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United States - Google knew its billion-dollar trademark policy changes confused consumers

By Adam Smith
December 07 2010

Newly unredacted court documents reveal that, in 2004, Google was aware that use of trademarks in sponsored link text resulted in a "high" degree of consumer confusion, with 94% of users confused “at least once” during the company’s own study. The papers, filed by Rosetta Stone in its ongoing appeal, also disclose that Google had predicted that the policy change that allowed for the use of trademarks in sponsored links could result in an additional $1 billion in revenue for the search engine.


The third revelation is that even Google's most senior trademark counsel could not tell that the difference between sponsored links leading to counterfeits and those leading to genuine products. The unredacted documents are an electrifying insight into what has to be the most provocative tranche of trademark litigation of our time.

At present, Rosetta Stone is appealing the judgment delivered against it in April by the US District Court for the Eastern District of Virginia. In October, Rosetta Stone filed its opening appellate brief, with substantial redactions. Paul Allen Levy from Public Citizen called for both litigants to "unseal their entire appellate briefs": Rosetta Stone has now done so, with Google expected to follow suit soon. The Rosetta Stone documents, marked by Levy to indicate what was originally redacted, reveal the company's fascinating arguments - including facts found on discovery. The highlights are:

"Google estimated that its 2009 policy change would result in at least $100 million, and potentially more than a billion dollars, in additional annual revenue to Google."

"Between September 3 2009, and March 1 2010, Rosetta Stone notified Google of approximately 190 instances of Google sponsored links promoting counterfeit Rosetta Stone products."

"In discovery, Google produced more than 100,000 pages showing that other trademark owners have lodged complaints about the infringing nature of Google's practices... Rosetta Stone identified 9,862 complaints lodged by 5,024 trademark owners from 2004 to 2009."

"In connection with its 2004 policy change allowing the purchase of trademarks as keywords, Google conducted in-house experiments... [which] concluded that the use of trademarks anywhere in the text of the sponsored link resulted in a "high" degree of consumer confusion... 87.5% of users were confused at least once during Experiment 2... 94% of users were confused at least once during the study."

On the latter point, keen Google litigation observer and associate professor at Santa Clara University School of Law Eric Goldman has noted that internet users changed a great deal since the study was conducted. "We should remember this was 2004, when Google's method of presenting advertising was relatively new," Goldman wrote on his blog. "Six years later, I would love to see the stats if we replicated that study. I am confident there would be much lower rates; and compared against a baseline level of confusion among online users generally regardless of what they see, my guess is that the numbers would be pretty close to the baseline."

Goldman is on to something, but it may be some time before we see such studies - if at all. In the meantime, trademark owners will have to settle for these revelations that Google and its trademark counsel, both the former chief, Rose Hagan, and the current chief, Terri Chen, could not tell the difference between good and bad sponsored links at the time of the study. The unredacted sections of Rosetta Stone's appeal brief certainly reveal something of the litigant's strategy, including its contention that Google's practices amount to trademark infringement. Google's position is shown in stark contrast: the company is celebrating 10 years of its keywords programme, which accounts for up to 99% of its $23.7 billion in revenue. "Thank you for 10 great years," states Google spokesman Jason Shafton. "We can’t wait to see what’s to come in the next 10." More litigation, for sure.

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