The companies agreed to dismiss their lawsuit settling all claims, according to a filing on Wednesday in U.S. District Court in Alexandria, Virginia. The terms of the settlement were not disclosed. The case raised a number of trademark law issues, including whether sponsored links incorporating trademarks could subject Google and other search engine companies to liability for trademark infringement. The parties recently released a joint statement, “Rosetta Stone Inc and Google have agreed to dismiss the three-year-old trademark infringement lawsuit between them and to meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet. . . .”

The vagueness of this statement and settlement raise several questions such as will Google still permit third parties to bid on keywords containing the trademarks of others? If not, how will Google determine whether such use is infringing or fair use?

In the lawsuit filed in 2009, Rosetta Stone accused Google of committing trademark infringement by selling its trademarks to third-party advertisers for use as search keywords. In a process known as pay per click (PPC), advertisers are able to bid on keywords that trigger sponsored ads displayed by Google and other search engine companies based on searches entered by users. Rosetta Stone argued that users searching for its products on Google were being redirected to competitors and software counterfeiters as a result of the PPC advertising.

A federal court in Virginia granted Google’s motion for summary judgment that there was no likelihood of confusion and dismissed the case in 2010. On appeal, the 4th Circuit Court of Appeals reversed the District Court allowing Rosetta Stone to pursue its claims that Google committed trademark infringement and diluted the Rosetta Stone® brand.

Before the Rosetta Stone case, Google had significant success winning these cases based on the argument that PPC advertising did not constitute “use in commerce” of trademarks. It is interesting and perhaps telling that this defense was not prominent in the Rosetta Stone case. The 4th Circuit’s reversal and the subsequent settlement leaves open the viability of trademark owners’ claim that search engine companies’ use of third-party trademarks in PPC advertising constitute trademark infringement. That argument may be strengthened where the search engine company specifically suggests usage of third-party trademarks.

The trademark community was anxiously awaiting a ruling from the District Court as to whether use of third-party trademarks in PPC advertising could meet the likelihood of confusion requirement. While the terms of the settlement were not disclosed, this development provides a road map for future trademark litigants, particularly in light of the internal Google documents discovered regarding the possibility of confusion.

For more information, please visit our trademark service page.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the IP law firm and its IP law attorneys may be found at www.klemchuk.com.

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