Google wins first battle in trademark war

Google, Inc., can continue to sell advertising to competitors of Geico Corp. who use Geico’s trademarked name in their ads, a federal district court in Virginia has ruled. Advertising based on Web search keywords is a significant and lucrative part of Google’s business. In the third quarter, about half of Google’s revenue of $805 million came from keyword advertising, also called sponsored links.

This case involved Google’s popular AdWords program. The program allows businesses to place ads on Web pages adjacent to the search results when certain keywords appear in queries entered by the Google user. There can be significant value in having a business’ ads appear on screens where Google users are searching for similar products.

Until recently, Google had allowed use of a keyword trigger that was a trademark of another entity, but its policy was to prevent such advertising if the trademark owner objected. Just this month, Google revised its policy and decided to allow keyword advertising using a third-party trademark whether the third party trademark owner objects or not.

Generally keyword advertisers pay only when their ad is clicked on by a Google user. Advertisers pay about $1.50 per click for the words “Geico Insurance.” In another court case involving Google and American Blind & Wallpaper Factory, Inc., the keywords “American Blinds and Wallpaper” sell for about $2.40 per click.

The purchase of a key phrase does not guarantee high placement of an ad on a page. Under the Google AdWords program, placement is determined by a combination of the cost per click and the click-through rate. If an ad is not useful to users, they don’t click on it and it will move down the page. Ads with more relevance to users will rise. The issue the Virginia court ruled on was whether Google’s sale of a keyword that is a trademark of another party constitutes trademark infringement. Geico argued that allowing Google to sell its trademark as a keyword to anyone other than Geico allowed Google to take advantage of the goodwill generated by Geico’s 75-year history and its millions of dollars in advertising. Google argued that keyword advertising using another’s trademarks was no different than the use of a competitor’s name in an advertisement.

The touchstone for trademark infringement is whether the use objected to is likely to cause confusion as to the source of a product or service among relevant consumers. In this case, following presentation of Geico’s evidence the judge dismissed Geico’s complaint indicating there was not enough evidence that Google’s activity alone caused confusion.

The Virginia decision is not binding precedent, either in other cases against Google in other district courts or in suits against other search engine companies with similar practices. This case is likely to be appealed. If a difference emerges between the federal circuit courts on the proper answer to this issue, it may eventually make its way to the Supreme Court. At this early stage, the most that can be said for Google is that it has won an early battle in what promises to be a long war.


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