Geico decision rocks Google

Paid third-party ads on Google that use the trademark of car insurance company Geico in the text of ads could infringe trademark law and Google may be liable for such ads, according to a recent court opinion.

Although Geico senior counsel Jonathan Shafner said on Tuesday the court opinion signalled that the judge wants the two sides to reach a settlement, he said he could not comment on any settlement discussions.

If the parties do not settle within the 30-day period for which the judge granted a stay, trial could continue on whether Google is liable for damages if Geico's trademarks are found to be infringed from any non-Geico ads that refer to Geico and what the damages would be, Shafner said.

A written opinion released 8 August by the US District Court for the Eastern District of Virginia reiterated and expanded on a verbal opinion from last December that was viewed as a victory for Google.

Judge Leonie Brinkema granted, at least in part, Google's motion to dismiss a trademark-infringement complaint brought by Geico in 2004. The insurance company had accused Google of violating its trademarks by using the words "Geico" and "Geico Direct" to trigger rival ads in sponsored search results. Geico claimed the practice, which brings in nearly all of Google's revenue, diluted its trademarks and caused consumer confusion.

However, for Web searchers who see Geico's trademark in the text of sponsored links paid for by other companies, Geico had sufficiently established a likelihood of confusion, the written opinion said.

"Based on this finding, Google may be liable for trademark infringement for the time period before it began blocking such usage or for such ads that have slipped or continue to slip through Google's system for blocking the appearance of Geico's mark in Sponsored Links," the opinion said.

However, Google has other legal avenues it may pursue in this case.

"Google could say they were not responsible for the ads and that advertisers are," said Eric Goldman, assistant professor of law at Marquette University Law School. Google could also invoke a special defence used by printers and publishers who argue they are not liable for trademark infringements in ad copy created by their customers, he said.

The court said its ruling applies only to the specific facts of this case, and that it does not address whether Google is liable for trademark violations resulting from advertisers' use of Geico's trademarks in the sponsored links, or what the measure of damages Geico would be entitled to if Google were found to be liable of violating the Lanham Act, which governs trademarks.

"Whether the advertisers themselves violated the Lanham Act is not before the Court because the advertisers are not parties to this action," the opinion said.

In its lawsuit, Geico had asked the court to bar Google from selling Geico trademarks in its Adwords program and from continuing to display third-party ads alongside the results of searches that use Geico's trademark. The court refused those requests, saying Geico did not produce sufficient evidence to establish that the mere use by Google of the Geico trademark as a search term violates trademark law.

However, the court found that Geico presented sufficient evidence for the court to consider whether ads that appear when a user searches on Geico's trademarks and which do reference those marks in their headings or text violate trademark law, the opinion said.

The court found that for purposes of trademark law, Google "uses" Geico's trademarks by allowing advertisers to pay to have their ads appear next to the organic listings that result when the marks, or words — Geico and Geico Direct — are entered as search terms. A Google spokesman did not return an email seeking comment. (Google representatives have instituted a policy of not talking with CNET News.com reporters until July 2006 in response to privacy issues raised by a previous story.)