Fourth Circuit Remands Rosetta Stone Ltd. v. Google Inc. 2010 Ruling

By Virginia Dudley

On April 9, 2012, the U.S. Court of Appeals for the Fourth Circuit revived the trademark infringement case Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531 (E.D. Va. 2010). The Fourth Circuit overturned the summary judgment granted in favor of Google by the U.S. District Court for the Eastern District of Virginia.

The Rosetta Stone case stemmed from Google’s sale of marks as AdWords. Adwords are Google’s online advertizing tool that allows a sponsor to “purchase” keywords that prompt the appearance of the sponsor’s advertisement when the keyword is entered as a search item. Rosetta Stone, a language-learning software company, was established in 1992 and began advertizing in connection with Google’s website in 2002.

Rosetta Stone initially accused Google of trademark infringement as a result of the website’s use of their mark in AdWords. In terms of this appeal, the Fourth Circuit re-addressed the possible elements of confusion, application of the functionality doctrine, dilution claims, and Google’s knowledge of infringement formerly discussed in favor of Google by the district court.

In August 2010, the district court rejected Rosetta Stone’s claim of an element of confusion caused by Google’s use of their mark by considering 3 out of 9 “likelihood-of-confusion” factors: (1) Google’s intent, (2) actual confusion, and (3) sophistication of the consuming public. The district court dismissed confusion claims against Google by ruling that Google did not intend to create confusion and that high consumer sophistication could be determined based on the nature and price of the product alone.

Conversely, the Fourth Circuit called for greater proper analysis of possible evidence of confusion and found a genuine issue of fact in terms of the previously discussed three factors of confusion. In particular, the Fourth Circuit reasoned that Google’s shifting trademark policies from the year 2004 on, as well as Rosetta Stone’s evidence of 123 complaints from those who had purchased knockoff software believing it to be legitimate, could reveal that Google had an intent to confuse. Also, the presence of confusion was further suggested by the difficulty Google’s own witnesses experienced in distinguishing between authentic and counterfeited Rosetta Stone advertisements on the search engine’s site.

Secondly, the district court held that the use of Rosetta Stone marks as keywords was protected by the functionality doctrine. The court found that Google’s use of Rosetta Stone’s trademarks as keywords was functional in that the keywords have “an essential indexing function because they enable Google to readily identify in its databases relevant information in response to a web user’s query.”[1] Trademark law’s functionality doctrine states, “a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” The district court claimed that Google’s AdWords were also protected under the Lanham Act, which states that a party cannot receive exclusive rights over solely functional features. 15 U.S.C. § 1114(a).

This past April, the Fourth Circuit stated that the district court did not consider whether the mark was functional in the way Rosetta Stone used the mark. Instead, the appellate court affirmed that the District Court focused solely on how Rosetta Stone’s mark made Google’s product more useful. The Fourth Circuit asserted that the functionality doctrine had been incorrectly applied to the case. In general, the Fourth Circuit emphasized that the words “Rosetta Stone” are not necessary to the function of the language-learning software, thus establishing the mark’s non-functional nature.

As for dilution claims against Google, the district court denied the presence of dilution in Google’s use of the mark. The district court also applied the fair use argument, which is present in the federal statute dealing with dilution 15 U.S.C. §1125 (c) (3) (a). The district court confirmed that Google did not use Rosetta Stone’s mark to identify its services. Moreover, the possibility of dilution of the mark was also disregarded by the district court as a result of the increase in public awareness of Rosetta Stone’s mark following its appearance in Google’s AdWords.

The Fourth Circuit, on the other hand, found evidence of dilution and stated that the notion of good faith arises in regards to the fair use inquiry mentioned by the district court.

Lastly, the Fourth Circuit addressed the extent of Google’s knowledge of infringement. In 2010, the district court referenced the Second Circuit ruling in Tiffany v. eBay 600 F.3d 93 (2d Cir. 2010)to claim that generalized knowledge of infringement makes Google less liable. The district court also ruled that Google would not be liable unless Rosetta Stone could provide concrete evidence that the search engine was aware that an act of infringement was occurring.

However, the Fourth Circuit held that the district court’s decision was gathered in an inappropriate and untimely manner. As with many of the other aspects addressed in this case, the appellate court supported Rosetta Stone and called for further analysis on Google’s knowledge of infringement in its use of the words “Rosetta Stone.”

Such recall of a former trademark infringement case also occurred on April 5, 2012 when the U.S. Court of Appeals for the Second Circuit heard Viacom International Inc. v. YouTube Inc., No. 10-3270 (2d Cir. April 5, 2012). Similar to Rosetta Stone Ltd. v. Google Inc., the Appellate Court pushed for greater analysis of trademark infringement claims against Google because they found the trial court to have been too swift in their decision making.

In sum, in focusing on the factors of confusion, mark functionality, dilution, and Google’s knowledge, the Fourth Circuit remanded the summary judgment granted by the U.S. District Court for the Eastern District of Virginia in favor of Google. [1]

[1] Rosetta Stone Ltd. v. Google Inc. Court of Appeals, Fourth Circuit 2012. available at http://scholar.google.com/scholar_case?case=11203645518793090722&q=rosetta+stone+v.+google&hl=en&as_sdt=2,9&as_vis=1

9th Circuit Finds Whether Keyword Advertising Infringes Mark Depends on Presentation of Search Results as a Whole

In Network Automation, Inc. v. Advanced Systems Concepts, Inc., Civ. Case No. 10-55840 (9th Cir. March 8, 2011), Network Automation sells a job scheduling and management software product under the mark AutoMate.  Advanced Systems also sells a job scheduling and management software product under the registered trademark ActiveBatch. Network Automation advertises its product online by purchasing certain keywords, including “ActiveBatch,” to produce a results page showing “www.NetworkAutomation.com” as a sponsored link. Advanced  Systems objected to Network Automation’s use of its ActiveBatch trademark to advertise its competing product where prospective purchasers are using a search engine to find ActiveBatch, and brought a trademark infringement action in the Los Angeles District Court based upon a theory of initial interest confusion. Continue reading

11th Circuit Finds Use of Trademarks in Metatags is an Infringing Use in Commerce

In North American Medical Corporation v. Axiom Worldwide, Inc. 522 F3d 1211; 86 USPQ2d 1462 (11th Cir. 2008), Axiom Worldwide (“Axiom”) appealed the District Court for the Northern District of Georgia’s grant of preliminary injunction in favor of North American Medical Corp. (“NAM”) enjoining Axiom from engaging in alleged acts of trademark infringement and false advertising. The Eleventh Circuit affirmed in part and vacated and remanded in part.

Background

NAM designs and manufactures physiotherapeutic spinal devices used to treat lower back pain, which are commonly known as traction devices. NAM owns and uses registered trademarks for “Accu-Spina” and “IDD Therapy.”  Axiom competes with NAM and manufactures a physiotherapeutic device known as the DRX 9000.

NAM alleged that Axiom infringed NAM’s trademarks by using the “Accu-Spina” and “IDD Therapy” marks on Axiom’s website within meta tags. Meta tags are words or phrases included in a website’s code intended to describe the contents of the website with which the meta tags are associated. Such included meta tags are often used by internet search engines to associate a user’s search terms with relevant websites but are not displayed thereon. NAM further alleged that Axiom made false statements about the DRX 9000 in stating (1) that Axiom and NASA or the DRX 9000 and NASA were affiliated and (2) that the DRX 9000 was FDA approved.

The District Court granted NAM’s request for a preliminary injunction thereby enjoining Axiom from using NAM’s trademarks within meta tags on Axiom’s websites and from making the challenged statements about the DRX 9000. Further, the District Court found that Axiom’s use of NAM’s trademarks created a likelihood of confusion among consumers and that Axiom’s statements about the DRX 9000 were literally false and material to consumers’ purchasing decisions.  This decision was appealed to the Eleventh Circuit.

On appeal, Axiom argued that NAM failed to establish a likelihood of success on the merits of either the trademark infringement or the false advertising claims and, assuming arguendo that NAM had established such likelihood of success, that the District Court erred in presuming that any plaintiff with a viable unfair competition claim will always suffer irreparable harm if a preliminary injunction is not issued.

Likelihood of Success: Trademark Infringement

Under Eleventh Circuit precedent, a preliminary injunction may be granted only if NAM established “(1) a substantial likelihood of success on the merits of the underlying case, (2) [NAM] will suffer irreparable harm in the absence of an injunction, (3) the harm suffered by [NAM] in the absence of an injunction would exceed the harm suffered by [Axiom] if the injunction issued, and (4) an injunction would not disserve the public interest.” Johnson & Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., F.3d 1242, 1246 (11th Cir. 2002).

In order to prevail on a claim of trademark infringement under the Lanham Act, the Eleventh Circuit required that NAM establish: “(1) that [NAM] possess[es] a valid mark, (2) that the [Axiom] used the mark, (3) that the [Axiom’s]  use of the mark occurred “in commerce,” (4) that the [Axiom] used the mark “in connection with the sale… or advertising of any goods,” and (5) that [Axiom] used the mark in a manner likely to confuse consumers.” Slip op. at 7, citing 1-800 Contacts, Inc., v. WhenU.com, Inc., 414 F.3d 400, 406-07 (2d Cir. 2005).

Specifically, Axiom argued that the use of NAM’s trademarks within meta tags of Axiom’s websites does not constitute a “use in commerce” under the Lanham Act and, even if such use as meta tags is a “use in commerce,” that such use is not likely to confuse consumers. The Eleventh Circuit “readily conclude[d]” that Axiom’s use of NAM’s trademarks as meta tags was an infringing use as Axiom used the trademarks in an “effort to promote and advertise its products on the Internet.” Slip op. at 9. Further, Internet search results displayed NAM’s trademarks along with a description of Axiom’s website. The Eleventh Circuit distinguished 1-800 Contacts because there (1) the defendant used the plaintiff’s web address and not plaintiff’s protectable trademark, and (2) the defendant did not cause the plaintiff’s trademark to be displayed to the consumer. Here, Axiom used NAM’s registered trademarks in meta tags and the registered trademarks were displayed along with descriptions of Axiom’s website when searched using an Internet search engine. The Eleventh Circuit went on to substantially criticize the Second Circuit’s analysis in 1-800 Contacts as incorrectly analyzing the elements of trademark infringement, rendering the conclusions therein reached suspect.  Specifically, the Second Circuit reasoned that because the defendant did not display the plaintiff’s trademark, there could be no possibility of confusion.

The Eleventh Circuit disagreed with the Second Circuit’s analysis in that, while the lack of display is worthy of consideration, it not dispositive of the likelihood of confusion analysis as the elements governing the confusion analysis are specifically separated and each deserves individual attention.  With regard to likelihood of confusion, the Eleventh Circuit analyzed the following seven factors:

(1) the strength of [NAM’s] mark;

(2) the similarity between [NAM’s] mark and the allegedly infringing mark;

(3) the similarity of the products and services offered by [NAM] and [Axiom];

(4) the similarity of the sales methods;

(5) the similarity of advertising methods;

(6) [Axiom’s] intent; and

(7) actual confusion.

Alliance Metals, Inc., of Atlanta v. Hinely Indus., Inc., 222 F.3d 895, 907 (11th Cir. 2000). In the above case, Axiom only challenged that the meta tags caused the Internet search results, which was rejected by the Court, and that the District Court’s reliance on Brookfield Communications, Inc., v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999), and Promatek Industries, Ltd. v. Equitrac Corp., 300 F.3d 808 (7th Cir. 2002) with respect to meta tags and search engines was misplaced.

In Brookfield, the Ninth Circuit enjoined a defendant from including a competitor’s trademark for confusingly similar terms in the meta tags of the defendant’s website. There, the Ninth Circuit characterized the infringing use of a trademark in a meta tag as generating initial interest confusion, assuming that the allegedly infringing use was not actually displayed by the defendant. The Seventh Circuit faced similar facts in Promatek, which led to a similar conclusion of initial interest confusion sufficient to support a finding of likelihood of confusion.

However here, the Eleventh Circuit distinguishes Brookfield and Promatek as NAM has demonstrated a likelihood of actual source confusion, i.e., a consumer is likely to be confused as to whether Axiom and NAM are affiliated or whether Axiom’s and NAM’s products come from a same source. Because Internet search results displayed a description of Axiom’s website in which NAM’s trademarks were highlighted, the Eleventh Circuit found that Axiom’s use of NAM’s trademarks in meta tags caused a likelihood of actual consumer confusion as to source.

Further, Axiom argued that its use was no different than a store placing the store’s generic competing product next to a brand name product on the store’s shelf. However, because Axiom’s use of NAM’s trademarks as meta tags caused Internet search engines to suggest that the competing products had a same source, were affiliated, or were both sold by Axiom, the Eleventh Circuit concluded that Axiom’s use caused a likelihood of actual source confusion. Therefore, the Axiom’s analogy was misplaced.

Likelihood of Success: False Advertising

In order to prevail on a false advertising claim under the Lanham Act in the Eleventh Circuit, NAM must demonstrate: “(1) the ads of [Axiom] were false or misleading, (2) the ads deceived, or had the capacity to deceive, consumers, (3) the deception had a material effect on purchasing decisions, (4) the misrepresented product or service affects interstate commerce, and (5) [NAM] has been – or is likely to be – injured as a result of the false advertising.” Slip op. at 23, citing Johnson & Johnson, 299 F.3d at 1247.

The Eleventh Circuit held that the District Court did not clearly err when finding that Axiom’s claims of affiliation with NASA and the DRX 9000 being FDA approved were literally false and that the ads were material to consumers’ purchasing decisions.  As such, the District Court did not clearly err in finding that NAM demonstrated a likelihood of success on the merits of the false advertising claims.

Presumptions of Irreparable Harm

The Eleventh Circuit vacated the District Court’s grant of preliminary injunction with respect to both the trademark infringement and false advertising claims, despite NAM’s demonstration of a likelihood of success on the merits, because the District Court improperly relied upon a presumption of irreparable harm for both the trademark infringement and false advertising claims.

In vacating the preliminary injunction with respect to NAM’s false advertising claims, the Eleventh Circuit notes that the District Court relied upon an incomplete recitation of the law. Specifically, proof of falsity of advertising is sufficient to sustain irreparable injury for purposes of a preliminary injunction when the challenged advertising makes a misleading comparison to a competitor’s product.  However, if the false advertising is non-comparative and makes no direct reference to a competitor’s product, irreparable harm is not presumed. Slip op. at 28, citing J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, Sec. 23.37 (4th e. 2003); Energy Four, Inc., v. Dornier Medical Systems, Inc., 765 F. Supp. 724, 734 (N.D. Ga. 1991) (internal quotations omitted). Below, the District Court incorrectly presumed irreparable harm despite Axiom’s false advertising being non-comparative and making no direct reference to NAM’s products. As such, the Eleventh Circuit vacated the preliminary injunction with respect to the false advertising claims and remanded for determination as to whether NAM will suffer irreparable harm in the absence of a preliminary injunction.

With regard to presuming irreparable harm on the trademark infringement claims, the Eleventh Circuit noted that it had previously acknowledged and extended a presumption of irreparable harm once a plaintiff has established a likelihood of success on the merits of a trademark infringement claim. However, the Eleventh Circuit relied on the recent Supreme Court decision in eBay to deny such extension in this case. See eBay Inc., v. MercExchange, L.L.C., 547 U.S. 388, 126 S.Ct. 1837 (2006).

In eBay, a District Court refused to grant the plaintiff’s motion for permanent injunction after a jury had found that the defendant had infringed plaintiff’s patents. The Federal Circuit reversed the District Court and articulated a categorical rule that permanent injunctions shall issue once infringement is established. The Supreme Court reversed the Federal Circuit and upheld the District Court’s denial of permanent injunction. “The [Supreme] Court stressed that the Patent Act indicates that injunctive relief may issue only in accordance with the principles of equity.” Slip op. at 30, quoting eBay at 393 (internal quotes omitted).

The Eleventh Circuit extended the eBay patent ruling (with respect to a permanent injunction) to the current trademark claims (with respect to a preliminary injunction) by relying on the similarity between the language of the Lanham Act and the Patent Act. Because the language of the two acts is so similar and no obvious distinction between preliminary and permanent injunctive relief can be made, the principles of equity should prevail.

However, the Eleventh Circuit did not state that the District Court erred in extending the presumption of harm to NAM’s trademark infringement claims. The Eleventh Circuit only held that the Supreme Court’s ruling in eBay should apply to NAM’s trademark infringement claims. As such, the Eleventh Circuit vacated the preliminary injunction with respect to the trademark infringement claims, remanded for further development of the case with respect to the Supreme Court’s decision in eBay and stated that the District Court may very well reach the conclusion that a preliminary injunction is appropriate.

Significance to Trademark Owners

The use of meta tags has presented a particular problem for trademark owners since consumers are driven to particular websites through the meta tags.  While certain courts have allowed relief under the rubric of initial interest confusion, the Eleventh Circuit more directly attacked the practice of meta tag use as presenting infringement either directly or through false association.  As such, the theories espoused by the Eleventh Circuit should provide a more direct mechanism to resolve infringement occurring through meta tags.

Additionally, the Eleventh Circuit’s decision also highlights the importance of presenting evidence of irreparable harm in trademark cases.  While presumptions of irreparable harm used to exist, after eBay, courts may require evidence of irreparable harm beyond mere use of the mark.   However, such evidence should be easier to present in the context of trademark infringement as trademark licensing is not as common as licensing is in the patent world, and importantly, allowing confusion to continue for trademark infringement is arguably more societally harmful since it allows deception of the public as opposed to a mere infringement of a private property right as in patent infringement.