Google Wins Trademark Ruling in Geico Suit

Search engine giant Google Inc. won a key ruling Wednesday in a case that had put an important chunk of its multibillion-dollar online advertising business in jeopardy.

A federal judge in Alexandria, Va., dismissed the heart of a lawsuit brought by auto insurer Geico that had sought to bar Google from selling the ads from rival insurers that appear when Web surfers type “Geico” into the search engine.

After 2 1/2 days of argument, Judge Leonie Brinkema granted Google’s request to dismiss much of the trademark infringement case. She said Geico, a subsidiary of Warren E. Buffett’s Berkshire Hathaway Inc., had failed to prove that consumers were tricked into doing business with the advertisers.

With the victory, Google survived the first major legal challenge to its lucrative practice of letting advertisers lure customers to their sites by buying small text ads linked to their competitors’ brand names.

About 98% of Google’s revenue, forecast at more than $3 billion this year, comes from targeted advertising. Although the company won’t say how much of that comes from ads tied to trademarked words, analysts believe it is significant.

“It’s pretty fundamental to what Google does,” said Scott Kessler, an analyst at Standard & Poor’s. “If the company were not allowed to sell copyrighted words, that would remove from its inventory a very large number of prized keywords.”

Google shares gained $1.09 to $179.78 on Nasdaq.

The Mountain View, Calif., company hailed the decision as a broad validation of its advertising practices. But Geico and other companies suing Google on similar grounds said Brinkema’s ruling set no precedent for the Internet industry.

Google collects revenue every time someone clicks on one of the text ads -- known as “sponsored links” -- that are delivered alongside normal search results. Many of the links are generated by searches using generic terms, such as “car insurance.” But advertisers also buy links based on brand-name keywords.

In court, Google argued that targeting advertisements at people looking to buy a competitor’s product isn’t trademark infringement -- it’s competition. Company lawyers likened the situation to a pizza-shop owner handing fliers to customers as they walk into a rival pizzeria.

The judge agreed. “There is no evidence that that activity alone causes confusion,” Brinkema said.

Trademark law is designed to prevent consumers from being confused about the source of products, said Jennifer Urban, an intellectual property law professor at USC who praised the judge’s ruling.

“People know when they put a word into a search engine that they get a list of results,” she said. “What they get out of it is more choice.”

David Drummond, Google’s vice president and general counsel, called the decision “a clear signal to other litigants that our keyword policy is lawful.”

Google’s adversaries said they weren’t deterred.

“It is by no means a sweeping declaration that Google can profit by selling other people’s marks,” said David Rammelt, a Chicago lawyer representing American Blind & Wallpaper Factory Inc. in a case awaiting trial in San Jose. Although the facts of that case are similar, the outcome could be different with a different judge, he said.

Sheldon H. Klein, an intellectual property lawyer in Washington, called the Geico decision “a very significant victory for Google.” Yet he noted that other judges will not be obligated to go along with Brinkema.

Geico also sued Yahoo Inc. over a similar practice of selling ads tied to trademarked names. Those companies settled their lawsuit out of court two weeks ago without disclosing the terms. Yahoo had no comment on the Google ruling.

Geico did prevail in one argument. Brinkema ruled that the sponsored links the insurer introduced as evidence confused consumers when they included “Geico” in the text. She did not decide whether Google is liable in those situations and urged the two sides to reach a settlement while she works on her written decision during the next few weeks.

Geico lawyers said they would await that written verdict before deciding whether to appeal.