We will be discussing one Fourth Circuit case and one Law Review article during our weekly SoCal IP Institute meeting on Monday, May 7, 2012. Brief synopses are presented below.

Rosetta Stone Ltd. v. Google, Inc., Case No. 10-2007 (4th Cir. April 9, 2012) (attached).

Rosetta Stone sued Google in 2009 over the search engine’s sale of advertising space “keyed” to searches on the ROSETTA STONE trademark through its AdWords program, claiming direct and contributory trademark infringement and trademark dilution, among other claims.

Rosetta Stone argued that consumers were confused by the AdWords advertisements into believing that Rosetta Stone was behind ads that in fact were for counterfeit Rosetta Stone software or competitors’ products.  Rosetta Stone also submitted survey evidence showing that consumers were confused, and pointed to internal Google studies acknowledging that consumers were confused about the source or sponsors of AdWords advertisements.

The district court rejected Rosetta Stone’s claims and granted summary judgment to Google, holding that: (1) Google’s keyword ad practices were protected by the “functionality” doctrine of trademark law, (2) Google could not be liable for dilution because it did not compete with Rosetta Stone and, because Rosetta Stone’s mark became more well-known during the period at issue, it couldn’t show actual dilution, and (3) Rosetta Stone’s anecdotal, survey, and documentary evidence of confusion was de minimis and could not support a finding of confusion at trial.  The appellate court reversed the lower court on each of these points.

The Fourth Circuit stated that the lower court misunderstood and misapplied the functionality doctrine in granting judgment for Google. The functionality doctrine protects functional product design features, and “it is irrelevant whether Google’s computer program functions better by use of Rosetta Stone’s nonfunctional mark.”

The Court also held that the lower court erred in ruling for Google on the grounds that it did not use the ROSETTA STONE mark on its own products.   However, U.S. trademark dilution law applies even where the parties do not compete and the statute does not require that the defendant use the mark on its products, but only “in commerce.”

Google had argued that Rosetta Stone’s brand awareness dramatically grew over the relevant timeframe, but the Court pointed out that the law does not require proof of actual harm, but rather only a likelihood of dilution.

The appeals court also found error in the district court’s treatment of the “fair use” exclusion to dilution. It said that the lower court in effect presumed that any non-trademark use was necessarily fair use, and instructed it to “reexamine the nominative fair use defense” on remand, keeping in mind that Google has the burden to prove it.

In sum, the Fourth Circuit corrected various legal errors in the lower court’s opinion and gave the court plenty of direction for its consideration of the evidence on remand.

Sean Tu, Luck/Unluck of the Draw: An Empirical Study of Examiner Allowance Rates, 20 Stan. Tech. L. Rev. (forthcoming) (attached).

The author of this article studied the allowance rates of specific examiners by art unit, technology center and the PTO as a whole.  He looked at over 1.5 million patents in an attempt to analyze every patent ever issued in the last 10 years (from January 2001-July 2011).

The author found two populations of examiners: (1) Examiners who on average, issue a disproportionately small number of patents per year (low allowance rate examiners), and (2) a small but significant population of examiners who issue a disproportionately large number of patents per year (high allowance rate examiners).

The first population of low allowance rate examiners consists mainly of secondary examiners (junior examiner usually with less than 5 years of experience and no signatory authority).  These examiners, on average, issue a very small number of patents per year (less than 5 patents per year).

The second population of high allowance rate examiners consists mainly of primary examiners (senior examiners usually with more than 5 years of experience and full signatory authority).  These examiners, on average, issue a high number of patents per year (more than 50 patents per year).

The author argues that the incentive system may play a role in creating these two distinct populations of examiners. Additionally, he proposes a holistic pre-grant prosecution history review of both low and high allowance rate examiners to ensure a more consistent application of patentability rules.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, May 7, 2012 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Elisha Manzur by 9 am Monday morning.