## Facts

- Rosetta Stone Ltd. sold language-learning software and owned registered ROSETTA STONE-family trademarks.
- Google operated a search engine and an auction-based keyword advertising program (AdWords) that displayed sponsored links in response to user search terms.
- Google’s policies evolved to permit advertisers to bid on trademarked terms and, later, to use trademarks in ad text as well as as keyword triggers.
- Rosetta Stone alleged Google’s policies enabled ads that misled users, including ads offering counterfeit Rosetta Stone software when users searched for “Rosetta Stone.”
- Rosetta Stone presented evidence of actual confusion, including consumers who bought counterfeit software after clicking sponsored links triggered by Rosetta Stone searches.
- The record included evidence that Google had internal information suggesting some users could be confused by trademark-triggered ads.
- Rosetta Stone also presented evidence that it notified Google about specific advertisers accused of selling counterfeit goods, and that some continued to use Rosetta Stone marks through AdWords after complaints.

## Issues

1. Whether summary judgment for Google on direct trademark infringement was proper given disputed evidence on likelihood of consumer confusion from AdWords keyword and ad-text uses.
2. Whether summary judgment for Google on contributory trademark infringement was proper where evidence could show Google continued supplying its advertising services to known or suspected counterfeiters.
3. Whether summary judgment for Google on trademark dilution was proper where the district court accepted a fair-use defense without analyzing statutory elements, including good faith.
4. Whether summary judgment for Google on vicarious trademark infringement and dismissal of Rosetta Stone’s unjust enrichment claim were proper.

## Decision

- The Fourth Circuit affirmed in part, vacated in part, and remanded.
- It vacated summary judgment on direct trademark infringement because a reasonable factfinder could find a likelihood of confusion on the record, and the district court did not apply the summary judgment standard correctly.
- It rejected Google’s functionality defense as a basis to defeat infringement at summary judgment, holding the doctrine does not turn on whether a defendant’s system makes use of a mark in a useful way.
- It vacated summary judgment on contributory infringement because evidence could permit a jury to find Google continued providing services to advertisers it knew or had reason to know were infringing.
- It vacated summary judgment on dilution because the district court’s fair-use analysis failed to address good faith and did not separately evaluate the statutory elements.
- It affirmed summary judgment for Google on vicarious infringement for lack of evidence of the control or partnership-type relationship required for vicarious liability.
- It affirmed dismissal of Rosetta Stone’s unjust enrichment claim under Virginia law.

## Legal Principles

- Summary judgment is improper when record evidence, viewed favorably to the nonmovant, permits a reasonable jury to find a likelihood of confusion under the applicable multifactor test.
- Evidence relevant to confusion may include actual confusion, defendant’s intent, and purchaser sophistication; purchaser sophistication is typically a fact question.
- The functionality doctrine concerns whether a mark identifies a functional product feature; it is not a defense based on the utility of a defendant’s own advertising or delivery system.
- Contributory trademark infringement may attach when a defendant continues to supply a product or service to a party it knows or has reason to know is engaging in trademark infringement.
- A statutory fair-use defense to dilution requires a structured analysis of the statutory elements, including consideration of the defendant’s good faith.
- Vicarious trademark infringement requires evidence of a relationship involving joint control, authority to bind, or partnership-like indicia; providing an advertising platform alone is insufficient.
- An unjust enrichment claim under state law may be dismissed where it is not independently viable as pleaded and does not state a distinct equitable basis beyond the trademark claims.

## Conclusion

The Fourth Circuit held that disputed evidence required trial-level factfinding on direct infringement, contributory infringement, and dilution arising from keyword advertising practices, while leaving intact the rulings rejecting vicarious liability and dismissing the state unjust enrichment claim.


Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144 (4th Cir. 2012)