Rosetta Stone sued Google in 2009, accusing the company of trademark infringement. (Chris Ratcliffe/Bloomberg)

The Arlington-based language software maker sued in 2009, accusing Google of trademark infringement for selling trademarked Rosetta Stone phrases without the company’s permission in the form of keywords to third-party companies that make copycat software. Rosetta Stone claimed this misled consumers to think the counterfeiters were selling genuine Rosetta Stone products. The Google advertising program in question, AdWords, allows third parties to buy keywords that generate sponsored links when someone types the phrase in an online search. Rosetta Stone’s trademarks include “language library” and “Rosetta Stone.”

The case had been dismissed in 2010 by the U.S. District Court for the Eastern District of Virginia, but Monday’s ruling reversed the bulk of that decision, meaning the case can now proceed to trial in federal court.

The case has stirred widespread interest among the business community, with dozens of corporations including Ford Motor Co., Coach Inc. and 1-800 Contacts lining up in support of Rosetta Stone. Several companies have lodged similar lawsuits against Google, but this is the first time a court of appeals has established that a company can bring a trademark infringement case against Google on the basis that the sponsored links are confusing to consumers.

“We’re deeply concerned about trademark infringement including the rampant problem of online counterfeiting confusing consumers regarding our products,” said Rosetta Stone general counsel Michael Wu. “We think today’s decision is very important in our efforts against infringement. We’re pleased the Fourth Circuit will allow this case to proceed.”

Cliff Sloan of Skadden Arps, outside counsel for Rosetta Stone, called the ruling “an important precedent.”

Google had argued that it was immune from trademark infringement claims because it used the trademarked phrases in a way that was "functional" to Google's business. The company also claimed consumers were not confused because they could tell the difference between sponsored links and regular search results. A Google spokesperson on Monday said Google users benefit from being able to choose from a variety of competing advertisers.
"We think that the legitimate use of trademarks as keyword triggers helps consumers to make more informed choices," the company said. "For what remains of the case, we're confident we will prevail on both the merits and the law."