Google Inc. took in nearly $1 billion last year by selling ads to firms eager to market their wares online to computer users. But a number of major businesses in the United States and Europe are crying foul, going after Google in court and alleging that the search-engine juggernaut is profiting illegally by trading on their names.
From local insurance giant Geico Corp. to Louis Vuitton in France, corporations have filed lawsuits recently to try to stop Google from selling ads linked to searches based on product names and trademarks. The companies charge that the lucrative practice tramples their legal rights and allows competitors to steal their customers.
Steve Katzman, chief executive of American Blind and Wallpaper Factory Inc., a business with more than $100 million in sales annually, said his company spent millions of dollars over the years building brand recognition, only to have Google come along and sell ads to competitors who snare people searching for his Web site and products.
"It has hurt a lot," Katzman said. "We know that our competitors have grown at our expense."
Katzman said his company's online sales took off significantly before search engines became popular and that he has incurred increased costs, and lost a substantial number of customers, because of Google's practices. He said he exchanged correspondence with Google for more than a year before the companies ended up in court.
Michael H. Page, outside counsel for Google, said additional lawsuits are likely to be filed against the company as online commerce grows but argued that the search-engine firm is doing nothing wrong.
"If you are Pepsi, you can say every time somebody searches for Coca-Cola, you want to put up a Pepsi ad," Page said. "As long as you don't deceive the viewer into thinking the ad is placed by your competitor, there is nothing wrong with that."
While Google once prevented competitors from buying ads linked to registered trademarks owned by other firms, the company relaxed that policy in April, saying it is in the consumer's interest to receive the broadest possible mix of ads when searching online.
"In order to provide users with more useful ads, we have recently revised our trademark policy in the U.S. and Canada," Google stated in a filing last month with the Securities and Exchange Commission. "As a result of this change in policy, we may be subject to more trademark infringement lawsuits. Defending these lawsuits could take time and resources. Adverse results in these lawsuits may result in, or even compel, a change in this practice which could result in a loss of revenue for us, which could harm our business."
Katzman, whose company is in litigation with Google over the issues in federal court in San Jose, drew a sharp contrast between Google and its major competitor, Yahoo Inc. Katzman said that unlike Google, Yahoo's commercial search-engine division, Overture Services Inc., does not allow competitors to buy ads linked to his company's registered trademarks.
"They have been fantastic to work with," Katzman said of Overture and Yahoo. "We have spent tens of millions of dollars over the years building the brand, and they know when someone types in 'American Wallpaper' or 'American Blinds,' that the consumer is looking for our Web site. They have been very respectful of our trademark names."
Katzman said he thinks Google relaxed its policy just before announcing plans to go public so it could maximize sales in the short run and worry about the legal issues later. Google declined comment on Katzman's allegations, citing the pending litigation and its impending public offering.
Jennifer Stephens, a spokeswoman for Yahoo's Overture subsidiary, said that unlike Google, her company has an editorial staff that tries to screen ads upfront. The company also will respond to complaints when competitors purchase ads linked to trademarks owned by other firms.
"We take this very seriously," Stephens said. "It is clear that our policies are very different."
In a lawsuit filed May 4 in U.S. District Court in Alexandria, Geico alleged that Google and Yahoo's Overture have allowed competitors to link their ads to the terms "GEICO" and "GEICO Direct," both of which are registered trademarks. Geico alleged that the practice is unlawfully steering consumers who want to contact Geico to the Web sites of its competitors.
"This practice deliberately misleads consumers and allows Geico's competitors and these Defendants to illegally exploit for their own commercial purposes, Geico's investment of hundreds of millions of dollars in its brand," the company said yesterday.
Steve Sturgeon, a Washington attorney with expertise in Internet and trademark law who is not involved in the Google cases, said this area of the law is so new in the United States that no trademark cases involving search engines have made their way through the American court system.
"There is nothing really definitive, there are no precedents, and the law will be interpreted as these lawsuits are decided," Sturgeon said. "Google has such resources they can easily combat any lawsuit and probably take a firm stand."
But Sturgeon said the global nature of the Internet, and the varied nature of trademark law in different countries, complicate matters further. In addition to the U.S. lawsuits, Google is involved in other, similar trademark litigation in France with insurance giant Axa and in Germany with a handful of other firms. Google has lost one case in France but is appealing.
Earlier this week, Metaspinner Media, which had won an injunction against Google's practices in a German court, went back into court to argue that Google had not changed its ways. According to the Associated Press, the company said Google Deutschland let a competitor buy ads linked to its trademarked software. "Other companies were taking advantage of this brand name," said attorney Peter Bosbach, who filed the lawsuit earlier this month, according to the AP report.
Google itself has expressed concern about its ability to protect its own trademarks.
In its SEC filing, the company said there "is a risk that the word 'Google' could become so commonly used that it becomes synonymous with the word 'search.' If this happens, we could lose protection for this trademark, which could result in other people using the word 'Google' to refer to their own products, thus diminishing our brand."