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The Fourth Circuit today partially reversed a district court decision that had granted broad protection to Google against trademark infringement claims arising out of its use of trademarked terms in keywords and advertisement text. Chief Judge Traxler wrote the opinion for the court in Rosetta Stone v. Google, in which Judge Keenan and Senior Judge Hamilton joined.

The language software company Rosetta Stone sued Google in 2009 asserting claims of: (1) direct trademark infringement; (2) contributory infringement; (3) vicarious infringement; (4) trademark dilution; and (5) unjust enrichment (under Virginia law). The district court granted summary judgment to Google on all five counts (see here for district court’s trademark claims analysis). Today’s decision affirms the win for Google on vicarious infringement and unjust enrichment, but vacates and remands with respect to direct infringement, contributory infringement, and trademark dilution.

With respect to direct infringement, the appeals court rejected Rosetta Stone’s argument that it is reversible error for a district court to decline to address all factors in the Fourth Circuit’s nine-factor, non-exclusive, totality-of-the-circumstances test for likelihood of confusion. The opinion suggests, however, that “[i]n the future . . . a district court opting not to address a given factor or group of factors should provide at least a brief explanation of its reasons.” The appellate court did, however, fault the district court for applying a too-demanding standard to Rosetta Stone’s evidence of intent to cause confusion, actual confusion, and consumer sophistication. This portion of the opinion contains a discussion of anecdotal and survey evidence, including in-house studies on confusion performed by Google. The Fourth Circuit also criticized the district court’s functionality analysis for focusing on whether Rosetta Stone’s mark made Google’s product more useful, rather than considering whether the mark was functional as Rosetta Stone used it. The appellate disposition of this functionality affirmative defense precludes Google’s further use of it in the litigation, but the remainder of the disposition simply leaves open the path for future litigation over the facts.

On contributory infringement, the Fourth Circuit held that the district court relied too heavily on the Second Circuit’s decision in Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010), which was an appeal from a jury verdict rather than a decision at the summary judgment stage.

Finally (with respect to the claims that the Fourth Circuit vacated), the court held that the district court impermissibly collapsed good faith and nominative fair use into a single question in assessing trademark dilution. The appeals court further held that the district court mistakenly read Louis Vuitton Malletier S.A. v. Haute Diggity Dog, L.L.C., 507 F.3d 252 (4th Cir. 2007) to require proof of actual economic loss or reputational injury, rather than a likelihood of dilution.

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