2012)[1] was a decision of the United States Court of Appeals for the Fourth Circuit that challenged the legality of Google's AdWords program.

[2] Although Rosetta Stone 'won' an overturn of summary judgment, the subsequent settlement between the two parties led commentators to declare that Google had won the keyword advertising trademark fight.

[6] In response to the changed AdWord policy, Rosetta Stone, the maker of popular foreign language learning software, filed suit against Google for violating the Lanham Act, claiming Google was "helping third parties to mislead consumers and misappropriate the Rosetta Stone Marks by using them as "keyword" triggers for paid advertisements and by using them within the text or title of paid advertisements".

[1] To prevail on a direct trademark infringement under the Lanham Act a plaintiff must prove: On appeal only the 'likelihood of confusion' prong was in dispute.

[1] Finally, the Court found the sophistication of the consuming public was too fact determinative to be decided on a motion for summary judgment.

[11] The district court had found that even if Rosetta Stone could make a case for consumer confusion, it would grant summary judgment on the direct trademark claim, based on the functionality doctrine.

[8] The district court found that the keywords had an essential indexing function by allowing Google to readily identify information in its databases.

[8] The district court also found the keywords serve an advertising function for consumers, allowing them to locate particular information, goods, or services, and to compare price.

[11] General knowledge is not enough; the defendant must supply its product or services to "identified individuals" that it knows or has reason to know are engaging in trademark infringement.

[8] In that case, the Second Circuit had ruled that the receipt of thousands of notices of counterfeit Tiffany jewelry did not amount to "knows or has reason to know" on the behalf of eBay.

[1] The district court held that Rosetta Stone had failed to allege an implicit promise to pay, thus granting Google's motion to dismiss.

[8] In ruling against dilution, the district court primarily relied on an increase of Rosetta Stone brand awareness since the introduction of Google's new AdWord trademark policy .

[15] After the Second Circuit's decision in Rescuecom Corp. v. Google Inc. it has become fairly settled that keyword advertising satisfies the 'use in commerce' prong of direct trademark infringement.

[18] The settlement of the parties, however, took away the chance to prove that theory and essentially resolved the last significant challenge to Google's new trademark policy.