In May, insurance company Geico sued Google for trademark infringement over its advertising practice. However, last week Leonie M. Brinkema, a district court judge for Virginia's Eastern District, citing lack of evidence, dismissed Geico's allegation that the practice will cause confusion among customers. The judge also ruled that advertisers who use Geico trademarks without authorization in the text of their ads are infringing on Geico's trademarks. The judge still has to rule on whether Google is liable when such an infringement occurs.
Until a legal consensus is reached, search engines are expected to strongly defend this advertising practice because it is an important part of their advertising model.
In the second quarter ended June 30, total U.S. Internet ad spending was about $2.37 billion, a 42.7 percent increase over the same period in 2003, according to the Interactive Advertising Bureau and PricewaterhouseCoopers LLP. Search-related ads -- triggered both by generic and trademarked terms -- were the largest category with $947 million.
Search engine ads that are triggered using trademarks tend to yield better results for advertisers than those using generic terms, said Kevin Lee, chief executive officer of Did It.com LLC, a search engine marketing company based in New York. "Trademarks are very popular as search terms, so this is a huge issue," he said.
The effect of banning the sale of ads using unauthorized trademarks on search engine advertising revenue would be significant, said Niki Scevak, a Jupiter Research analyst. "A sizable amount of queries monetized by Google have some trademark name within them," he said. "The ability to bid on trademark terms is a fairly significant component of any search engine business."
Moreover, a precedent limiting the use of trademarks as keywords in search engine ads may force search engines to devote time and resources to checking every keyword for trademark violations, Did It.com's Lee said. "That verification process would be very burdensome," he said.
Google has never had to undertake this process. The company's trademark policy on ads puts the onus on trademark owners to complain to Google about potential violations, not on Google to proactively screen its ads for possible infringement. Google's current policy, revised in April 2004, allows trademark keywords, and pledges to investigate complaints only when trademarks are used in the ad text itself.
To succeed in court, trademark owners need to convince the judge that the trademark keywords practice is likely to confuse customers, even if the confusion were to be brief and last only a few seconds, Arent Fox's Sheldon said. In addition to Geico and Rescuecom, other businesses that have filed lawsuits against search engine companies in the U.S. over this practice include Pets Warehouse, American Blind & Wallpaper Factory Inc. and 800-JRCigar Inc. All of these lawsuits are ongoing.
Companies that have been sued in U.S. district courts over the past several years for this advertising practice include, in addition to Google, Yahoo's Overture ad network subsidiary and AltaVista search site, Ask Jeeves and its Excite search site, and America Online and its Netscape and CompuServe units. The advertising practice has also landed Google in court in several European countries.