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Rosetta Stone: The Latest Case Against Google

Some companies are up in arms over a controversial Google ( (GOOG)) advertising program, but they may have a hard time winning their battle in court, legal experts say. Rosetta Stone ( (RST)), purveyor of language education products, is the latest company to sue Google over its strategy of letting companies use competitors' trademarks in their marketing campaigns. At issue is Google's AdWords, which shows text ads just to the right of Web search results on a Google page. To get their products and brands to appear, companies "bid" on keywords that trigger certain ads when they're used in a search query. For instance, a mobile-phone manufacturer may pay for its ads to appear whenever someone searches for the term "cell phone" or uses "wireless" as part of a search. Echoing the objections made in roughly eight other pending U.S. suits, Rosetta Stone says Google is impermissibly selling Rosetta Stone's name to competitors. Detailing its allegations in a 37-page complaint filed in federal district court in Virginia on July 10, Rosetta Stone wants the court to bar Google from doing this. "free ride on Rosetta Stone's brand"Over the past year, Google has steadily loosened its policies regarding when companies can bid on rival trademarks. Until recently, the trademark couldn't appear in the displayed ad text. Toyota, for example, could bid so that a search for "Honda" would display an ad for Toyota cars, but couldn't use the Honda name in its ad. Google changed that policy, effective June 15. That, says Rosetta Stone's attorney Terence P. Ross, is what prompted the lawsuit. Ross is a partner at Gibson, Dunn & Crutcher in Washington. Arlington (Va.)-based Rosetta Stone takes issue with Google allowing other advertisers to use its name—and other trademarks it owns—as either keywords or in ad text. "Google and its advertisers benefit financially from and trade off the goodwill and reputation of Rosetta Stone without incurring the substantial expense that Rosetta Stone has incurred in building up its popularity, name recognition, and brand loyalty," Michael Wu, the company's general counsel, said in a statement. In its complaint, Rosetta Stone states: "This lawsuit involves…efforts by certain companies to free ride on Rosetta Stone's brand with the active participation and assistance of Google." Rosetta Stone claims that Google's policy forces it to spend "millions of dollars" to purchase the AdWords rights to its own name just to try to preclude competitors from doing so. Legal key: Are consumers confused?Google spokesman Andrew Pederson said the search firm could not comment specifically on the Rosetta Stone suit, since the company has not formally been notified of the action. But he defended Google's policy. "Just as it's reasonable to expect a range of brands on any shelf in a grocery store, providing users on Google with more than one option when they search for a brand name or other trademark helps them to find the best product at the lowest price," he wrote in an e-mail. With Internet search being relatively new, the law in this area remains unsettled. But as in any trademark infringement case, a complaining company can win only if it can prove that the alleged misuse of its trademark confuses consumers. That may be tough. "Nobody has really good empirical data explaining what consumers are thinking when they are looking at a search results page," says Eric Goldman, a professor at Santa Clara University School of Law and director of its High Tech Law Institute. "I'm a skeptic about the fact that consumers are confused about what they are seeing," though the question is heavily dependent on the facts in each case, he notes. In a ruling that drew attention in April, the U.S. Circuit Court of Appeals for the Second Circuit reinstated a trademark suit by computer repair firm Rescuecom against Google. The court said the company should at least have a chance to present evidence that consumers who searched for "Rescuecom" would be misled if ads for rival computer repair firms appeared in addition or instead.
Orey covers corporations for BusinessWeek.

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