basically says that this standard can really only be used after a costly and wasteful trial, even if the court could get around all that by noting the obvious fact that the service provider is a good actor in getting rid of infringing works when it learns of them.

Things get equally troubling when we get down to the question of trademark dilution. The lower court rejected Rosetta Stone’s arguments here on a few factors, but the appeals court sends that back too. Specifically, the lower court pointed out that there was no dilution because Google wasn’t using the Rosetta Stone trademarks to identify its own (different) products, thus there was no dilution. This is the correct interpretation of the law, because the entire point of the (very new) concept of “dilution” in trademark law is that it can’t be used to “dilute” the value of the trademark by applying it to different products. Here, no one is claiming that Google is making use of Rosetta Stone’s marks to impart the value of that mark on something different. So the lower court got that right… but the appeals court gets confused and denies this reasoning, instead saying that this is really a “fair use” discussion, which can only be used as a defense, rather than a proactive argument at the summary judgment stage. Once again, that’s batty. It only encourages long, drawn-out, wasteful and useless trials where none are needed.

The court did accept some of the more minor arguments of the lower court, but sent back all of the major issues. Hopefully the district court does a full trial and still comes to the same (correct and reasonable) conclusion, but in the meantime, they have to waste time and resources on a silly trial that was properly dumped in the first place.

Filed Under: adwords, competition, trademark
Companies: google, rosetta stone