Rosetta Stone Reply Brief

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APPEAL NO. 10-2007

__________________________

IN THE

United States Court of AppealsFOR THE FOURTH CIRCUIT

__________________________

ROSETTA STONE LTD.,Plaintiff-Appellant,

v.

GOOGLE INC.,Defendant-Appellee.

__________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

ALEXANDRIA DIVISION

__________________________

APPELLANTS REPLY BRIEF__________________________

Clifford M. Sloan

Mitchell S. Ettinger

Jennifer L. Spaziano

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

1440 New York Avenue NW

Washington, DC 20005Phone Number: 202.371.7000

Email: [email protected]

Counsel for Appellant

Case: 10-2007 Document: 137 Date Filed: 12/13/2010 Page: 1


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TABLE OF CONTENTS

TABLE OF AUTHORITIES ................................................................................... iii

INTRODUCTION .....................................................................................................1

I. GOOGLE IS NOT ENTITLED TO SUMMARY JUDGMENT ON

THE DIRECT TRADEMARK INFRINGEMENT CLAIMS ........................3

A. Rosetta Stones Direct Liability Claim Is Not Premised On

Initial Interest Confusion.......................................................................3

B. Confusion Is Presumed As A Matter Of Law .......................................6

C. Googles Use Of The Rosetta Stone Marks Results In A

Likelihood Of Confusion ......................................................................7

1. Googles Practices Must Be Considered In Context And

Cannot Be Analyzed Piecemeal..................................................7

2. All Nine Factors Relevant To The Likelihood Of

Confusion Analysis Favor Confusion.......................................10

(a) The Undisputed Factors Are Relevant To Googles

Practices And Favor Confusion......................................11

(b) Evidence Of Actual Confusion Defeats SummaryJudgment.........................................................................12

(c) Intent And Consumer Sophistication Favor

Confusion........................................................................18

II. THE FUNCTIONALITY DOCTRINE HAS NO APPLICATION TO

GOOGLES USE OF THE ROSETTA STONE MARKS ...........................20

III. GOOGLE IS NOT ENTITLED TO SUMMARY JUDGMENT ON

THE SECONDARY TRADEMARK INFRINGEMENT CLAIMS ............21

A. Google Is Not Entitled To Summary Judgment On Contributory

Infringement ........................................................................................22

B. Google Is Not Entitled To Summary Judgment On Vicarious

Infringement ........................................................................................25



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IV. GOOGLE IS NOT ENTITLED TO SUMMARY JUDGMENT ON

THE TRADEMARK DILUTION CLAIM ...................................................25

V. THE DISTRICT COURT ERRED IN DISMISSING ROSETTA

STONES UNJUST ENRICHMENT CLAIM..............................................29

CONCLUSION........................................................................................................32



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TABLE OF AUTHORITIES

Cases Page(s)

Anheuser-Busch, Inc. v. L & L Wings, Inc., 962 F.2d 316 (4th Cir. 1992) ...............4

Austl. Gold, Inc. v. Hatfield, 436 F.3d 1228 (10th Cir. 2006)...................................3

CareFirst of Md., Inc. v. First Care, P.C., 434 F.3d 263 (4th Cir. 2006) .................9

Coca-Cola Co. v. Snow Crest Beverages, Inc.,

64 F. Supp. 980 (D. Mass. 1946), affd, 162 F.2d 280 (1st Cir.),

cert. denied, 332 U.S. 809 (1947)..................................................................24

Diane Von Furstenberg Studio v. Snyder, No. 106cv1356 (JCC),

2007 U.S. Dist. LEXIS 66633 (E.D. Va. Sept. 10, 2007) .......................27, 28

GEICO v. Google, Inc., 330 F. Supp. 2d 700 (E.D. Va. 2004) ...............................25

General Analytics Corp. v. CAN Ins. Cos., 86 F.3d 51 (4th Cir. 1996) ..................22

George & Co., LLC v. Imagination Entertainment Ltd.,

575 F.3d 383 (4th Cir. 2009) .........................................................................13

Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844 (1982)....................................24

Johnson & Johnson Vision Care, Inc. v. 1-800-Contacts, Inc.,299 F.3d 1242 (11th Cir. 2002) .......................................................................9

Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700 (3d Cir. 2004) ..............................14

Lamparello v. Falwell, 420 F.3d 309 (4th Cir. 2005)................................................5

Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC,

507 F.3d 252 (4th Cir. 2007) .........................................................................28

Perini Corp. v. Perini Constr., Inc., 915 F.2d 121 (4th Cir. 1990) .........................16

PETA v. Doughney, 113 F. Supp. 2d 915 (E.D. Va. 2000),

affd, 263 F.3d 359 (4th Cir. 2001) ...............................................................27

Playboy Enters., Inc. v. Netscape Commcns Corp.,

354 F.3d 1020 (9th Cir. 2004) .................................................................20, 21



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Promatek Indus., Ltd. v. Equitrac Corp., 300 F.3d 808 (7th Cir. 2002) ...............4, 5

Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009) ..............................27

Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455 (4th Cir. 1996) ...........14, 17, 18

Schering Corp. v. Pfizer Inc., 189 F.3d 218 (2d Cir. 1999) ....................................15

Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992)........................21

Shakespeare Co. v. Silstar Corp. of Am., 110 F.3d 234 (4th Cir. 1997) ...................6

Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010),

cert. denied, 562 U.S. --- (Nov. 29, 2010).............................................passim

Statutes and Rules Page(s)

15 U.S.C. 1114..............................................................................................passim

15 U.S.C. 1115................................................................................................11, 12

15 U.S.C. 1125..............................................................................................passim



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INTRODUCTION

The judgment for Google should be vacated for the reasons

established in Rosetta Stones opening brief (RSB). As to each of its claims,

Rosetta Stone set forth facts showing genuine issues for trial. In concluding

otherwise, the District Court violated settled principles of summary judgment,

misconstrued fundamental trademark tenets, and created a special, unwarranted,

and unprecedented rule of immunity for Google.

In its response (GB), Google largely abandons the District Courts

opinion, presumably recognizing the District Courts analysis cannot stand. Then,

in presenting its own arguments, Google mischaracterizes this case. Rosetta Stone

brought this case to stop Googles auction and sale of the Rosetta Stone Marks to

third parties for use as keywords and in the content of their sponsored links.

Google, however, asserts that Rosetta Stone challenges not only these uses of its

Marks, but all uses of the Rosetta Stone Marks on the Internet. GB at 2. Rosetta

Stone openly acknowledges numerous permissible uses of its Marks, including on

the Internet, but Googles auction and sale of the Rosetta Stone Marks, which is

likely to confuse consumers and dilute the Marks, violates established trademark

law.

Google not Rosetta Stone seeks a special rule of trademark law for

the Internet. Google argues that the Internet practices challenged here could cause,



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at most, initial interest confusion, GB at 12, 15-17, even though the Lanham Act

broadly prohibits trademark use that is likely to cause confusion, or to cause

mistake, or to deceive. 15 U.S.C. 1114(1)(a). Google likewise argues that the

traditional likelihood-of-confusion factors, which this Court has applied for

decades, should not apply to its practices on the Internet. GB at 21-22. Finally,

Google recognizes that uncertainty on the part of consumers in brick-and-mortar

stores can trigger trademark liability, but argues that uncertainty on the part of

Internet consumers is insufficient because it can be difficult to tell by looking at

an online ad the exact nature of the advertised product. GB at 36-37.

Although Google appears to recognize the flaws in the District

Courts analysis, its own analysis suffers from the same infirmities: Google

characterizes as undisputed numerous facts that Rosetta Stone disputed, presents

the facts in the light most favorable to Google, downplays the evidence presented

by Rosetta Stone, and, ultimately, asks this Court to weigh the facts and find in

Googles favor.

Among other things, Google asks this Court to ignore (i) the search-

results pages that appear on Googles website when a user queries a Rosetta Stone

Mark; (ii) Googles own extensive involvement in the sponsored link campaigns of

its customers; (iii) Googles own internal studies showing user confusion; and (iv)

Googles carefully designed business model by which it profits every time a user



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clicks on any sponsored link that appears, as a result of Googles auction and

selection, when a user queries a Rosetta Stone Mark. Because triable issues of

material fact exist with respect to these issues, and many others, the District

Courts rulings should be reversed.

ARGUMENT

I. GOOGLE IS NOT ENTITLED TO SUMMARY JUDGMENT ON THE DIRECTTRADEMARK INFRINGEMENT CLAIMS.

Google does not dispute that the first four elements of direct

trademark infringement are met and that the only open issue is whether Google

used the Rosetta Stone Marks in a manner likely to confuse consumers. Rosetta

Stone proffered significant evidence of confusion to the District Court, precluding

summary judgment to Google. RSB at 19-42. Googles brief does not support a

different conclusion.

A. Rosetta Stones Direct Liability Claim Is Not Premised On InitialInterest Confusion.

Googles argument that Rosetta Stones direct infringement claim

depends by its nature on initial interest confusion, which Google asserts is not

actionable in this Circuit, GB at 15-17, is flawed in two respects.1

Most

1Initial interest confusion in the internet context derives from the unauthorized

use of trademarks to divert internet traffic, thereby capitalizing on a trademark

holders goodwill. Austl. Gold, Inc. v. Hatfield, 436 F.3d 1228, 1239 (10th Cir.

2006). It occurs when a customer is lured to a product by the similarity of the

mark, even if the customer realizes the true source of the goods before the sale(cont'd)



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importantly, Rosetta Stones claim does notdepend on initial interest confusion.

Rather, regardless of initial interest confusion, Rosetta Stone demonstrated that

Googles use of the Rosetta Stone Marks is likely to confuse an ordinary

consumer as to the source or sponsorship of the goods. Anheuser-Busch, Inc. v.

L & L Wings, Inc., 962 F.2d 316, 318 (4th Cir. 1992) (citation omitted).

For example, Rosetta Stone presented the testimony of five consumers

who were misled by sponsored links on Google search-results pages for Rosetta

Stone into believing the sponsored link was endorsed or affiliated with Rosetta

Stone and that they were purchasing genuine Rosetta Stone product. JA(41)-4592-

4593, 4614-4615, 4724-4727, 4778-4781, 4804-4805. This testimony does not

show merely initial interest confusion; it proves actual confusion regarding the

source or sponsorship of the purchased goods. Likewise, the other confusion

evidence presented Googles internal studies, the testimony of Googles

Trademark Counsel, an expert confusion study, and testimonial evidence of

consumer confusion all demonstrate confusion as to the source or sponsorship of

the goods. RSB at 26-37.

________________________

(cont'd from previous page)

is consummated. Promatek Indus., Ltd. v. Equitrac Corp., 300 F.3d 808, 812

(7th Cir. 2002). What is important is not the duration of the confusion, it is the

misappropriation of . . . goodwill. Id. at 812-13.



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Indeed, Rosetta Stone did not even mention initial interest confusion

in its opening brief until page 34, where it noted that, [i]n addition to providing

evidence of actual confusion, its expert confusion study also supports an

independent finding of initial interest confusion. RSB at 34 n.11 (emphasis

added). Thus, a fundamental premise of Googles brief that only initial interest

confusion is at issue is incorrect.

Second, as Rosetta Stone explained in its opening brief, while this

Court declined to endorse initial interest confusion on the facts before it in

Lamparello v. Falwell, 420 F.3d 309 (4th Cir. 2005), it has not rejected the

doctrine. Id. at 316-18. Rather,Lamparello left open the question of whether the

doctrine applies in cases, such as this, where the defendant uses the plaintiffs mark

for its own financial gain. Id. at 318 n.16.

Rosetta Stone submits that the cases that have applied the doctrine in

such situations were correctly decided, see id.; RSB at 34 n.11; supra note 1, and

that initial interest confusion should be recognized here because Google profits

from the diversion of users to sponsored links and is therefore plainly

misappropriating Rosetta Stones goodwill for its own financial gain. See

Promatek, 300 F.3d at 812-13; Dkt. 78-1. Regardless whether the Court adopts the

doctrine, however, Rosetta Stone also has presented extensive evidence of

traditional confusion.



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B. Confusion Is Presumed As A Matter Of Law.Google also erroneously argues that confusion cannot be presumed

because the presumption of confusion that arises when a defendant intentionally

copies a protected mark applies only where defendants have copied a mark to sell

their own counterfeit or competing goods. GB at 39. This Court, however, has

stated that the presumption arises when the copier inten[ds] to exploit the good

will created by an already registered trademark. Shakespeare Co. v. Silstar Corp.

of Am., 110 F.3d 234, 237 (4th Cir. 1997) (quotation omitted). Rosetta Stone

presented evidence demonstrating that Google intended to exploit the goodwill

created by the Rosetta Stone Marks (and other trademarks it sells) in 2004, when it

decided to permit its customers to bid on the Marks, and again in 2009, when it

decided to permit certain customers to use the Marks in their sponsored links.

JA(41)-4265, 4297, 4382-4383, 4565, 4676; JA(46)-5235, 5366.

Google misses the point when it argues that the presumption of

confusion does not apply here because Google does not provide competing or

counterfeit goods. GB at 40. Google regularly displays on its search-results

pages sponsored links for counterfeit goods and allows those sponsored links to

use the Rosetta Stone Marks as keyword triggers and in their text. These

sponsored links, and thus Googles search-results pages, are presumptively

confusing. RSB at 19-21.



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Google, moreover, completely ignores the two other circumstances in

which confusion has been presumed, both of which are present here: (i) using

identical marks on the same goods; and (ii) using a trademark in whole or in part in

an Internet domain name. Id.

Because confusion should have been presumed, the District Courts

conclusion that Googles practices are not likely to confuse consumers cannot be

sustained.

C. Googles Use Of The Rosetta Stone Marks Results In ALikelihood Of Confusion.

Google also mistakenly argues that Rosetta Stone cannot show that

Googles use of the Rosetta Stone Marks results in a likelihood of confusion. GB

at 17-40. In so arguing, Google distorts its practices, mischaracterizes disputed

facts as undisputed, and asks the Court to view the facts in the light most favorable

to Google. Properly considered, the record demonstrates that, at a minimum,

genuine issues of material fact exist which cannot be resolved on summary

judgment.

1. Googles Practices Must Be Considered In Context AndCannot Be Analyzed Piecemeal.

As a threshold matter, Googles analysis distorts reality because

Google presents its sponsored links in artificial isolation and out of context,

addressing separately ads that do not violate Googles policies, GB at 18-33, and



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ads for counterfeit products, GB at 33-40. Google thus frames the confusion

question in a piecemeal fashion that has no relation to what appears on Googles

search-results pages. In fact, these sponsored links routinely appear together on

Googles search-results pages as demonstrated by the following screenshot

(JA(33)-1436-1441), which includes sponsored links to the Rosetta Stone webpage

(www.RosettaStone.com), two counterfeit sites (www.rosettaonsale.com and

www.learningsofts.com), and reseller sites (Barnes & Noble, Staples, and J&R

Music and Computer World):



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As this Court has stated, in analyzing confusion, it must examine the

allegedly infringing use in the context in which it is seen by the ordinary

consumer. CareFirst of Md., Inc. v. First Care, P.C., 434 F.3d 263, 271 (4th Cir.

2006) (citation omitted); see also Johnson & Johnson Vision Care, Inc. v. 1-800-

Contacts, Inc., 299 F.3d 1242, 1248 (11th Cir. 2002) (a court must analyze the

message conveyed in full context and must view the face of the statement in its

entirety, rather than examining the eyes, nose, and mouth separately and in

isolation from each other (quotation omitted)). The foundation of Googles

presentation thus is flawed the Court may not look at each sponsored link, but

must consider Googles search-results pages as a whole.

Google also obfuscates its trademarkpractices by emphasizing its

stated trademarkpolicies. Google asserts that the Court first should consider

whether the use of the Rosetta Stone Marks to refer to the company or its products

is actionable, then determine whether the use of the Marks in sponsored link text

constitutes infringement, and finally assess whether keyword bidding infringes the

Marks. GB at 17-40.

In fact, Google does not restrict its sale of the Rosetta Stone Marks to

purchasers that are lawfully referring to Rosetta Stone or its products in practice,

it allows anyone to bid on and buy the Marks and to have their sponsored links

displayed when a user queries Rosetta Stone. JA(39)-3957. Likewise, although



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Googles trademark policies purport to restrict the actual use of the Rosetta Stone

Marks in sponsored link text to customers that are lawfully referring to Rosetta

Stone or its products, in practice, Google conducts negligible diligence and

regularly allows counterfeiters to display sponsored links that use the Marks in

their text, including counterfeiters who have been previously identified to Google

by Rosetta Stone. See JA(41)-4655-4656, 4661-4663, 4698, 4706-4708, 4755-

4757.2

Moreover, because sponsored links using the Rosetta Stone Marks appear

on search-results pages when a user queries a Rosetta Stone Mark, Googles

practice of auctioning trademarks as keywords cannot be divorced from its practice

of allowing customers to use the purchased trademarks in sponsored link text.

2. All Nine Factors Relevant To The Likelihood-Of-ConfusionAnalysis Favor Confusion.

The District Court erroneously considered just three of the nine

factors analyzed in determining whether a likelihood of confusion exists. RSB at

21-26. It considered the three disputed factors actual confusion, intent, and

consumer sophistication but ignored the remaining six undisputed factors. As

explained in Rosetta Stones opening brief, all nine factors favor confusion.

2Google merely looks for the presence of certain words or phrases, such as

counterfeit, in the sponsored link text or the advertisers website a practice

that, to say the least, a jury might find not to be a serious effort to avoid

allowing counterfeiters to use trademarks in sponsored link text. See JA(41)-

4655-4656, 4661-4663, 4698, 4706-4708, 4755-4757.



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(a) The Undisputed Factors Are Relevant To GooglesPractices And Favor Confusion.

Google does not contest that factors 1 (strength and distinctiveness of

the mark), 2 (similarity of the marks), 3 (similarity of the goods and services the

marks identify), 4 (similarity of the facilities the parties use in their businesses), 5

(similarity of the advertising the parties use) and 8 (quality of the defendants

product) all favor a finding of confusion. Instead, Google argues that these

traditional factors are irrelevant to the question of whether referential use in

online ad text is likely to confuse. GB at 21-22.

Once again, Google seeks to establish a special rule of immunity for

its practices, under the guise of a carve-out for online ad text, that has no basis in

the law, and certainly no warrant in the Lanham Act. To the extent Google seeks

to raise a fair use defense, see 15 U.S.C. 1115(b)(4), it can present that defense

at trial, where a fact-finder can resolve the disputed issues. But Googles fair use-

based objection (i.e., the permissibility of referential use in text) cannot be

converted into a broad shield of statutory immunity that protects it against the

consequences, for example, of its extensive publication of the Rosetta Stone Marks

in the sponsored links of counterfeiters.3

Googles effort to reject the relevance of

3For this reason, concerns about free expression raised in amicus briefs

supporting Google from advocacy groups are misplaced. Dkt. 113, 114.

Congress addressed these concerns in the fair use provision of the Lanham Act,(cont'd)



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the six undisputed factors, all of which strongly favor confusion, is no more

persuasive than the District Courts analysis ignoring them.

(b) Evidence Of Actual Confusion Defeats SummaryJudgment.

Factor 7 (actual confusion) also favors a finding of confusion as

Rosetta Stone presented abundant evidence of actual consumer confusion. RSB at

26-37. Through its artificial, piecemeal presentation of its practices, Google

understates and misconstrues this evidence. In discussing ads that do not violate

Googles policies, Google addresses only the expert confusion study and

Googles internal studies. GB at 22-28. When it discusses ads for counterfeit

products, Google addresses the testimonial evidence of actual confusion. GB at

34-37. When it discusses its use of the Rosetta Stone Marks as keywords, Google

returns to the confusion studies. GB at 43-45. The actual confusion evidence

cannot be considered in such a fragmented fashion. Considered together, this

evidence supports the conclusion that Googles use of the Rosetta Stone Marks is

likely to cause consumer confusion.

First, five consumers were confused by sponsored links displayed on

Googles search-results pages for Rosetta Stone, leading them to do business

________________________

(cont'd from previous page)

15 U.S.C. 1115(b)(4), which Google has not advanced as a basis for summary

judgment.



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with companies they believed were sponsored by Rosetta Stone and to buy what

they thought was genuine Rosetta Stone product but that, in fact, was counterfeit

software. JA(41)-4592-4595, 4614-4620, 4724-4727, 4778-4784, 4804-4807;

JA(33)-698.

Tacitly conceding that the District Court erroneously weighed the

testimony of these consumers, Google does not contest the substance of their

testimony. GB at 34-35. Google instead argues only that five instances of

confusion is de minimis. Id. at 34. Relying on George & Co., LLC v.

Imagination Entertainment Ltd., 575 F.3d 383 (4th Cir. 2009), Google suggests

that in weighing this evidence, the Court should consider the 100,000,000 ads

displayed on Google.com since 2004 in response to search queries that contained

the Rosetta Stone marks. GB at 34.

Googles effort to substitute an alternative ground for the District

Courts holding, however, falls short. Google seeks to compare the number of

Rosetta Stones actual confusion witnesses (the maximum number permitted by the

District Courts deposition limits) to the largest possible universe Google can

invoke the total number of sponsored links (without even mentioning that

multiple sponsored links appear on a single page). Googles suggested universe

says nothing about the actual number of sales to other entities (including



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counterfeiters) through the relevant sponsored links, or about the number of users

who responded to, or engaged with, the sponsored links.

In light of the fact that individuals review Googles search-results

pages at the privacy of their computers (without interaction with salespersons), it is

significant that Rosetta Stone was able to identify any consumers who were

actually confused by Googles search-results pages. As the Third Circuit has

recognized, [w]ithout knowing how many, or what percent of, incidents go

unreported, anecdotal evidence of confusion cannot usefully be compared to the

universe of potential incidents of confusion. The rarity of such evidence makes

even a few incidents highly probative of the likelihood of confusion. Kos

Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 720 (3d Cir. 2004) (emphasis added)

(citation omitted). While Google notes that Kos is not controlling, GB at 35, it

does not address the logic ofKos and ignores Sara Lee Corp. v. Kayser-Roth Corp.,

81 F.3d 455 (4th Cir. 1996), in which this Court made the same point: [I]ndeed,

we can but wonder how often the experiences related by the trial witnesses have

been repeated but not reported in stores across the country. Id. at 466-67.

Given the circumstances of the witnesses actual confusion, the

weight of the witnesses testimony, the other confusion evidence presented by

Rosetta Stone (which was absent in George & Co.), and Googles factual rebuttal,



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the confusion testimony, at a minimum, should be submitted to a jury for

consideration and evaluation.

Second, Dr. Kent D. Van Liere tested consumer confusion arising

from Googles practices and concluded that 17 percent of consumers demonstrate

actual confusion. JA(46)-5459. The District Court erroneously discounted the

Van Liere report based on an impermissibly narrow reading of Section 1114(1)(a).

RSB at 33-34. Google apparently agrees, as it does not rely on the District Courts

reasoning. GB at 24-27. Instead, Google identifies supposed flaws in the survey

design and methodology. Id. These alleged deficiencies bear on the weight afact-

findercould give the survey; they provide no basis for discarding this evidence of

confusion at the summary judgment stage. See, e.g., Schering Corp. v. Pfizer Inc.,

189 F.3d 218, 228 (2d Cir. 1999) ([E]rrors in methodology [] properly go only to

the weight of the evidence[.]).

Google also asks this Court to reinterpret the Van Liere report,

asserting that the survey data reveals that participants were not actually confused

by Sponsored Links. GB at 26. Google argues that Dr. Van Lieres conclusions

are suspect, characterizes the verbatim responses of the survey participants,

questions the way Dr. Van Liere counted confusion and subtracts from Dr. Van

Lieres results the sponsored links that Google deems purely referential. Id.

While Google would be free to argue these points to a jury, summary judgment



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requires that the Van Liere report be viewed in the light most favorable to Rosetta

Stone. See, e.g., Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 124 (4th Cir.

1990).4

Third, Googles own studies show that Googles practices are

confusing. One set of studies demonstrates that Internet users frequently cannot

distinguish between sponsored links and organic search results (especially with

regard to the sponsored links at the top of the search-results pages). JA(41)-4298-

4360; JA(46)-5257-5275. Google states without any support that these studies

shed[] no light on the question of whether a user is confused as to the source or

sponsorship of the products sold by either a Sponsored Link or an organic one.

GB at 29. This assertion contradicts Googles assurances to its users that its

organic search engine identifies the most relevant sites in response to user queries.

JA(2)-28. A user who is unable to differentiate [the top sponsored links] from

organic search results, JA(41)-4298-4360; JA(46)-5257-5275, necessarily

4The factual nature of Googles criticisms is obvious. For example, Google

ignores two important facts: (i) the CouponCactus and Amazon.com sponsored

links appeared in the top two spaces, which Googles own studies show tend to

confuse consumers, thus strongly supporting Rosetta Stones position that the

top two sponsored links are especially confusing; and (ii) at the time of Dr. Van

Lieres study, neither CouponCactus nor Amazon.com was a legitimate bidderon the Rosetta Stone Marks (facts that would be presented at trial). Thus,

Googles re-writing of the experts report to claim a confusion result of -3%

is a product of its own invention, and Rosetta Stone strongly disputes it.

Google may not, on appeal, edit an expert report to create a straw man as an

alternative ground for defending the grant of summary judgment.



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believes that the top sponsored link is the top i.e., most relevant organic search

result.5

A second set of studies shows that Internet users are confused by the

use of trademarks in sponsored link text. JA(41)-4364-4377. Google says that

these studies are irrelevant because they tested neither the limited use of

trademarks permitted by Googles 2009 policy nor any ads using Rosetta Stones

marks. GB at 28. Rosetta Stone, however, does not challenge Googles carefully

drafted policies; it challenges Googles real-world practices. Moreover, the

conclusions reached in Googles studies were not mark-specific, and Google relied

on them in initially deciding not to permit customers to use trademarks in

sponsored link text. JA(41)-4578, 4669, 4672.

Fourth, Googles former and current Chief Trademark Counsel could

not tell that three of the sponsored links displayed on a Google search-results page

for Rosetta Stone were not resellers of genuine Rosetta Stone software. JA(46)-

5699-5707, 5805-5811. Google argues that these witnesses were not confused

they were merely uncertain. GB at 36. But this Court expressly recognized in

Sara Lee that uncertainty as to origin is evidence of actual confusion. 81 F.3d at

466.

5Google recently changed its practices and now uses the term ads instead of

sponsored links on its search-results pages.



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Google attempts to distinguish Sara Lee, asserting that the uncertain

witnesses there were consumers in stores, ready to make a purchase, with access

to the actual products. GB at 36. Here, again, Google seeks a special carve-out

that is not authorized by law. Googles practices never involve consumers in

stores with access to the actual products. They involve consumers faced with

search-results pages similar to those shown to Googles Trademark Counsel.

Nothing in the Lanham Act removes the resulting confusion from the scope of the

statute. Google also argues that the witness testimony in Sara Lee was coupled

with numerous other instances of actual confusion and surveys showing thirty to

forty percent confusion. GB at 36. So, too, here Rosetta Stone proffered

numerous other instances of actual confusion and a survey showing actionable

confusion. RSB at 26-37.

(c) Intent And Consumer Sophistication Favor Confusion.Finally, factors 6 (intent) and 9 (consumer sophistication) favor a

finding of confusion. RSB at 37-42. Regarding intent, Google misstates the

question presented, asserting that Rosetta Stone lack[s] any evidence that Google

intended accurate references to Rosetta Stone products to be confusing. GB at 29.

The challenged practices, however, extend far beyond accurate references to

Rosetta Stone products. They include, for example, Googles repeated sale of the



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Rosetta Stone Marks to counterfeiters even after Rosetta Stone complained about

those very counterfeiters to Google. JA(33)-693-2257.

In any event, the record shows that Google implemented its trademark

policies despite (i) its own studies showing high levels of confusion and (ii)

thousands of complaints about the infringing nature of its conduct. RSB at 38.

Googles only substantive response concerning the studies amounts to an argument

for viewing them in Googles favor, GB at 29-30, contrary to the summary

judgment standard. As to the complaints, Google reargues its motion to strike

them, id. at 30-31, which the District Court correctly denied, finding them

relevant to establishing Googles knowledge and intent for purposes of Rosetta

Stones trademark infringement claim. JA(28)-605. Google also asserts that,

even if admissible, the jury could not draw any conclusions from these complaints

without a mini-trial on each. GB at 30-31. The presentation of the complaints to

the jury, however, is a matter for the District Court to handle at trial; it does not

provide a sound basis for affirming summary judgment to Google.

With respect to consumer sophistication, Google simply ignores the

evidence demonstrating that the relevant segment of the consuming public is

confused by Googles sponsored links. JA(41)-4298-4360, 4591, 4612, 4723,

4777, 4803; JA(46)-5447-5502, 5699-5707, 5805-5811. Google does not address



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these facts or the District Courts failure to consider them in its brief. GB at

32-33.

II. THE FUNCTIONALITY DOCTRINE HAS NO APPLICATION TO GOOGLES USEOF THE ROSETTA STONE MARKS.

The functionality doctrine concerns features in the trademark owners

productthat are not protected under trademark law it does not create immunity

from a trademark infringement claim foralleged infringers who claim that certain

features are functional to their own products. RSB at 42-45. Three of the amicus

briefs filed in support of Rosetta Stone, including the brief filed by the

International Trademark Association, advance the same position, explaining in

great detail the flaws in the District Courts analysis of the functionality doctrine.

Dkt. 33-1, 37-1, 38-1.

Google does not meaningfully address the analysis presented by

Rosetta Stone and these amici, except to say that no legal principle justifies

narrowly construing the doctrine. GB at 42. Rosetta Stone and the amici, however,

do not seek to narrowly construe the doctrine: the doctrine itself has no application

to the facts here. As the Ninth Circuit held when faced with the exact argument

adopted by the District Court, [t]he fact that the marks make defendants

computer program more functional is irrelevant. Playboy Enters., Inc. v.

Netscape Commcns Corp., 354 F.3d 1020, 1031 (9th Cir. 2004).



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Google mentions this decision in a footnote, stating that the Ninth

Circuit briefly touched upon functionality in Playboy, but suggests the decision

is questionable because the Ninth Circuit did not address the purported

inconsistencies with its prior decision in Sega Enterprises Ltd. v. Accolade, Inc.,

977 F.2d 1510 (9th Cir. 1992). GB at 41 n.5.

However, there is no inconsistency between Playboy and Sega. In

Playboy, as here, the alleged infringer argued that using the trademark owners

trademark would make the alleged infringers product more functional. In Sega,

the alleged infringer argued that the trademark owners trademark was a functional

feature that must be included in a video game program in order for the game to

operate on the trademark owners video game system.

In short, all the authorities cited by both parties (and the amici)

support the same conclusion: the Rosetta Stone Marks are not functional within

the meaning of the functionality doctrine. The functionality doctrine therefore

provides no basis for affirming summary judgment in Googles favor.

III. GOOGLE IS NOT ENTITLED TO SUMMARY JUDGMENT ON THE SECONDARYTRADEMARK INFRINGEMENT CLAIMS.

The District Court erroneously granted summary judgment to Google

on its secondary trademark infringement claims. RSB at 46-51. Indeed, the

District Court itself expressly recognized the facts that precluded summary



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judgment. Id. Googles response does not support its assertion that these facts

should not be presented to a jury.

A. Google Is Not Entitled To Summary Judgment On ContributoryInfringement.

Rosetta Stone submitted facts showing that Google engaged in

contributory infringement by intentionally inducing others to infringe and

continuing to supply its products to customers it knew or had reason to know were

engaging in trademark infringement. RSB at 46-50. Regarding intentional

inducement, Google does not dispute that Rosetta Stone presented evidence

showing Googles awareness of the infringing nature of its sponsored links and

Googles encouragement of its customers to bid on trademarks as keywords and to

use trademarks, including the Rosetta Stone Marks, in sponsored link text. RSB at

46-47. Instead, Google argues that these facts are not sufficient to demonstrate the

specific intent necessary to support liability under an intentional inducement

theory because trademark inducement findings are rare and easily

distinguishable. GB at 47. The fact that such findings may be rare or

distinguishable, however, does not mean that Rosetta Stone failed to proffer

evidence requiring the question of Googles intent to be submitted to a jury.

General Analytics Corp. v. CAN Ins. Cos., 86 F.3d 51, 54 (4th Cir. 1996)

([D]etermining intent is fact-intensive[.]).



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Regarding continuing to supply product to known infringers, Rosetta

Stone proffered specific evidence demonstrating exactly such conduct by Google.

JA(33)-693-2257; JA(35)-2299-2317; JA(62). Google concedes as much, but

argues that such evidence is insufficient underTiffany (NJ) Inc. v. eBay, Inc., 600

F.3d 93 (2d Cir. 2010), cert. denied, 562 U.S. --- (Nov. 29, 2010), to establish the

level of specific knowledge required to support a finding of contributory

trademark liability. GB at 49.

In Tiffany, the Second Circuit affirmed the district courts decision,

following a fully litigated bench trial, that eBay was not liable for the sale of

counterfeit Tiffany products on its website because Tiffany failed to demonstrate

that eBay was supplying its service to individuals who it knew or had reason to

know were selling counterfeit Tiffany goods. 600 F.3d at 109. As Google

recognizes, the Second Circuit concluded that eBays general knowledge of

infringement was not sufficient to impose contributory liability. GB at 49

(emphasis added); see also Tiffany, 600 F.3d at 107. Here, in contrast, Rosetta

Stone proffered evidence showing Googles specific knowledge that particular

individuals were selling counterfeit Rosetta Stone goods and Googles continued



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sale of the Rosetta Stone Marks to such individuals. See JA(29)-640-641;JA(33)-

693-2257; JA(35)-2299-2317; JA(62).6

In addition, in Tiffany the Second Circuit considered the district

courts findings regarding eBays extensive efforts to combat counterfeiting,

consisting of, among other things, some 4,000 employees devoted to trust and

safety issues, including over 200 who focus exclusively on combating

infringement and 70 who work exclusively with law enforcement. 600 F.3d at

98. In sharp contrast, Rosetta Stone showed that the resources Google devotes to

attempting to combat counterfeiters are negligible although it has 19,835

employees, Google devotes just 150 man hours per week (less than four employees)

to dealing with counterfeiting. JA(36)-2319; JA(46)-5354.

Finally, contrary to Googles assertion that there is no dispute about

whether Google responded to Rosetta Stones notices regarding ads for

counterfeit products, GB at 50-51, Rosetta Stone showed that it frequently takes

days, and sometimes weeks, for Google to respond to notices of counterfeit

6To the extent Tiffany stands for the proposition that general knowledge may

never be sufficient for secondary trademark liability, it conflicts with venerable

principles and precedents. See, e.g., Coca-Cola Co. v. Snow Crest Beverages,Inc., 64 F. Supp. 980, 989-90 (D. Mass. 1946) (Wyzanski, J.), affd, 162 F.2d

280 (1st Cir.), cert. denied, 332 U.S. 809 (1947) (knowledge of widespread

infringing activity may be sufficient for secondary trademark liability), cited

with approval in Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854

(1982).



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sponsored links and there have been many instances where Google has taken no

action with respect to them. JA(33)-694-698, 703-2261.

Tiffany provides no basis to resolve these disputed facts on summary

judgment.

B. Google Is Not Entitled To Summary Judgment On VicariousInfringement.

With respect to vicarious infringement, Rosetta Stone presented

evidence showing that Google controls the selection and appearance of the

sponsored links that appear on its search-results pages and the use of the Rosetta

Stone Marks in those links. JA(41)-4153-4154, 4392-4397, 4420-4489, 4492,

4658-4659. Google asserts that it does not act in concert to create counterfeit

goods and that it has no control over counterfeiters websites, but it does not

address its joint ownership and control of the infringing sponsored links. GB at

52-53 (emphasis added). Accordingly, summary judgment in Googles favor was

erroneous. SeeGEICO v. Google, Inc., 330 F. Supp. 2d 700, 705 (E.D. Va. 2004).

IV. GOOGLE IS NOT ENTITLED TO SUMMARY JUDGMENT ON THETRADEMARK DILUTION CLAIM.

The District Court erroneously granted summary judgment to Google

on dilution based on its conclusions that (i) because Google does not sell language

learning software, its use of the Rosetta Stone Marks constitutes a fair use within

the meaning of the dilution statute and (ii) Rosetta Stone cannot demonstrate



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dilution because its brand awareness has increased since 2004. RSB at 53-57. As

explained in Rosetta Stones brief and in the briefs filed by amici, neither of these

conclusions is sustainable under established trademark principles. Seeid.; Dkt. 37-

1 at 12-20; Dkt. 38-1 at 17-27.

In its response, Google avoids characterizing its argument as a fair

use argument, and thereby triggering a fair use analysis that cannot be resolved on

summary judgment on this record. RSB at 53-54.7

Instead, Google argues that it

cannot be held liable for dilution because it does not use the Rosetta Stone marks

on Googles own goods and services. GB at 54. But 15 U.S.C. 1125(c)(1) does

not require that the defendant use the plaintiffs mark on its own goods and

services; it requires that the defendant use the plaintiffs mark in commerce. See

Dkt. 38-1 at 19-23. Google does not dispute that it uses the Rosetta Stone Marks

in commerce.

To support its argument, Google cites only Tiffany. There, the Second

Circuit held that because eBay did not sell the goods at issue, it did not itself

engage in dilution. Tiffany, 600 F.3d at 112. Unlike eBay, however, Google uses

the Rosetta Stone Marks it sells the Rosetta Stone Marks to third parties and

selects and displays a limited number of sponsored links on its search-results pages

7Indeed, Google concedes that at least some of its uses of the Rosetta Stone

Marks are notfair uses under the dilution statute. See GB at 54.



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Dist. LEXIS 66633, at *11 (E.D. Va. Sept. 10, 2007).9

Google argues that PETA

and Von Furstenberg are inapposite because they involved defendants that used the

plaintiffs trademarks to promote their own goods and services. GB at 54-55.

Google again misses the mark. These cases stand for the proposition that either

using the plaintiffs mark or linking the plaintiffs mark to counterfeit products

may be sufficient to prove dilution. As discussed above, Rosetta Stone has

presented evidence that Google uses the Rosetta Stone Marks in each of these ways.

Google argues, alternatively, that summary judgment may be affirmed

because Rosetta Stone was not a famous mark in 2004. GB at 56-57. Google

suggests that, because Rosetta Stone had not achieved general fame in April

2004, when Google started its practice of auctioning trademarks, Google cannot be

held liable for any blurring or tarnishment of the Rosetta Stone Marks that has

resulted from Googles practices since then. Id. Googles argument is without

merit.

9Googles assertion that Rosetta Stone somehow waived any argument based

on the District Courts failure to properly analyze dilution is groundless. GB at

55. Rosetta Stone plainly raised this issue in its briefing below, citing both thestatute and relevant case law. JA(32)-688-689; JA(44)-5158-5160; JA(52)-

6522-6523. Moreover, the [statute] directs the court to consider all factors

relevant to the issue, including six factors that are enumerated in the statute.

Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252, 266 (4th

Cir. 2007).



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Rosetta Stone presented evidence that Rosetta Stone was a famous

mark in 2004. JA(9)-202-204; JA(34)-2263-2276. Moreover, Google began using

the Rosetta Stone Marks in sponsored link text in 2009 when even Google

recognizes the Rosetta Stone Marks were famous. JA(41)-4676. Finally, this case

involves Googles auction and sale of the Rosetta Stone Marks on an ongoing basis.

Google thus commences use of the Rosetta Stone Marks in commerce each time

it auctions the Rosetta Stone Marks to its customers.

V. THE DISTRICT COURT ERRED IN DISMISSING ROSETTA STONES UNJUSTENRICHMENT CLAIM.

The District Court erroneously dismissed Rosetta Stones unjust

enrichment claim for two reasons: (i) the Amended Complaint alleged facts that

plausibly stated an unjust enrichment claim and (ii) the Communications Decency

Act (CDA) does not bar the claim. RSB at 57-60.

Regarding the sufficiency of the pleading, Google argues that the

Amended Complaints assertions that Rosetta Stone conferred involuntarily a

benefit on Google and that Google should reasonably have expected to

compensate Rosetta Stone for that benefit are conclusory, unwarranted

deductions of fact, or unreasonable inferences that need not be accepted as true.

GB at 60 (citation omitted). Google is simply incorrect. The Amended Complaint

alleges facts supporting both of them. Specifically, the Amended Complaint

alleges that Google (i) used the Rosetta Stone Marks without Rosetta Stones



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authorization; (ii) sold the Marks as keyword triggers for third-party advertising;

and (iii) retained profits from those sales without paying Rosetta Stone for the

value of its intellectual property. JA(8)-196-197. These facts support the

assertionsthat Google asks this Court to reject.

Google further argues that Rosetta Stone did not have a reasonable

expectation of compensation because Rosetta Stone did not plead any facts to

support a claim that Google typically paid trademark owners for AdWords

revenue or that Google led Rosetta Stone to believe Google would pay for use of

Rosetta Stones trademarks as keywords. GB at 60. In other words, Google

argues that because it brazenly uses all trademarks without any subjective intention

of paying for the value that it receives in doing so, no one can state a claim against

it for unjust enrichment. That is not the law.

Where, as here, a defendant seizes a benefit without authorization, the

plaintiff need only demonstrate that the defendant should reasonably have expected

to pay the plaintiff for the benefit taken. RSB at 58. The Amended Complaint

alleges facts plausibly suggesting that Google reasonably should have expected to

pay Rosetta Stone for the benefits it reaped from its sale of the Rosetta Stone

Marks. JA(8)-196-197. Indeed, the record shows that Google (i) began selling

trademarks as keywords in 2004 because it determined that it could achieve a

[s]ignificant potential revenue impact, JA(41)-4265, and (ii) knew that it might



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have to pay trademark owners for auctioning their marks as it warned investors of

the potential adverse financial consequences that might result from lawsuits by the

trademark owners, JA(41)-4297.10

Regarding the CDA, Google seeks to cloak itself in the Acts

protections because it has structured its AdWords program so that it gets paid when

a user actually clicks on a sponsored link. GB at 57-58. But how Google gets paid

is beside the point as the practice at issue here is Googles auction and sale of

trademarks as keywords conduct to which the CDA does not apply regardless of

Googles contingent payment arrangement. RSB at 58-59.

Finally, even if the CDA were applicable, dismissal of the unjust

enrichment claim was improper given the extensive allegations of Googles active

participation in creating the content of the sponsored links. RSB at 59-60. In

responding to this argument, Google discusses only its Keyword Tool, asserting

that the tool does not create the content of the advertisements. GB at 59.

Rosetta Stones allegations, however, cannot be read so narrowly. JA(8)-181-182.

Indeed, Rosetta Stone presented extensive evidence of Googles direct

involvement in creating content, including evidence that Google tells its customers

to put the keywords that trigger the ad in the ads headline and description and to

10Thus, Googles assertion that Rosetta Stone did not argue any additional

factual points in connection with summary judgment briefing, GB at 61, is

incorrect.



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highlight[] the brand name in their display URL. JA(41)-4492; JA(46)-5617.

Thus, Google is not merely a passive publisher of content provided by its

customers. Accordingly, the District Court was erroneous in ruling, as a matter of

law, that Google is immune from liability under the CDA.

CONCLUSION

This Court should reverse the District Courts orders and remand this

case for trial.

Dated: December 13, 2010 Respectfully submitted,

Skadden, Arps, Slate, Meagher & Flom LLP

/s/ Clifford M. Sloan

Attorneys for Appellant



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UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 10-2007 Caption: Rosetta Stone Ltd. v. Google Inc.

CERTIFICATE OF COMPLIANCE WITH RULE 28.1(e) or 32(a)Certificate of Compliance With Type-Volume Limitation,

Typeface Requirements, and Type Style Requirements

1. This brief complies with the type-volume limitation of Fed. R. App.

28.1(e)(2) or 32(a)(7)(B) because:

[Appellant's Opening Brief, Appellee's Response Brief, and Appellant's

Response/Reply Brief may not exceed 14,000 words or 1,300 lines; Appellee's

Opening/Response Brief may not exceed 16,500 words or 1,500 lines; any Reply or

Amicus Brief may not exceed 7,000 words or 650 lines; line count may be usedonly with monospaced type]

this brief contains 6,943 words, excluding the parts of the brief

exempted by Fed. R. App. 32(a)(7)(B)(iii), or

this brief uses a monospaced typeface and contains _____________

[state the number of] lines of text, excluding the parts of the brief

exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

2. This brief complies with the typeface requirements of Fed. R. App. P.32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because:

[14-point font must be used with proportional typeface, such as Times New Roman

or CG Times; 12-point font must be used with monospaced typeface, such as

Courier or Courier New]

this brief has been prepared in a proportionally spaced typeface using

Microsoft Word in 14-point Times New Roman; or

this brief has been prepared in a monospaced typeface using _______

[state name and version of word processing program] with ________

[state number of characters per inch and name of type style].

Dated: December 13, 2010 /s/ Clifford M. Sloan

Counsel for Appellant



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CERTIFICATE OF SERVICE

I certify that on December 13, 2010, the foregoing document was served on

all parties or their counsel of record through the CM/ECF system.

I further certify that on December 13, 2010, I caused the required number of

bound copies of the foregoing document to be delivered to the Clerk of the Court

via Federal Express overnight delivery.

/s/ Clifford M. Sloan


Documents

Rosetta Stone Reply Brief