Rosetta Stone Inc. (RST) had some trademark-infringement claims against Google Inc. (GOOG), the world's largest Internet search company, restored by a federal appeals court and returned to the trial court for further consideration.
Rosetta Stone had asked the U.S. Court of Appeals in Richmond, Virginia, to overturn U.S. District Judge Gerald Bruce Lee's decision in 2010 that Google's sales of Rosetta Stone's trademarked phrases as keywords in Web searches wouldn't confuse customers. Rosetta Stone, a maker of language-learning software, claimed the keywords were sold to rivals and counterfeiters.
"A reasonable trier of fact could find that Google intended to cause confusion in that it acted with the knowledge that confusion was very likely to result from the use of its marks," the appeals judges said today in their ruling.
Google sells advertisers the rights to use certain words or phrases as keywords for the paid ads, known as sponsored links, on its search site. The links direct users to the advertisers' websites. Advertisers bid what they will pay Google for each click on an ad triggered by the keyword. The highest bid and other factors determine whether the keywords can be used. Google, based in Mountain View, California, derives most of its revenue from ad sales.
The keywords that Google sold to other businesses include "Rosetta Stone" and "Rosettastone.com."
"Each time Rosetta Stone informed Google that a particular advertiser was selling counterfeit Rosetta Stone products, Google promptly took action including removing the advertisement," Google said in its appeal brief.
Jim Prosser, a spokesman for Google, and Kristen Ingraham, a spokeswoman for Arlington, Virginia-based Rosetta Stone, didn't immediately return messages seeking comment on the ruling.
The appeals court vacated three summary-judgment claims that had gone against Rosetta Stone and affirmed two rulings that that went in Google's favor.
There was no evidence that Google "acts jointly with any of the advertisers to control the counterfeit Rosetta Stone products," the judges said.
Rosetta Stone, founded in 1992, provides software for learning more than 30 languages.
Google rose 40 cents to $632.72 at 2:25 p.m. New York time in Nasdaq Stock Market trading. Rosetta Stone dropped 13 cents to $9.77 on the New York Stock Exchange.
The case is Rosetta Stone v. Google, 10-2007, U.S. Court of Appeals for the Fourth Circuit (Richmond, Virginia).
To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
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