eBay/Yahoo Amicus Brief in Rosetta Stone V Google

Case: 10-2007 Document: 115-1 Date Filed: 12/06/2010 Page: 1
RECORD NUMBER: 10-2007
United States Court of Appeals

for the
Fourth Circuit
ROSETTA STONE LTD.,

Plaintiff-Appellant,
– v. –
GOOGLE, INCORPORATED,
Defendant-Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA AT ALEXANDRIA
BRIEF OF AMICI CURIAE EBAY INC. AND YAHOO! INC.

IN SUPPORT OF GOOGLE, INCORPORATED
R. BRUCE RICH
JONATHAN BLOOM
MARK J. FIORE
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
MICHAEL LYLE
1300 Eye Street NW
Suite 900
Washington, DC 20005
(202) 682-7000
Attorneys for Amici Curiae
COUNSEL PRESS ! VA – (800) 275-0668

TABLE OF CONTENTS
Page
INTRODUCTION AND INTEREST OF THE AMICI................................. 1
ARGUMENT .................................................................................................. 4
I. TRADEMARK LAW EMBRACES THE RIGHT OF ONLINE

SERVICES TO ENGAGE IN KEYWORD ADVERTISING............. 4
II. THE DISTRICT COURT PROPERLY APPLIED THE

CONTRIBUTORY TRADEMARK INFRINGEMENT
STANDARD....................................................................................... 11
A. Inducement ............................................................................... 12
B. Continued Supply to a Known Infringer.................................. 19
CONCLUSION............................................................................................. 23
i
TABLE OF AUTHORITIES
Cases Page(s)
Anti-Monopoly, Inc. v. General Mills Fun Group,
611 F.2d 296 (9th Cir. 1979) ................................................................... 10
Century 21 Real Estate Corp. v. Lendingtree, Inc.,

425 F.3d 211 (3d Cir. 2005) ...................................................................... 9
CPC Int’l, Inc. v. Skippy Inc.,
214 F.3d 456 (4th Cir. 2000) ..................................................................... 9
Georgia Pacific Consumer Products, LP v. Von Drehle Corp.,
618 F.3d 441 (4th Cir. 2010) ................................................................... 16
Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc.,

955 F.2d 1143 (7th Cir. 1992) ........................................................... 13, 21
Inwood Labs., Inc. v. Ives Labs., Inc.,

456 U.S. 844 (1982).......................................................................... passim
KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc.,

543 U.S. 111 (2004)................................................................................... 7
Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.,
545 U.S. 913 (2005)........................................................................... 13, 14
New Kids on the Block v. News Am. Publ’g, Inc.,
971 F.2d 302 (9th Cir. 1992) ..................................................................... 8
Pebble Beach Co. v. Tour 18 I Ltd.,
155 F.3d 526 (5th Cir. 1998) ..................................................................... 9
Platinum Home Mortgage Corp. v. Platinum Fin. Group, Inc.,

149 F.3d 722 (7th Cir. 1998) ................................................................... 10
Prestonettes v. Coty,
264 U.S. 359 (1924)................................................................................... 9
Rosetta Stone Ltd. v. Google Inc.,

No. 1:09cv736, 2010 WL 3063152 (E.D. Va. Aug. 3, 2010)........... passim
ii
Scholastic, Inc. v. Macmillan, Inc.,

650 F. Supp. 866 (S.D.N.Y. 1987) ......................................................... 10
Sony Corp. of Am. v. Universal City Studios, Inc.,

464 U.S. 417 (1984)........................................................................... 13, 15
Tiffany (NJ) Inc. v. eBay Inc.,

600 F.3d 93 (2d Cir.), cert. denied, -- S. Ct. --, No. 10-300, 2010 WL
3416635 (U.S. Nov. 29, 2010).......................................................... passim
TrafFix Devices, Inc. v. Mktg. Displays, Inc.,

532 U.S. 23 (2001)..................................................................................... 9
Univ. Commc’ns Sys., Inc. v. Lycos, Inc.,

478 F.3d 413 (1st Cir. 2007)...................................................................... 9
Other Authorities
1 IAN C. BALLON, E-COMMERCE & INTERNET LAW (2010)............................. 9
4 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR

COMPETITION (4th ed.) ............................................................................. 10
Mark A. Rosso & Bernard J. Jansen, Smart Marketing or Bait & Switch?
Competitors’ Brands as Keywords in Online Advertising (2010)
http://faculty.ist.psu.edu/jjansen/academic/
rosso_jansen_wicow06.pdf ................................................................ 11,17
Kurt M. Saunders, Confusion Is the Key: A Trademark Law Analysis of

Keyword Banner Advertising, 71 FORDHAM L. REV. 543 (2002) ............ 11
iii
INTRODUCTION AND INTEREST OF THE AMICI
Amici eBay Inc. (“eBay”) and Yahoo! Inc. (“Yahoo!”) (collectively, the
“Amici”) are pioneers in the development of the commercial and informational
potential of the Internet. eBay, the world’s most prominent online marketplace,
provides a venue, www.ebay.com, through which some 93 million users
worldwide buy and sell wares of all types. eBay provides a platform for
transactions that are carried out directly between eBay users. Some 200 million
active listings appear on eBay’s website at any given time. Keyword searching
allows users to locate the listings for the products they are seeking. eBay recently
litigated direct and contributory trademark infringement claims similar to those
asserted here in Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir.), cert. denied,
-- S. Ct. --, No. 10-300, 2010 WL 3416635 (U.S. Nov. 29, 2010), a decision Amici
believe provides important guidance for the Court’s consideration of this appeal.
Yahoo! is a global online network of integrated services. Yahoo! provides a
wide range of Internet services to consumers, including services relating to Internet
search, email, shopping, finance, news, sports, and entertainment. Yahoo!’s
revenues come primarily from selling online advertising, some of which makes fair
use of third-party trademarks or uses them in a generic or descriptive manner.
The online services Amici provide have transformed commerce and
communications for millions of people worldwide. Their search engines and
1
online marketplaces give users the ability to locate and purchase an almost
unlimited array of products and services and to access information on any
conceivable topic by simply typing a search term – a keyword or keywords – and
pushing a button. The sale of keywords and the associated advertising generates
the revenue that allows search engines such as Yahoo!’s to exist without charge to
users.
Amici file this brief to provide the Court with their perspective on two issues
raised by this appeal that have a significant bearing on the services they provide to
consumers. The first is the nature and importance of keyword advertising, which
fosters competition, delivers valuable information to consumers, and generates the
revenues on which search engines and other online services depend. Many courts
have recognized the right of entities such as Amici to use trademarks in
noninfringing ways, including on the Internet.
The second, and related, issue is the proper scope of contributory trademark
infringement, which was a focus of the Second Circuit’s ruling in Tiffany, the
recent landmark decision involving application of the contributory trademark
infringement standard articulated by the Supreme Court in Inwood Laboratories
Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982), to online commerce. Amici
believe the Second Circuit’s interpretation and application of the Inwood standard
provides the proper framework for examining the contributory infringement
2
arguments advanced in this appeal by the appellant, Rosetta Stone Ltd. (“Rosetta”),
and by its amici Carfax, et al. (“Carfax”) and Convatec, Inc., et al. (“Convatec”).
Those arguments are inconsistent with Tiffany and other authority and would, if
accepted, jeopardize the lawful use of trademarks as keywords and in sponsored
ads by holding online service providers contributorily liable for infringements that
the service provider neither encouraged nor knew about.
As the Second Circuit recognized in Tiffany, by requiring entities offering
online services to take action only upon notice of specific infringing activity,
trademark law sensibly allocates enforcement responsibility in a manner that
reflects the incentives and expertise of rights owners, who bear the primary
policing obligation, on the one hand, and the practical constraints on the policing
capabilities of Internet service providers, on the other. The law does not require
search engines or other online services to undertake the impossible task of
proactively monitoring their sites for potential infringements of thousands of
trademarks through millions of advertisements or listings for products they never
have the opportunity to inspect. Nor is the mere provision of a service that might
be used to infringe, without more, an adequate basis for imposing secondary
infringement liability on the service provider.
Departing from current law and imposing an affirmative policing duty on
search engines and other online services would present the crippling prospect of
3
massive liability for undetected – and perhaps undetectable – infringements despite
these services’ implementation of notice-and-takedown procedures. Without
seeking to address either the remaining issues implicated by this appeal or the state
of the fact record per se, Amici urge the Court to rule with sensitivity to the legal
issues and concerns raised in this submission.
ARGUMENT
I. TRADEMARK LAW EMBRACES THE RIGHT OF ONLINE

SERVICES TO ENGAGE IN KEYWORD ADVERTISING
Ignoring decades of precedent, Rosetta and its amici argue that keyword
advertising that uses terms that might be the trademarks of others should be
deemed inherently unlawful solely because third parties may make infringing uses
of those trademarks in their advertisements. In advocating this rewriting of
trademark law, Rosetta contends that search engines should simply “stop selling
the Rosetta Stone Marks to unauthorized third parties,” Rosetta Stone Br. 49, while
amicus Carfax notes approvingly that Google “previously . . . weed[ed] out all
trademarks from its AdWords program.” Carfax Br. 13. The law, however,
imposes no such obligation. The district court recognized the rights of third parties
to make lawful uses of trademarks in a variety of contexts, including referential
uses. Many courts have examined referential uses of trademarks pursuant to the
“nominative fair use” doctrine or related doctrines, and Amici submit that such
4
analysis provides the proper framework for examining the lawfulness of the
keyword advertising practices their policies permit.
As the district court explained, consumers searching for a specific company,
good, service, or other piece of information without knowing the exact website
address for that information will likely use a search engine to identify and locate it.
Rosetta Stone Ltd. v. Google Inc., No. 1:09cv736 (GBL/TCB), 2010 WL 3063152,
at *2 (E.D. Va. Aug. 3, 2010). The results that appear in response to a user’s
search include those generated from the search engine’s algorithm as well as paid
advertisements that are identified separately on the search results page. These paid
advertisements contain content relating to the subject of the advertisement and a
link to the advertiser’s website, where the user can obtain additional information
and perhaps purchase the advertiser’s goods or services. Id. at *3.
As part of this keyword advertising, search engines allow advertisers (in
conformity with certain requirements) to bid on terms that may be other
companies’ trademarks, thereby providing advertisers with the opportunity “to
place their advertising in front of consumers who identify themselves as interested
in certain products or services offered by the advertisers’ companies.” Id. at *4.
Such keyword advertising benefits consumers by exposing them to the advertisers’
offerings. The district court recognized that the use of trademarks in connection
with keyword advertising comprehends a number of lawful, pro-competitive
5
practices, such as the sale or resale of products bearing the trademarks; the sale of
components, replacement parts, and compatible products; and the provision of non-
competitive information about the goods or services corresponding to the
trademarks. Id. These practices require the use of trademarked terms in a manner
that courts have held to be noninfringing fair uses.
For example, in Tiffany, the jeweler Tiffany sought to hold eBay liable for
direct trademark infringement arising from its use of the Tiffany trademarks in
advertisements on its website and in connection with sponsored links purchased
from search engines such as Google and Yahoo!. The Second Circuit rejected
Tiffany’s argument, holding that a defendant “may lawfully use a plaintiff’s
trademark where doing so is necessary to describe the plaintiff’s product and does
not imply a false affiliation or endorsement by the plaintiff of the defendant.” 600
F.3d at 102-03. Although the court declined to adopt the nominative fair use
defense per se, it endorsed the principles underlying the defense, concluding that
“eBay’s use of Tiffany’s mark on its website and in sponsored links was lawful,”
as eBay “used the mark to describe accurately the genuine Tiffany goods offered
for sale on its website” without “suggest[ing] that Tiffany affiliated itself with
eBay or endorsed the sale of its products through eBay’s website.” Id. at 103.
The Second Circuit was not persuaded by Tiffany’s contention that eBay
could not use Tiffany’s trademarks because some unknown items on eBay’s
6
website bearing the Tiffany trademarks were assertedly counterfeit, particularly
where the evidence showed that eBay removed those items after receiving notice
of them. The court concluded that the presence of potentially counterfeit items,
and any specific knowledge thereof, could be relevant to contributory infringement
but did not otherwise bar eBay from using the Tiffany trademarks. Indeed, the
court observed that, if accepted, Tiffany’s argument “would unduly inhibit the
lawful resale of genuine Tiffany goods.” Id. The same conclusion is compelled
here: there is no basis for barring the use of Rosetta’s trademarks in connection
with keyword-triggered sponsored advertising solely on the ground that some
third-party advertisers might engage in counterfeiting or other infringement. See
id.; see also KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S.
111, 121-22 (2004) (“some possibility of consumer confusion must be compatible
with fair use, and so it is”).
In addition to being contrary to established law, such a ban would have
sweeping ramifications, precluding, among other things, advertisements for
resellers of the trademark owner’s products; advertisements for sites providing
comparisons, reviews, commentary, criticism, or other protected speech; and
advertisements referencing unrelated goods, services, or subjects having nothing to
do with the trademark owner but nonetheless bearing the same name, such as (in
this case) the Rosetta Stone in the British Museum.
7
Numerous other courts have adopted the nominative fair use defense or a
similar fair use doctrine. For example, the Ninth Circuit recognized the lawfulness
of the referential use of trademarks in New Kids on the Block v. News Am. Publ’g,
Inc., 971 F.2d 302 (9th Cir. 1992), where it observed that “[m]uch useful social
and commercial discourse would be all but impossible if speakers were under
threat of an infringement lawsuit every time they made reference to a person,
company or product by using its trademark.” Id. at 307. See also id. at 306-07
(“[M]any goods and services are effectively identified only by their trademarks
. . . . Indeed, it is often virtually impossible to refer to a particular product for
purposes of comparison, criticism, point of reference or any other such purpose
without using the mark.”); id. at 308 (“nominative use of a mark – where the only
word reasonably available to describe a particular thing is pressed into service –
lies outside the strictures of trademark law”) (emphasis in original).
Other courts are in accord. As Google pointed out in its summary judgment
motion below, “A century of precedent firmly establishes that use of a trademarked
term to refer to a product originating from the trademark owner is not actionable.”
Google S.J. Br. 8; see also Google S.J. Reply Br. 5 (noting that “both referential
and plain language uses of a trademark are lawful”). Indeed, the Supreme Court
held long ago that “[w]hen the mark is used in a way that does not deceive the
8
public we see no such sanctity in the word as to prevent its being used to tell the
truth. It is not taboo.” Prestonettes v. Coty, 264 U.S. 359, 368 (1924).
Although this Court has not expressly adopted the nominative fair use
defense, it has recognized as “important that trademarks not be transformed from
rights against unfair competition to rights to control language.” CPC Int’l, Inc. v.
Skippy Inc., 214 F.3d 456, 462 (4th Cir. 2000) (internal quotation marks and
citation omitted).
The application of the nominative fair use defense to the use of trademarks
in keyword advertising accords with the policies of trademark law. Although
trademark law exists to ensure that rights owners can benefit from the goodwill
associated with their trademarks, it is not intended to grant a monopoly on a word
or phrase or otherwise to stifle competition – as a blanket prohibition on using
trademarks in keyword advertising would. See, e.g., Platinum Home Mortgage
Corp. v. Platinum Fin. Group, Inc., 149 F.3d 722, 726 (7th Cir. 1998)
(“[T]rademark protection should not interfere with the traditional policies of a
competitive market and courts have generally recognized that the public
substantially benefits from competition.”); Anti-Monopoly, Inc. v. General Mills
Fun Group, 611 F.2d 296, 300-01 (9th Cir. 1979) (“trademark policies are
designed to protect consumers from being misled,” not to “further or perpetuate
product monopolies”); Scholastic, Inc. v. Macmillan, Inc., 650 F. Supp. 866, 873
9
(S.D.N.Y. 1987) (finding that “the purpose of the trademark law is to protect
consumers from confusion – not companies from competition”).
Against the backdrop of the many lawful and socially beneficial uses of
trademarks in keyword-triggered sponsored advertising – advertising that is
unquestionably permissible in the offline world and that generates the revenue that
makes search engines possible – we next discuss the proper parameters for the
Court’s contributory infringement analysis.
II. THE DISTRICT COURT PROPERLY APPLIED THE

CONTRIBUTORY TRADEMARK INFRINGEMENT STANDARD
The district court rejected Rosetta’s claims that Google (i) intentionally
induced advertisers selling counterfeit Rosetta products to use Rosetta trademarks
in their sponsored links or (ii) continued to supply its service to advertisers known
to be infringing Rosetta’s trademarks. The applicable legal principles that should
govern the Court’s review of these holdings, discussed below, will avoid
endangering the businesses of legitimate online service providers.
A. Inducement
The Supreme Court stated in Inwood that contributory trademark liability
may lie where the defendant either “intentionally induce[d] another to infringe a
trademark” or “continue[d] to supply its product to one whom it knows or has
reason to know is engaging in trademark infringement.” 456 U.S. at 854. The
10
Court defined inducement as “knowing and deliberate instigation” of infringing
activity, id. at 851, and it further observed that liability may be imposed where the
defendant “intentionally induced” direct infringement. Id. at 855 (emphasis
added).
Applying Inwood, the district court held that Google did not induce
infringement of Rosetta’s trademarks. On appeal, Rosetta criticizes the district
court for refusing to find Google’s economic incentive to encourage advertisers to
bid on keywords to be a sufficient basis for inducement. See Rosetta Br. 47.
However, a profit motive, by itself, does not establish the requisite wrongful intent.
Rosetta’s argument to the contrary confuses a practice – bidding on keywords –
that may result in some infringing ads being posted without the service provider
knowing or having reason to know of the illegality with a practice the purpose of
which is to encourage infringement. The district court’s holding that the “mere
existence of a tool that assists advertisers in optimizing their advertisements does
not, in itself, indicate intent to induce infringement,” 2010 WL 3063152, at *14, is
correct and consistent with Inwood.
Amicus Carfax’s reliance on Metro-Goldwyn-Mayer Studios, Inc. v.
Grokster, Ltd., 545 U.S. 913 (2005) (“Grokster”), see Carfax Br. 11-13, is
misplaced. First, Grokster was a copyright case, and the Supreme Court has held
that the “narrow” Inwood standard for contributory trademark infringement does
11
not apply in copyright cases. See Sony Corp. of Am. v. Universal City Studios,
Inc., 464 U.S. 417, 439 n.19 (1984). Moreover, even if Grokster did apply to this
case, the inducement standard the Court announced there plainly does not support
liability in this context. The Court held in Grokster that for inducement liability to
lie, the defendant must have engaged in “purposeful, culpable expression and
conduct” and have taken “active steps to encourage infringement.” Grokster, 545
U.S. at 924, 937. Only a defendant who acts “with the object of promoting”
infringement, “as shown by clear expression or other affirmative steps taken to
foster infringement,” the Court stated, is liable for inducement. Id. at 919.
Whereas the record in Grokster clearly established that Grokster’s business
model was designed to promote and, ultimately, profit from infringement
(unauthorized copying and distribution of digital music files), the district court
found no comparable evidence here. The fact that an online service may facilitate
keyword advertising that turns out to be infringing does not constitute inducement.
In this regard, the district court found that “despite its efforts, some advertisers
have used loopholes in Google’s programming to create Sponsored Links that
deceive and misdirect Google’s users to websites that sell counterfeit Rosetta Stone
products or suggest to consumers a connection to Rosetta Stone that does not
exist.” 2010 WL 3063152, at *4 (emphasis added). Such misuse or manipulation
12
of a service by users does not constitute “active steps to encourage infringement,”
Grokster, 545 U.S. at 937, by the service provider.
Carfax’s contention that, as in Grokster, Google’s “fundamental business
model” evinces an “intent to promote infringement,” Carfax Br. 12, depends on the
proposition that an online service makes money by selling advertising space and
profits from encouraging users to click on advertisements. But such conduct does
not support the conclusion that the service provider seeks actively and specifically
to encourage infringing advertising. Indeed, any such conclusion with respect to
the search engines and online marketplaces that are fundamental drivers of Internet
commerce would be absurd. This is particularly so where the service provider has
implemented detailed anti-counterfeiting policies and notice-and-takedown
practices. A contrary holding would render the business models of Amici and
other online service providers vulnerable to similarly ill-founded inducement
claims.
Carfax’s assertion that the requisite wrongful intent is demonstrated by
Google’s “induc[ing] customers to bid on terms that it knows or has reason to
know can be . . . used to trade upon intellectual property owned by others,” Carfax
Br. 8 (emphasis added), reflects a misunderstanding of inducement. Just as
trademarks can be used for infringing purposes, so too could the Sony Betamax at
issue in Sony be used for infringing purposes. That possibility did not, in the
13
Supreme Court’s view, make Sony a contributory infringer. See Sony, 464 U.S. at
441 n.21 (calling “extraordinary” the plaintiffs’ suggestion that they should be
allowed to enjoin the sale of Betamax videotape recorders “simply because they
may be used to infringe copyrights”). It was only in Grokster, where the very
purpose of the defendant’s service, as manifested in both words and deeds, was to
facilitate infringement, that the Court found inducement liability appropriate.
Tiffany is also instructive. There, the Second Circuit cited evidence that
eBay “actively sought to promote sales of premium and branded jewelry, including
Tiffany merchandise, on its site,” 600 F.3d at 101, including by “advis[ing] its
sellers to take advantage of the demand for Tiffany merchandise as part of a
broader effort to grow the Jewelry & Watches category” and purchasing
advertisements on search engines to promote the availability of Tiffany items on its
website. Id. Yet the court acknowledged the legitimate secondary market for
genuine Tiffany products, id. at 98, 103, and it did not intimate that encouragement
of sales generally was wrongful because some of the Tiffany items offered for sale
might be counterfeit. To the contrary, the court held that imposing liability
“because eBay cannot guarantee the genuineness of all of the purported Tiffany
products offered on its website would unduly inhibit the lawful resale of genuine
Tiffany goods.” Id. at 103.
14
This Court’s recent ruling in Georgia Pacific Consumer Products, LP v. Von
Drehle Corp., 618 F.3d 441 (4th Cir. 2010) (see Carfax Br. 5-6), does not support
Rosetta’s inducement claim. The defendant in that case, Von Drehle, admitted that
it developed its less expensive towels specifically to be placed into plaintiff
Georgia Pacific’s dispensers, which were the only ones that accepted towels of that
size, and they were marketed accordingly. 618 F.3d at 451. Whereas Von
Drehle’s conduct thus was directed solely toward profiting from assertedly
infringing towel substitution, there is, by contrast, nothing inherently wrongful in
suggesting to customers the use of specific, relevant keywords “to attract
customers.” Carfax Br. 6. The noninfringing uses of trademarks in connection
with sponsored-link advertising discussed in Part I above, coupled with policies
and practices intended to prevent infringement by advertisers, see, e.g., 2010 WL
3063152, at *4, undermine the analogy to Georgia Pacific.
The district court recognized the counterintuitive nature of Rosetta’s
theory that Google’s intent to increase earnings “necessarily demonstrate[s] an
intent to mislead or confuse potential buyers” of the trademark owner’s products.
Id. at *8. In fact, the court noted,
it is in Google’s own business interest, as a search

engine, not to confuse its users by preventing
counterfeiters from taking advantage of its service.
Google’s success depends on its users finding relevant
responses to their inquiries. . . . If Google intentionally
confuses its users and deprives them of a positive
15
experience, traffic at its website will decrease, causing it

to lose revenue.
Id. (emphasis added).
The district court’s skepticism as to the existence of a nefarious symbiotic
relationship between Google and counterfeiters is consistent with the business
incentives of Amici and other online service providers to eliminate, rather than
encourage, counterfeiting and other infringement. In Tiffany, the Second Circuit
recognized that “private market forces give eBay and those operating similar
businesses a strong incentive to minimize the counterfeit goods sold on their
websites.” 600 F.3d at 109. The court pointed out that the “risk of alienating . . .
users gives eBay a reason to identify and remove counterfeit listings” and that
eBay had “spent millions of dollars in that effort.” Id. That effort involved eBay
“consistently [taking] steps to improve its technology and develop[ing] anti-fraud
measures as such measures became technologically feasible and reasonably
available.” Id. at 100 (internal quotation marks and citation omitted).
Rosetta’s expansive view of inducement would threaten search engines and
other online service providers by holding them liable not just for any infringement
they intended, encouraged, and facilitated but also for infringement that Rosetta
and its amici claim could have been foreseen. Rosetta’s theory thus runs headlong
into Inwood’s rejection of a “reasonable anticipation” knowledge standard, see
Inwood, 456 U.S. at 854 n.13 (referring to a “reasonable anticipation” standard as
16
“‘watered down’ and incorrect”). See also Tiffany, 600 F.3d at 110 n.15 (“a
service provider is not contributorily liable under Inwood merely for failing to
anticipate that others would use its service to infringe a protected mark”).
B. Continued Supply to a Known Infringer

In a straightforward reading of the plain language of Inwood, the Second
Circuit held in Tiffany that “a service provider must have more than a general
knowledge or reason to know that its service is being used to sell counterfeit
goods”; rather, “contemporary knowledge of which particular listings are
infringing or will infringe in the future is necessary.” 600 F.3d at 107. Applying
this settled rule of law, the district court, citing the evidence that Google prohibits
advertisements for counterfeit goods and takes down such ads when it learns of
them, found no basis for contributory liability. 2010 WL 3063152, at *14.
The district court noted that in Tiffany the record contained evidence of
counterfeit Tiffany items listed on eBay’s site but that the Second Circuit,
following Inwood’s instruction that liability attaches only when the defendant
continues to supply specific known infringers, declined to hold eBay liable in the
absence of failure to act in response to knowledge of specific infringing listings.
Id. (citing Tiffany, 600 F.3d at 97) (emphasis added). In so holding, the Second
Circuit simply applied the “knows or has reason to know” standard articulated in
Inwood – which the court properly construed as requiring specific rather than
17
general knowledge of infringement, 600 F.3d at 109 – to eBay’s vast online
marketplace. The district court below likewise refused to hold Google liable based
on non-specific knowledge of advertisements for infringing Rosetta Stone
products. 2010 WL 3063152, at *14.
Amici believe the Second Circuit’s statement of the Inwood standard is the
only one that is compatible with the circumstances of online service providers such
as Amici, who cannot feasibly proactively investigate the ads placed on or products
offered through their services. The Second Circuit held in this regard that eBay
was not liable for contributory infringement because when eBay was notified of
listings for assertedly counterfeit Tiffany items by Tiffany (pursuant to eBay’s
VeRO Program) or through buyer complaints, it removed the listings and
suspended repeat offenders. Tiffany, 600 F.3d at 109. See also id. at 110 (“eBay
did not ignore the information it was given about counterfeit sales on its website.”).
That analysis is applicable here as well.
Rosetta suggests that Google’s removal of advertisements for counterfeits of
which it is notified is not enough to avoid liability because Google can “stop
selling the Rosetta Stone Marks to unauthorized third parties,” Rosetta Br. 49,
while Carfax makes the puzzling assertion that online services “should . . . be
aware of infringements by the mere fact of their provision to customers of the very
tools that not only make such infringement possible, but encourage them.” Carfax
18
Br. 18. As explained above, search engines and other online services could not
function if they were held liable merely for making available technological tools
that might be used to commit infringement but that are used predominantly for
socially and economically valuable noninfringing purposes. The claim that such a
showing should defeat summary judgment is not consistent with the rejection of a
“reasonable anticipation” knowledge standard in Inwood, nor is it consistent with
Sony, Tiffany, or any other decision.
Rosetta and Carfax contend that Google allowed advertisers to continue to
post advertisements after Google had been notified that other advertisements by
those advertisers were infringing. Rosetta Br. 47-48; Carfax Br. 18. Tiffany is
again instructive, as the Second Circuit recognized the factually and legally
irrelevant nature of such a showing. It found no liability even though (contrary to
Convatec’s suggestion, see Convatec Br. 28 n.12) eBay did not always
immediately ban sellers found to have engaged in infringing conduct but, rather,
generally employed consequences appropriate to the circumstances, whereby a
seller who “appeared overall to be a legitimate seller” would be given a warning
and educational information upon a first offense and told they would be suspended
if the alleged infringement continued. 600 F.3d at 100. A rule that one infringing
ad should cause all ads placed by that advertiser to be deemed infringing has no
basis in the law.
19
It may be true that it is easier to sue a service provider than its infringing
users, see Carfax Br. 13, but the law does not tolerate such expedience absent
wrongful conduct by the service provider. In defining what “wrongful” means in
this context, the law circumscribes the liability of service providers based on the
recognition that the public would be deprived of these services if the service
providers were held strictly liable for the conduct of their users. Thus Inwood, as
construed and applied by the Second Circuit in Tiffany, requires a failure to act on
actual or constructive knowledge of specific instances of infringement, see Tiffany,
600 F.3d at 107, and it does not impose trademark liability based on the inability to
guarantee the genuineness of all items offered through the service. See id. at 103.
Online advertising platforms cannot be required to investigate all websites
used by certain advertisers, nor is it reasonable to expect them to presume all such
websites to be selling counterfeit merchandise. Rather, as the Second Circuit held
in Tiffany, specific information is required from the trademark owner or another
source to enable the platforms to expeditiously remove advertisements that
promote counterfeit or otherwise infringing products.
20
CONCLUSION
Amici urge the Court to evaluate Rosetta’s appeal with the recognition that
keyword advertising involves lawful referential uses of trademarks and provides
significant benefits to consumers. They also urge the Court to hew to the
parameters of contributory trademark infringement recently outlined by the Second
Circuit in Tiffany, consistent with the Supreme Court’s rulings in Inwood, Sony,
and Grokster, by requiring specific knowledge of infringement on the part of an
online service provider in order to trigger a duty to take remedial action. Such a
rule is necessary to preserve the ability of online service providers such as Amici
to continue to offer socially and economically valuable online services without
having to guarantee the absence of infringing conduct by their users.
Respectfully submitted,
/s/ Michael Lyle

Michael Lyle
1300 Eye Street NW, Suite 900
Washington, DC 20005
Telephone: (202) 682-7000
R. Bruce Rich
Jonathan Bloom
Mark J. Fiore
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
21
UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT
ROSETTA STONE LTD v. GOOGLE INC.
No. _______
10-2007 Caption: __________________________________________________
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eBay/Yahoo Amicus Brief in Rosetta Stone V Google

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eBay/Yahoo Amicus Brief in Rosetta Stone V Google

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Case: 10-2007 Document: 115-1 Date Filed: 12/06/2010 Page: 1

RECORD NUMBER: 10-2007

United States Court of Appeals

ROSETTA STONE LTD.,

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

BRIEF OF AMICI CURIAE EBAY INC. AND YAHOO! INC.

Attorneys for Amici Curiae

COUNSEL PRESS ! VA – (800) 275-0668

INTRODUCTION AND INTEREST OF THE AMICI................................. 1

I. TRADEMARK LAW EMBRACES THE RIGHT OF ONLINE

II. THE DISTRICT COURT PROPERLY APPLIED THE

B. Continued Supply to a Known Infringer.................................. 19

Century 21 Real Estate Corp. v. Lendingtree, Inc.,

Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc.,

Inwood Labs., Inc. v. Ives Labs., Inc.,

KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc.,

Platinum Home Mortgage Corp. v. Platinum Fin. Group, Inc.,

Rosetta Stone Ltd. v. Google Inc.,

Scholastic, Inc. v. Macmillan, Inc.,

Sony Corp. of Am. v. Universal City Studios, Inc.,

Tiffany (NJ) Inc. v. eBay Inc.,

TrafFix Devices, Inc. v. Mktg. Displays, Inc.,

Univ. Commc’ns Sys., Inc. v. Lycos, Inc.,

4 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR

Kurt M. Saunders, Confusion Is the Key: A Trademark Law Analysis of

INTRODUCTION AND INTEREST OF THE AMICI

“Amici”) are pioneers in the development of the commercial and informational

provides a venue, www.ebay.com, through which some 93 million users

litigated direct and contributory trademark infringement claims similar to those

Yahoo! is a global online network of integrated services. Yahoo! provides a

wide range of Internet services to consumers, including services relating to Internet

search, email, shopping, finance, news, sports, and entertainment. Yahoo!’s

use of third-party trademarks or uses them in a generic or descriptive manner.

The online services Amici provide have transformed commerce and

communications for millions of people worldwide. Their search engines and

unlimited array of products and services and to access information on any

conceivable topic by simply typing a search term – a keyword or keywords – and

fosters competition, delivers valuable information to consumers, and generates the

have recognized the right of entities such as Amici to use trademarks in

noninfringing ways, including on the Internet.

recent landmark decision involving application of the contributory trademark

infringement standard articulated by the Supreme Court in Inwood Laboratories

provides the proper framework for examining the contributory infringement

accepted, jeopardize the lawful use of trademarks as keywords and in sponsored

the service provider neither encouraged nor knew about.

As the Second Circuit recognized in Tiffany, by requiring entities offering

trademark law sensibly allocates enforcement responsibility in a manner that

search engines or other online services to undertake the impossible task of

proactively monitoring their sites for potential infringements of thousands of

trademarks through millions of advertisements or listings for products they never

be used to infringe, without more, an adequate basis for imposing secondary

infringement liability on the service provider.

Departing from current law and imposing an affirmative policing duty on

massive liability for undetected – and perhaps undetectable – infringements despite

these services’ implementation of notice-and-takedown procedures. Without

issues and concerns raised in this submission.

I. TRADEMARK LAW EMBRACES THE RIGHT OF ONLINE

of those trademarks in their advertisements. In advocating this rewriting of

to make lawful uses of trademarks in a variety of contexts, including referential

keyword advertising practices their policies permit.

As the district court explained, consumers searching for a specific company,

advertisements contain content relating to the subject of the advertisement and a

and perhaps purchase the advertiser’s goods or services. Id. at *3.