Google Inc. won a major legal victory yesterday when a federal judge ruled that the Internet search engine's advertising policy does not violate federal trademark laws.
U.S. District Judge Leonie Brinkema in Alexandria rejected a claim by auto insurance giant Geico Corp., which argued that Google should not be allowed to sell ads to rival insurance companies that appear when Geico's name is typed into the Google search box.
A judge ruled yesterday that Google can sell ads linked to searches that use trademarks. Above is Google's Mountain View, Calif., headquarters.
(Paul Sakuma -- AP)
Google derives a major portion of its revenue from selling ad space to businesses that bid on search terms -- both generic words and names protected by trademark -- used by people looking for information online.
Geico, a unit of billionaire Warren Buffett's Berkshire Hathaway Inc., claimed that Google's AdWords program, which displays the rival ads under a "Sponsored Links" heading next to a user's search results, confuses consumers and illegally exploits Geico's investment of hundreds of millions of dollars in its brand.
"There is no evidence that that activity alone causes confusion," Brinkema said in granting Google's motion for summary judgment on that issue. The ruling, on what the parties considered the seminal issue in the case, came just three days after the trial had begun.
David Drummond, Google's vice president and general counsel, called the decision a victory for consumers.
"It confirms that our policy complies with the law, particularly the use of trademarks as keywords," Drummond said. "This is a clear signal to other litigants that our keyword policy is lawful."
Google's attorneys argued that the company was simply acting as a publisher by allowing competitors' ads to appear on the same screen when the names of rivals are typed in. Geico said it is losing customers who use the search engine to look for Geico but are led to other Web sites.
The Geico lawsuit, filed in May, came just weeks after Google said it planned to raise billions of dollars with an initial public stock offering. In filings with the Securities and Exchange Commission, the company said it would face financial risks if it was forced to limit sales of keyword ads to generic words.
Google is facing similar lawsuits from other companies in the United States and Europe, including American Blind & Wallpaper Factory Inc. and the insurance giant AXA.
Brinkema said the case would continue to move forward on one remaining issue: whether ads that pop up and actually use Geico in their text violate trademark law. Google contends that its policies expressly prohibit advertisers from using trademarked names in their ads. The search engine says that it does its best to keep ads that violate the policy off its site and that the advertisers would be liable for any trademark violation, not Google.
Geico attorney Charles Ossola said he was pleased the judge decided to continue proceedings on the second issue.
"I think the judge's ruling has given both parties part of what they were seeking," he said.
Brinkema said she would halt the trial at this point to put a decision in writing and encouraged both parties to attempt to settle the remaining issues.
Google shares rose $1.09 to close at $179.78 yesterday on the Nasdaq Stock Market.