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Eons ago (it seems) Rosetta Stone, makers of language learning software, sued Google for various counts of trademark infringement and dilution. The district court ruled heavily in Google's favor and Rosetta Stone appealed. The appeals court just issued its opinion, agreeing with the most important of Rosetta Stone's claims and sending the case back to the district court for further argument. Google still has a chance to prevail in the district court but there's no avoiding that this decision is a pretty big win for Rosetta Stone. But it's not a big win for clarity. After this decision, trademark law is the same as it was before it: a confusing mess of vague multi-part tests that work at cross-purposes both to each other and to the supposed purpose of the law.
To recap: Rosetta Stone argued that Google was directly liable for trademark infringement because it sold ads based on keywords like "Rosetta Stone," and contributorily liable because the companies it sold ads used those ads to violate Rosetta Stone's trademarks. It also contended that Google "diluted" its trademarks.
Public Knowledge and EFF filed an amicus brief in the case, because Rosetta Stone was trying, as so many trademark owners do, to turn provisions of law that are supposed to be about protecting consumers from fraudulently-labelled products into a provisions that grant broad ownership of words and phrases. Rosetta Stone has the exclusive right to label language-learning software with its name, but it wants to block its competitors from saying things like "Our product is better than Rosetta Stone's!" and "Buy Super Language Learner 9000 instead of Rosetta Stone."
So in our amicus brief we argued:
Google does not make "trademark uses" of Rosetta Stone's trademarks so it cannot be a direct infringer.
Any uses Google does make of Rosetta Stone's trademarks, whether they are "trademark uses" or not, are intended to facilitate competition and are therefore lawful fair uses. Thus Google is not a direct infringer and is not liable for dilution.
Google is not a contributory infringer, either, because the facts show that it adequately deals with the occasional bad apple and because its typical customer does not infringe trademarks.
The opinion doesn't really address the fair use issue as we've framed it. Fair use is mostly dealt with in the dilution section and there the court disagrees with the way the district court conducted its fair use analysis. More on this in a bit. And the issue of whether Google is contributorily liable for the actions of its customers is extremely fact-specific--here, the court found that there was an "issue of fact" as to whether Google was selling ad space to known infringers.
One of the problems with trademark law is how stupidly hard it is to get bad cases thrown out of court. This is because, over the years, various threshold tests have been forgotten and everything has turned into an argument about "confusion," which requires all kinds of surveys and testimony to resolve. It would be great if a defendant could just say "We weren't using the plaintiff's trademark to identify our product as the plaintiff's." But instead it seems that if the defendant is simply "using" the trademark in the broadest possible sense there has to be a trial and a parade of competing surveys attempting to show how many or how few people were "confused" in some way by the defendant's use. It shouldn't matter if a few muddle-headed consumers are "confused" by a non-trademark use; it shouldn't be illegal to use a company's trademark in a way that isn't part of a scheme of "passing off" your product as something that it's not.
This is a bit of an aside, but as for direct infringement, really the only confusion that should matter is confusion among Google's customers, i.e., advertisers. If users are confused by an infringing ad, Google should only be, at most, contributorily liable--which requires showing that Google knew or should have known that it was selling ad space to infringers. But courts rarely accept this argument which means that the distinction between direct and indirect liability gets just as lost as the distinction between trademark use and non-trademark use, and online advertising platforms can become directly liable on the basis just about anyone being confused.
In this case, apparently Google itself did not make "trademark use" a central part of its appeal. This allowed the court to sidestep the issue, writing in footnote 4, "Since it is not an issue in this appeal, we express no opinion today as to whether Google "used" these marks as contemplated by the Lanham Act."
Of course if the court had directly addressed the issue there's a good chance that what has become my pet trademark theory would have gone down in flames. But it's still frustrating that the argument is just hanging out there somewhere because two of its cousins were addressed in the opinion.
First, the district court for some reason tried to turn the doctrine of "functionality" into a stand-in for "trademark use" kinds of arguments. Functionality means that a trademark owner can't use trademark as a kind of quasi-patent to control what its competitors products can and can't do. If you make knives you can't trademark sharpness. In the most famous case, a company that made traffic sign stands that looked a certain way tried to keep other companies from making traffic sign stands that looked the same. But the Supreme Court said, "No, your signs look like that because it makes them stand up better in the wind, and your patent on that has expired." Instead of treating the functionality doctrine as a limit on the kinds of things that can be trademarked to begin with, though, in Rosetta Stone the district court simply noted that Google was using the trademarks in a "functional" kind of way. The appeals court rightly rejected the district court's misuse of the functionality argument. But it would have been nice if the district court, instead of going down the functionality blind alley, would have instead applied similar reasoning to find that Google's sale of keywords is simply not a "trademark use"--it's not like it's trying to pass off its ad platform or any given keyword as being a Rosetta Stone product, after all.
But that's not the only place the district court comes really close to the "use" argument--it also held that, in a dilution context, that if Rosetta Stone didn't establish that Google made "trademark uses" of Rosetta Stone's marks, then Google could not be liable. However, dilution is a different cause of action than infringement, based on a different statute, and based on the structure of the statute the appeals court decided that the issue of trademark use might be part of a defense that Google could make but not a factor that Rosetta Stone has to initially allege.
So close yet so far. The court's decision is understandable in light of some aspects of how the district court analyzed the issues but still regrettable, because it does nothing to clarify the law. The court of appeals could have jumped on any mention of the "trademark use" issue, even if the district court only brought it up in an elliptical way, and clarified it one way or the other. But instead of adopting a nice clean test that can easily dispose of silly trademark claims, the court has continued the trend that makes public opinion surveys essentially the only relevant standard in infringement cases. Terrible.