Alert December 16, 2010

Trademark Owners Oppose Reinterpretation of the Functionality Doctrine in Rosetta Stone v. Google

Many trademark owners believe that a recent decision by the U.S. District Court for the Eastern District of Virginia may open the door for accused infringers to avoid liability if they can prove that they are using another’s trademark in a “functional” way. 

In Rosetta Stone Ltd. v. Google, Inc. (Case No. 1:09cv736), Rosetta Stone sued Google for trademark infringement and dilution based on Google’s practice of selling Rosetta Stone’s trademarks as keyword triggers in Google’s “AdWords” program.  In April 2010, the district court granted summary judgment in Google’s favor on all counts.  In one section of the court’s opinion, released in August 2010, the court held that the functionality doctrine protected Google’s use of Rosetta Stone’s trademarks because Google’s application of the trademarks “ha[d] an essential indexing function because they enable Google to readily identify in its databases relevant information in response to a web user’s inquiry.”  The court also found that Google’s use of Rosetta Stone’s trademarks affects the cost and quality of Google’s “AdWords” program because, without it, Google’s advertising model would be less efficient.  On these bases, the district court granted summary judgment of non-infringement.

Traditionally, the “functionality doctrine” prevents trademark owners from protecting as trademarks those features that are essential to the manufacture or use of a product.  In 1998, Congress amended the Lanham Act to make functionality a statutory bar to federal registration, an affirmative defense to infringement and a statutory ground for cancellation of a mark.  15 U.S.C. § 1052(e)(5) (2000).

The functionality doctrine is often raised as a defense by accused infringers in trade dress cases.  Trade dress, like a trademark, serves as a source identifier, but, unlike a trademark, trade dress may include product features such as size, shape, color, texture, etc.  Trade dress is usually found in a product’s packaging or its configuration.  Examples of well-known trade dress include the curved and ribbed shape of the COCA-COLA bottle, the design and format of TIME magazine, and the shape of WHITE CASTLE restaurants.  Trade dress that is determined to be “functional” is not registrable as a trademark, and unregistered functional trade dress is not protectable under trademark law.  In essence, the functionality doctrine draws a line between trademark and patent law and “prevents trademark law, which seeks to promote competition by protecting a firm’s reputation, from instead inhibiting legitimate competition by allowing a producer to control a useful product feature.”  Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164 (1995). 

For example, in Traffix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001), the Supreme Court held that even though consumers associated a spring for wind-resistant road signs with a particular company, the design of the spring was not protectable as a trademark because the spring served the function of withstanding heavy wind conditions.  According to the court, a product feature is functional “if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” 

Following the Supreme Court’s ruling in Traffix, trial courts typically look to whether the alleged “function” of the feature/mark at issue is “essential to the use or purpose of the article [or] affects [its] cost or quality.”  If the answer is “yes” – the feature/mark is not properly considered a trademark at all and therefore cannot be infringed.  Many trademark owners consider the trial court’s ruling in Rosetta Stone to be inconsistent with this functionality doctrine as explicated by the Supreme Court.  Some have argued that the trial court turned the functionality doctrine “on its head” when it concluded that because Google’s product – the allegedly infringing product – purportedly operates better by using and selling trademarks as commercial keywords, its “use of trademarked keywords as triggers for paid advertisements is functional,” thereby “prevent[ing] a finding of infringement.” 

In August 2010, Rosetta Stone appealed the trial court’s ruling to the U.S. Court of Appeals for the Fourth Circuit.  Multiple amici curiae – including the International Trademark Association, the UK Intellectual Property Law Society, the Association for Competitive Technology, ConvaTec and others – also filed briefs seeking reversal.  In summary, the amici comprised of trademark owners first argue that the functionality doctrine has no application to Google’s use of the Rosetta Stone word marks because the doctrine is relevant only to trade dress cases.  Second, they take issue with the trial court’s inquiry into whether Google’s use of the marks as keyword triggers made the “Adwords” program more useful.  Instead, they say, the trial court should have examined Rosetta Stone’s own use of the marks on its product, because the functionality doctrine is a defense based on the characteristics of a trademark owner’s product, not the alleged infringer’s product.  Under that analysis, Rosetta Stone’s marks are argued not to be functional because they are not essential to the use or purpose of Rosetta Stone’s language learning software.  The trademark owners also question why the trial court failed to address the Ninth Circuit’s decision in Playboy Enters., Inc. v. Netscape Comm’s Corp., 354 F.3d 1020, 1031 (9th Cir. 2004).  In that case, the Ninth Circuit rejected the same position adopted by Google, finding that the functionality doctrine has no application to an Internet search engine’s use of the plaintiff’s trademarks because, “[t]he fact that the marks make defendants’ computer program more functional is irrelevant.”

Taken to its limit, the trademark owners say, the trial court’s reinterpretation of the functionality doctrine will permit a competitor to trade on any mark if they can prove that there is some “usefulness” of that mark to the competitor’s product or service.  According to one of the amici curiae, “[i]n extending the functionality doctrine to protect Google’s use trademarked words in its ‘Adwords’ program, the court opened the door for anyone to claim that its use of another party’s famous brand name is beneficial to its business and thereby to escape liability for trademark infringement.”  This approach, they say, distorts both basic principles of trademark law and the doctrine of functionality in particular. 

A decision from the Fourth Circuit is expected in the new year.