Three months after dismissing a trademark infringement suit filed against search engine giant Google Inc., the judge in the case issued a memorandum opinion explaining his decision. (Rosetta Stone Ltd. v. Google Inc., Case No. 1:09cv736 (E.D. Va. Aug. 3, 2010).)

In July 2009, language learning software company Rosetta Stone filed suit in the Eastern District of Virginia—called the “rocket docket” for the speed with which it handles cases—charging Google with a number of federal and state trademark violations, including direct and secondary infringement and dilution and related business torts. The suit centered on Google’s revenue-generating AdWords Program, auction-style marketing that allows advertisers to bid on search terms (including trademarks such as ROSETTA STONE) and then displays advertisements to Google users based on search terms. Rosetta Stone alleged that when Google users search for “Rosetta Stone,” the AdWords Program helps advertisers mislead users and misappropriate Rosetta Stone’s trademarks by directing users to the websites of companies that compete with Rosetta Stone or sell counterfeit Rosetta Stone products.

In its first amended complaint, Rosetta Stone alleged seven counts for relief, and Google moved for summary judgment, arguing it was not making an actionable “use” of Rosetta Stone’s trademarks. In a strange twist, however, Google also argued that its use of the Rosetta Stone trademarks as keywords was functional.

The court granted summary judgment on all counts (the business tort claim was dismissed separately). It addressed the federal and Virginia trademark infringement claims together, as both required a finding of likelihood of confusion. The court analyzed nine factors, ruling that only three were in dispute (Google’s intent, actual confusion and user sophistication) and all three weighed in Google’s favor. Nevertheless, the court adopted Google’s functionality theory, holding that “the functionality doctrine protects Google’s use of the Rosetta Stone Marks as keyword triggers … ‘if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.’”

Under the functionality doctrine, trademark or trade dress protection is denied to a product feature if the feature is useful and/or provides a competitive advantage—that is, if the feature is functional. Relying on the Supreme Court’s landmark Traffix decision (denying trademark protection to a functional design that was also the subject of a design patent), the court analogized that the principle in this case was the same: “allowing competitors a monopoly on functional uses would inhibit competition.”

The court held that when used as keywords in Google’s AdWords Program, Rosetta Stone’s trademarks served “an essential indexing function because they enable[d] Google to readily identify in its databases relevant information in response to a web user’s query.” Therefore, according to the court, Google’s use of the trademarks was functional.

Because the court concluded that Rosetta Stone could not show that Google had specific knowledge of infringement by its advertisers and Google has no control over the appearance and content of its advertisers’ advertisements, the remaining counts of vicarious and contributory infringement were dismissed. Finally, the court held that Google was not likely to dilute Rosetta Stone’s trademarks because Google does not sell language learning software and those trademarks have become more famous since Google began allowing its advertisers to purchase trademarks as keywords.

On August 31, 2010, Rosetta Stone filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit.

Reprinted with permission from INTA Bulletin, Vol. 65, No. 18 – October 15, 2010, Copyright © 2010 the International Trademark Association.