Earlier this week, Google Inc. and Rosetta Stone Inc. settled their dispute over whether the sale of Rosetta Stone’s name to third parties for search-engine advertising constitutes an infringing use of Rosetta Stone’s trademark.  Google’s AdWords advertising platform permits third parties to purchase “sponsored links” that are shown to users whose online searches include certain keywords.  Rosetta Stone filed suit in 2009, alleging both direct and secondary trademark infringement based on Google’s sale of its name as a keyword used for this purpose.  Although the terms of the settlement have not been made public, Rosetta Stone announced that they will work together with Google to “meaningfully collaborate to combat online ads for counterfeit goods and prevent misuse and abuse of trademarks on the Internet.” 

In 2010, the Eastern District of Virginia granted Google summary judgment in the dispute, but the Fourth Circuit vacated that decision earlier this year.  In evaluating the direct infringement claim, the Court focused on the question of whether Google’s actions were likely to cause consumer confusion.  Even though Google itself was not passing off any goods or services as Rosetta Stone’s, the Fourth Circuit  concluded that a reasonable trier of fact could find that Google “intended to create confusion” based on “knowledge that confusion was very likely to result from its use of the marks.”  The court also cited evidence that consumers had in fact purchased counterfeit Rosetta Stone software from sponsored links that they mistakenly believed were authorized by Rosetta Stone.  The Fourth Circuit further held that evidence that Google allowed known infringers and counterfeiters to bid on Rosetta Stone’s marks as keywords was sufficient to withstand summary judgment on the contributory infringement claim.

Although some have speculated that the Fourth Circuit’s decision may make it more likely that keyword advertisers and advertising service providers may face claims of trademark infringement or dilution when they purchase or sell trademarks as keywords, the Google and Rosetta Stone settlement leaves open the question of whether brand owners can prevail on such claims.  Indeed, the recent Eastern District of Pennsylvania summary judgment decision in the CollegeSource, Inc. case suggests that the path to victory may be difficult in view of the “modern Internet user’s increasing level of experience with search sites,” which arguably “decreases the likelihood” that they will be confused by Internet advertising.  One relatively recent empirical study seems to back this up, noting that while consumers may find keyword advertising “unfair and inappropriate,” the traditional empirical consumer confusion data necessary to prevail in litigation may be lacking.