RICHMOND, Va. (Legal Newsline) - A three-judge panel of a federal appeals court on Monday reinstated a trademark infringement lawsuit brought by Rosetta Stone against Google.
Rosetta Stone, which makes and sells software that teaches people to learn to speak foreign languages, sued in 2009 because it believed Google's policies concerning the use of trademarks as keywords and in advertisement text created confusion and misled Internet users into purchasing counterfeit Rosetta Stone software.
The company claims there have been massive counterfeiting problems. Between Sept. 3, 2009, and March 1, 2010, it reported 190 instances to Google in which one of Google's sponsored links was marketing counterfeit Rosetta Stone products.
Virginia's eastern district federal court threw the suit out in 2010, but the U.S. Court of Appeals for the Fourth Circuit revived it.
The court ruled, "(S)tudies performed by Google at this time suggested that there was significant source confusion among Internet searchers when trademarks were included in the title or body of the advertisements... Nonetheless, Google shifted its policy again in 2009, telling its customers and potential customers that "we are adjusting our trademark policy to allow some ads to use trademarks in the ad text.
"Google expected a substantial boost in revenue from the policy change as well as an uptick in litigation from trademark owners... (W)e conclude 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 the marks."
The appeals court also said that the district court erred in not considering evidence of actual confusion by customers seeking to buy Rosetta Stone products using Google. This evidence included two of Google's own lawyers who were presented with the Google results page of a "Rosetta Stone" website search and could not determine without more research which of the sponsored links were authorized Rosetta Stone sites. The district court also erred, according to the appeals court, by not considering expert testimony.
Jennifer Spaziano -- an attorney for the law firm of Skaddden, Arps, Slade, Meagher and Flom in Washington, D.C., which represented Rosetta Stone -- said, "We are certainly pleased with the Fourth Circuit's decision. We think it is important precedent."
This is the second time in four days a lawsuit against Google was reinstated by an Appeals Court. The Second Circuit ruled April 5 that a lawsuit for copyright infringement filed against the video internet giant YouTube, owned by Google, can proceed.
Last summer, Google also paid $500 million to the federal government as a penalty for permitting Canadian pharmacies to advertise to customers in the United States. The Department of Justice said then that not only did this result in an illegal importation of medicine but medicine was being sold without valid prescriptions.
Google did not respond for requests for comment.
Frank Fodale, a visiting associate professor of law at Ave Maria Law School in Florida who teaches intellectual property law, said the whole area of Internet law poses unique questions that the courts are now addressing.
He said Internet providers are analogous to a flea market owner and someone who is selling counterfeit goods at the flea market. Should the owner of the flea market be responsible for someone selling counterfeit items? The Fourth Circuit said this must be litigated.
"Rosetta is also saying that Google itself is a direct infringer and they are diluting the Rosetta trademark," Fodale said. "If the District Court rules in Rosetta Stone's favor, it will establish two precedents. One that the search engine can be a direct infringer for trade mark and two the search engine can also dilute a famous trademark."