The U.S. Court of Appeals for the 4th Circuit released a decision earlier this week in Rosetta Stone v. Google, remanding issues of trademark infringement in the summary judgment appeal relating to Google’s AdWords program.

Rosetta Stone’s allegations relate to both Google’s use of trademarks in the advertising text that appears in ads and in the use of trademarks as keywords used to trigger ads as part of its AdWords program.

The Court of Appeal refused to uphold the finding of summary judgment in Google’s favour on the issues of functionality of the marks used as keywords and on the likelihood of confusion and remanded those issues so that further evidence could be adduced. Although the Court rejected any presumption of the infringement, the Court concluded:

In sum, we conclude that there is sufficient evidence in the record to create a question of fact on each of the “disputed” factors—intent, actual confusion, and consumer sophistication—to preclude summary judgment.

The Court included a long discussion of Google’s own studies of the AdWords program and changes to its policy on trademarks over time.

On the issue of functionality, the Court stated that the analysis must focus on the trademark owner’s use of the mark:

The functionality analysis below was focused on whether Rosetta Stone’s mark made Google’s product more useful, neglecting to consider whether the mark was functional as Rosetta Stone used it.
…
Once it is determined that the product feature—the word mark ROSETTA STONE in this case—is not functional, then the functionality doctrine has no application, and it is irrelevant whether Google’s computer program functions better by use of Rosetta Stone’s nonfunctional mark.

The Court of Appeal did uphold the summary judgment on vicarious infringement and unjust enrichment.

Travis Crabtree at JDSupra has an analysis of the decision.