Source: http://www.rosettastone.com
Google AdWords faces another legal challenge over AdWords. Emboldened by a recent Second Circuit opinion, Rescuecom Corp. v. Google, Inc., Rosetta Stone filed a suit last Friday against Google for trademark infringement. Rosetta Stone accuses Google of allowing other companies to "free ride" on its brand name and of misleading and confusing consumers into clicking on sites other than the Rosetta Stone site.
Rosetta Stone says it owns US trademark rights to "global traveler," "language library," "dynamic immersion," "adaptive recall," and "the fastest way to learn a language guaranteed." The complaint alleges that "...many of Google's 'Sponsored Links' are expressly designed to draw consumers away from Rosetta Stone websites."
Google AdWords' Legal Problems
Rosetta Stone's suit is the latest in a string of lawsuits against Google AdWords, an important revenue stream for Google. Google AdWords allows advertisers to sponsor specific search terms, including ones that are trademark protected. The advertiser does not need the trademark owner's permission to sponsor a keyword.
For example, if you enter "Rosetta Stone" in the Google search box and hit "search," you will get listings from companies who sponsor the "Rosetta Stone" keyword. Google places those listings on the right side of the search results and clearly states they are ads. Companies including American Airlines and GEICO have brought suits alleging that AdWords violates their trademarks by confusing and misleading consumers about the source of their goods on the internet.
Rescuecom Revived Trademark Protection On The Internet
In Rescuecom, the Second Circuit reversed a district court ruling and held that Google was using trademarks in commerce. In contrast to other cases, Google allowed others to purchase the "Rescuecom" mark as a keyword, an activity that fit within the Lanham Act's requirement of "use in commerce." As a result, the trademark owners were entitled to bring a trademark infringement claim under the Lanham Act. The issue then becomes whether AdWords confuses and misleads consumers about the source of goods.
Google Anticipated Trademark Infringement Suits Over AdWords
- Google's Form S-1 Registration Statement For Its Initial Public Offering
As early as 2004, Google understood that AdWords could result in litigation against the company and warned investors in its Form S-1 registration statement. (The S-1 is a registration statement used in the initial public offering of securities).
"Companies have also filed trademark infringement and related claims against us over the display of ads in response to user queries that include trademark terms. The outcomes of these lawsuits have differed from jurisdiction to jurisdiction. A court in France has held us liable for allowing advertisers to select certain trademarked terms as keywords. We have appealed this decision. We were also sued in Germany on a similar matter where a court held that we are not liable for the actions of our advertisers prior to notification of trademark rights. We are litigating similar issues in other cases in the U.S., France and Germany.
In order to provide users with more useful ads, we have recently revised our trademark policy in the U.S. and Canada. Under our new policy, we no longer disable ads due to selection by our advertisers of trademarks as keyword triggers for the ads. As a result of this change in policy, we may be subject to more trademark infringement lawsuits. Defending these lawsuits could take time and resources. Adverse results in these lawsuits may result in, or even compel, a change in this practice which could result in a loss of revenue for us, which could harm our business."
(see pg. 10 of the Form S-1)
- Google's Trademark Policy Is Part Of The Problem
Google's trademark policy and complaint procedure states that its "AdWords Terms and Conditions with advertisers prohibit intellectual property infringement by advertisers." Regarding the resolution of trademark disputes, the company states:
"Because Google is not a third-party arbiter, we encourage trademark owners to resolve their disputes directly with the advertisers, particularly because the advertisers may have similar ads running via other advertising programs."
This policy has contributed to Google's legal problems. In its complaint, Rosetta Stone alleges: "Google either is misleading or will mislead consumers in innumerable different ways... Accordingly, it is impossible for Rosetta Stone to cure this problem merely by pursuing remedies against Google's advertisers alone."
Google's Legally Informed Strategy
Despite the potential risks, Google developed a Legally Informed Strategy with AdWords as the underlying business strategy. The company decided that the litigation risk was acceptable in light of the unsettled state of trademark law on the internet. The legal strategy was to fight the suits and hope to set precedent that would work in Google's favor. On the business side, Google carefully crafted the business strategy behind AdWords to produce a steady revenue stream.
In examining its legal options in light of its business strategy, Google decided the business strategy (AdWords) would be closely integrated with the legal strategy (fighting trademark infringement suits). The legal risk would not compel Google to abandon its business strategy without an attempt to shape trademark law on the internet With respect to AdWords, Google's legal moves and business strategy are closely coordinated.
Now that trademark protection is becoming a reality on the internet, Google's Legally Informed Strategy is being put to the test. The current strategy will need to be modified if Rosetta Stone and other trademark holders prevail.
Douglas Y. Park
Twitter: @DougYPark
