Google Updates AdWords Policies Following Suit Over Trademark Infringement

After several years of litigation over the use of trademarks in paid search advertisements, or AdWords, Google recently introduced new policies protecting trademark owners. Google now requires written permission from the trademark owner in order to use a trademark term in the text of a paid search ad—even if the advertiser is a legitimate reseller of the trademarked product. This is a curious development considering that it departs from Google’s past practice of being less aggressive with regard to trademark issues. For example, Google long ago abandoned a policy of permitting trademark owners to block bidding on trademarks used as ad words. The explanation for this change appears to be linked to a rare defeat for Google in a lawsuit relating to its AdWords advertising service.

Back in 2009, Rosetta Stone sued Google for trademark infringement, contributory infringement, and dilution based on Google’s practice of allowing acknowledged counterfeiters of Rosetta Stone software to purchase sponsored search results using Rosetta Stone’s name. Although the suit was initially dismissed by a federal court in 2010, in April 2012, the United States Court of Appeals for the 4th Circuit reinstated Rosetta Stone’s claims. The 4th Circuit found that there was a genuine question of fact as to whether web users would be confused about the source of sponsored search results purchased by acknowledged counterfeiters of Rosetta Stone software. The court’s conclusion was based in part on internal Google documents that showed that consumers are often confused as to the meaning of sponsored search results. Moreover, the evidence in the case showed Rosetta Stone repeatedly notified of Google of paid search ads for counterfeit software—over 190 times in a seven month span.

The Rosetta Stone case is unusual in that it may be the first time that a trademark-related case involving AdWords appeared to be headed to trial. (In the US, that is—Google has lost a number of trademark cases in Europe and in fact has different AdWords policies there as a result). Not surprisingly, the case settled. No specific terms of the settlement have been disclosed, but in a somewhat terse joint statement, Google and Rosetta Stone announced their intention to “collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet.” Shortly thereafter, Google amended its Ad Words policies. Given the language of the joint statement, and the timing of the subsequent change in Ad Words policies, it seems likely that the Rosetta Stone case is responsible for the new requirement that trademark owners provide permission for the use of trademarks in paid search ad copy.

Beyond the change to Google’s policies, the case is significant going forward as well. It suggests that Google may be held responsible in instances in which it has knowledge that the ads create confusion and/or point to counterfeiters’ web sites. This marks a new development in the area of paid search infringement analysis that bears further watching.