a) Direct Infringement
The District Court for the Eastern District of Virginia found no genuine issue of fact as to whether Google’s use of Rosetta Stone’s trademarks caused a likelihood of confusion based on its analysis of only three likelihood of confusion factors—intent to confuse, actual purchaser confusion and sophistication of the consuming public and entered judgment in Google’s favor.
The court of appeals reversed, finding sufficient evidence in the record to create a question of fact as to each of the three factors considered by the district court. For example, with respect to intent, the court of appeals concluded that “a reasonable trier of fact could find that Google intended to cause confusion in that it acted with the knowledge that confusion was very likely to result” from its use of third-party trademarks in its AdWords program, as its own internal studies suggested. With respect to actual confusion, the court of appeals concluded a trier of fact could find that actual confusion occurred based on the deposition testimony of five consumers who unintentionally purchased counterfeit products from sponsored ads, as well as the hundreds of complaints Rosetta Stone received from purchasers of pirated/counterfeit software.
b) Contributory Infringement
Contributory trademark infringement exists if a party intentionally induces another to infringe a mark or continues to supply a product to one it knows or has reason to know is engaging in trademark infringement.
Despite evidence that Google allowed known infringers and counterfeiters to bid on Rosetta Stone’s trademarks as keywords, the district court granted summary judgment in Google’s favor, finding that Rosetta Stone had not met its burden of proving that summary judgment was proper as to its own contributory infringement claim. The court of appeals noted, however, that whether Rosetta Stone was entitled to summary judgment was not the issue; rather, the issue was whether Google had met its burden for its summary judgment motion, which the court of appeals found it had not.
c) Trademark Dilution
Relying on the Federal Trademark Dilution Act’s (FTDA's) “fair use” defense, the district court ruled that Google was not liable for trademark dilution because Rosetta Stone could point to no evidence that Google used Rosetta Stone’s marks to identify Google’s own goods and services. The court of appeals reversed for two reasons. First, the district court had not addressed whether Google used Rosetta Stone’s marks in good faith, which is a requirement of the FTDA’s “fair use” defense. Second, the district court wrongly placed the burden of proof on Rosetta Stone, when the fair use defense should have been Google’s to prove.
The district court found that Google’s use of Rosetta Stone’s trademarks as keywords was “functional” and thereby non-infringing as a matter of law because such keywords “have an essential indexing function” in providing relevant information to users’ queries. But as the court of appeals correctly observed, functionality is a doctrine that applies to a trademark as used by its owner not by third parties. For example, if the owner’s use of a product design is considered to be necessitated by the nature of the product, such as a bottle that is narrower where it needs to be grasped, that aspect of the product design is not protectable and others are free to use it. The court of appeals stated baldly, “[t]he functionality doctrine simply does not apply in these circumstances,” and therefore reversed the district court’s application of the doctrine.