Internet ads will face trademark lawsuit

The unpublicised 25 August decision by Judge Leonie Brinkema of the US District Court for the Eastern District of Virginia delivered a blow to the two Internet search giants in their efforts to defend ad sales of trademarks as fair use. It could also ultimately threaten their livelihood: Google and Overture make money by selling ads linked to keyword-triggered search results, and many commercially driven searches are tied to trademarked brands such as Geico or Nike.

Judge Brinkema denied Google and Overture's motion to dismiss six charges brought by Geico, which alleged that the search companies' use of its name to trigger search-related advertisements was trademark infringement, unfair competition and dilution of its marks under the Lanham Act.

"We find that plaintiffs have alleged facts sufficient to support their claims that advertisers make a 'trademark use' of Geico's marks and that defendants may be liable for such trademark use," the ruling stated.

The judge, however, granted Google and Overture's motions to dismiss claims of tortious interference and statutory business conspiracy.

Geico representatives were pleased with the decision. "The judge rejected the argument advanced by Google and Overture that they should not be subject to liability for allowing their advertisers to bid on the Geico marks and, in the words of the judge, 'pay defendants to be linked to the trademarks,'" Geico spokeswoman Janice Minshall said.

"We look forward to the opportunity to prove at trial that this unauthorised use of Geico's well-known trademarks is unlawful and should be stopped," Minshall said.

Google spokesman Steve Langdon countered by saying, "we believe this suit is without merit and will continue to defend against it vigorously." The No. 1 search provider faces similar charges from American Blind and Wallpaper Factory.

Overture, owned by Yahoo, declined to comment, pointing out that it is only a preliminary ruling.

Geico sued Google and Overture in May, saying that use of its trademarks when selling advertising in search engines constituted trademark infringement and raised various state law causes of action. Google filed a motion to dismiss the case on the grounds that it had no legal merit and that the state claims were insufficiently pleaded.

Last week's decision throws out the state claims as insufficient but allows the trademark claims to proceed on the grounds that Geico's allegations, if proved at trial, would constitute trademark infringement. The judge wrote in the opinion that such a decision can't be made until discovery is done.

Google had argued that it only uses trademarks in "internal computer algorithms to determine which ads to show," according to the ruling. It had further argued that that process is not visible to users and therefore can't cause them to be confused as to the origin of goods or services displayed in the ads.

Google attorneys cited the U-Haul International v. WhenU case, in which the moving-truck company alleged trademark infringement against WhenU for displaying rivals' pop-up ads over its Web page. The court found in favour of WhenU, because it only used U-Haul's marks for "pure machine-linking function," Google argued.

Geico's counsel cited similar trademark disputes -- but with rulings to favour its case, of course. In 1-800-Contacts v. WhenU, a case fought on the same merits, the judge found against WhenU for making use of the plaintiff's trademarks in the advertising of competitors' Web sites and by including trademarks in the directory of terms that trigger pop-ups. It also called on the 9th Circuit Court opinion in the Playboy v. Excite and Netscape case, in which it found that the two online portals created consumer confusion when using Playboy trademarks to sell banner ads.

"Of the two lines of cases cited by the parties, the court finds that plaintiff's authorities are better reasoned," Judge Brinkema wrote.

Attorneys believe that the decision bodes ill for Google and Overture.

"This decision represents a serious defeat for Google and may open the floodgates to new litigation challenging Google's selling of trademarks as keyword triggers for advertising," said Terence Ross, a partner at law firm Gibson, Dunn & Crutcher who has represented plaintiffs in similar cases against adware makers Claria and WhenU.com.