Rosetta Stone v. Google: Schwimmer, Goldman, Levy intervene, 4th Circuit listens – UPDATED

The Rosetta Stone v. Google appeal:  Marty, Eric and Paul — listed in the caption as limited intervenors, but, really, the biggest sticks in the room — have spoken, and the Fourth Circuit has, um, also spoken:

Appellant Rosetta Stone Ltd. appeals from an order, see Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531 (E.D. Va. 2010), granting snmmary judgment against Rosetta Stone on its claims against Appellee Google Inc. for trademark infringement, see 15 U.S.C. § 1114(1)(a); contributory and vicarious trademark infringement; and trademark dilution, see 15 U.S.C. § 1125(c)(I). Rosetta Stone also appeals from an order dismissing its unjust enrichment claim under Virginia Law. See Rosetta Stone Ltd. v. Google Inc., 732 F. Supp. 2d 628 (E.D. Va. 2010). For the reasons that follow, we affirm the district court’s order with respect to the vicarious infringement and unjust enrichment claims; however, we vacate the district court’s order with respect to the direct infringement, contributory infringement and dilution claims and remand these claims for further proceedings.

Here’s the opinion (PDF with OCR).  For analysis of the secondary trademark  liability issues the court was presented with see here, of course.  Notably, the court readily reversed the vicarious infringement ruling below.  But regarding contributory infringement, first — hey, it’s my blog — consider what Jane Coleman said, in the excerpt posted here at the time, on how the district court in Rosetta Stone applied, or misapplied, the opinion in Tiffany:

The court drew heavily on the Second Circuit’s reasoning in Tiffany v. eBay to reject Rosetta Stone’s second argument, finding that it failed to show that Google knew or had reason to know that it was supplying its services to parties engaging in trademark infringement.  In Tiffany, “eBay’s generalized knowledge of infringement” on its website was insufficient to impose contributory liability on the online sales site eBay.  Compared to eBay, the court reasoned, Google had been presented with even fewer notices of infringement. It therefore declined to find the “specific” knowledge required by the court in Tiffany. . . .

In finding that Rosetta Stone had not met its burden of showing that summary judgment was proper as to the contributory trademark infringement claim, the court’s language left unclear what its conclusions were regarding Google’s liability for the sale of trademark-protected keywords to competitors who were not necessarily counterfeiters. Specifically it found that “no reasonable trier of fact could find that Google intentionally induce[d] or knowingly continue[d] to permit third party advertisers selling counterfeit Rosetta Stone products to use the Rosetta Stone Marks in their Sponsored Link titles and advertisement text.”  If indeed the court intended to limit its holding to direct trademark infringement arising out of counterfeit websites, then it is not clear how or whether its decision would apply to the scenarios presented in the cases of GEICO and American Blind. In these two earlier cases, the courts left open the possibility that search engine operators who use third parties’ trademarks might, in appropriate circumstances, bear contributory liability for trademark infringement arising out of those advertisements.

The Fourth Circuit seems troubled by a similar question, focusing on the contrasting procedural postures in the respective cases:

On appeal, Rosetta Stone argues that the district court misapplied the standard of review and incorrectly awarded summary judgment to Google where the evidence was sufficient to permit a trier of fact to find contributory infringement. We agree. In granting summary judgment to Google because “Rosetta Stone has not met the burden of showing that summary judgment is proper as to its contributory trademark infringement claim,” the district court turned the summary judgment standard on its head. . . .   Tiffany involved an appeal of judgment rendered after a lengthy bench trial.  Because of its procedural posture, the district court in Tiffany appropriately weighed the evidence sitting as a trier of fact. Accordingly, Tiffany is of limited application in these circumstances, and the district court’s heavy reliance on Tiffany was misplaced. We conclude that the evidence recited by the district court is sufficient to establish a question of fact as to whether Google continued to supply its services to known infringers. Accordingly, we vacate the district court’s order to the extent it grants summary judgment in favor of Google on Rosetta Stone’s contributory infringement claim.

Facts:  Important stuff!

UPDATE:  From the horse’s mouth —  Eric’s take:  “Fourth Circuit’s Rosetta Stone v. Google Opinion Pushes Back Resolution of Keyword Advertising Legality Another 5-10 Years.”  Highlights:

Direct TM Infringement. This is probably the most obvious place where the opinion mechanically marched through the doctrinal elements without acknowledging the big picture. It’s really makes so sense to hold that Google *directly* liable for trademark infringement for keyword ad sales, because Google’s products/services or marketing do not confuse consumers about the source and origin of marketplace offerings. If any consumer confusion takes place, it’s caused by the advertisers, and Google is at most secondarily liable for that. But the opinion is tone deaf about this key point. . . .

On the plus side, the opinion correctly notes that the standard multi-factor likelihood of consumer confusion (LOCC) test doesn’t work in nominative use situations. . . . I hope other courts similarly rethink the multi-factor LOCC test in nominative use cases. It really don’t work at all.  [Actually, the Third Circuit did so a while ago (see here) — RDC] . . .

The opinion says that the district court’s reliance on Tiffany v. eBay was misplaced because that ruling came after a bench trial and therefore couldn’t help on summary judgment. Unfortunately, the opinion gives short shrift to what evidence from Rosetta Stone could support contributory infringement. The only evidence cited by this opinion is the fact that Rosetta Stone identified some ads from rogue sellers and Google didn’t block other unidentified ads from those sellers. If that’s Rosetta Stone’s best argument for contributory infringement, I think it will lose the contributory claim handily.

Dilution. Characterizing keyword ad sales as dilution is unprecedented and virtually unsupportable doctrinally. This opinion doesn’t address that. It simply points out minor doctrinal errors in the lower court’s opinion (not surprising, as I said the lower court’s “rejection of the dilution claim was bizarre”), but misses the big picture that there’s absolutely nothing Google does that could dilute or tarnish Rosetta Stone’s marks. . . .