In July 2009, Rosetta Stone, an industry leader in technology-based language learning products and online services, filed suit in the US District Court for the Eastern District of Virginia against Google asserting several claims, including direct trademark infringement under the Lanham Act, trademark dilution, and unjust enrichment. Rosetta Stone contended that Google's AdWords program policy—which had changed in 2009 to permit the limited use of trademarks in “Sponsored Links” by advertisers that were not the actual trademark owners—created not only a likelihood of confusion but also actual confusion, misleading Internet users into purchasing counterfeit Rosetta Stone software. Rosetta Stone alleged that, between 3 September 2009 and 1 March 2010, it reported 190 instances to Google in which one of Google's sponsored links was marketing counterfeit Rosetta Stone products. Google filed a motion for summary judgment as to all claims except unjust enrichment, which it moved to dismiss. The district court granted Google's motion for summary judgment on all claims and granted the motion to dismiss the unjust enrichment claim. Rosetta Stone subsequently appealed the decision.

NERA Senior Vice President Dr. Kent Van Liere, an expert in survey research, market analysis, and consumer behavior, was retained by Rosetta Stone to conduct a survey to test for actual confusion regarding the appearance of sponsored links when consumers conducted a Google search for “Rosetta Stone.” Based on this study, Dr. Van Liere concluded that “a significant portion of consumers in the relevant population are likely to be confused as to the origin, sponsorship, or approval of the ‘sponsored links’ that appear on the search results page after a consumer has conducted a Google search using a Rosetta Stone trademark as a keyword and/or are likely to be confused as to the affiliation, endorsement, or association of the websites linked to those ‘sponsored links’ with Rosetta Stone.”

In its decision, the district court had stated that Dr. Van Liere's report was “unreliable evidence of actual confusion because the result contained a measure of whether respondents thought Google ‘endorsed’ a Sponsored Link, a non-issue.” However, the Fourth Circuit noted that trademark infringement creates a likelihood of “confusion not only as to source, but also as to affiliation, connection or sponsorship.” The Fourth Circuit further noted that survey evidence indicating 10–12 percent confusion was generally thought to be sufficient to demonstrate actual confusion. Dr. Van Liere's survey “yield[ed] a net confusion rate of 17 percent”—that is, “17 percent of consumers demonstrate actual confusion.” This result, the Circuit concluded, “is clear evidence of actual confusion for purposes of summary judgment.”

On 9 April 2012, the Fourth Circuit issued a ruling vacating the district court's order with respect to Rosetta Stone's direct infringement, contributory infringement, and dilution claims and remanded the claims for further proceedings. (The Fourth Circuit also affirmed the district court’s order with respect to the vicarious infringement and unjust enrichment claims.) The decision marked the first time that 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. Rosetta Stone's outside counsel, Cliff Sloan of Skadden Arps, called the ruling an “important precedent.” The case can now proceed to trial in federal court.