The providers of search-based advertising have a tough road ahead following a court ruling in GEICO's trademark-infringement case, legal experts say.A federal judge has let insurer GEICOs lawsuit against the two biggest providers of search-based advertising move forward, setting the stage for closer examination of whether the burgeoning form of online ads breaks trademark laws.
U.S. District Judge Leonie Brinkema last week rejected motions from Google Inc. and Yahoo Inc.s Overture Services Inc. to dismiss the cases trademark infringement claims, according to a court filing made public this week.
The Government Employees Insurance Co. sued Google and Overture in May in the U.S. District Court for the Eastern District of Virginia, alleging that they are infringing on its trademarked name by allowing advertisers and competitors to bid on "GEICO" as a keyword for triggering sponsored search listings.
In an Aug. 25 ruling, Brinkema allowed six claims to proceed in the case, five of which deal largely with trademark issues. But the judge dismissed two other claims dealing with tortious interference and business conspiracy.
The court decision is significant because it essentially states that GEICOs facts, when accepted as true, could prove trademark infringement. But the case is far from resolved, legal experts say.
Search-based ad programs, where advertisers bid for placement and pay based on the number of clicks, account for a significant portion of revenues for Google and Yahoo. GEICOs lawsuit is one of many challenging the use of trademarks as keyword triggers for paid search results. In the United States, Google also is battling a trademark-infringement lawsuit from American Blind and Wallpaper Factory Inc.
Click here to read more about Googles recent changes to its trademark policy.
Robert Gerstein, a partner at law firm Marshall, Gerstein & Borun LLP in Chicago, said "the case is a close one." He said he doubts that GEICO will be able to prove that Google and Overture are confusing consumers by letting the trademarked term trigger other companies search ads.
Consumer confusion is one test of trademark infringement, but on other tests Google and Overture appear to be in a tough spot, he said.
"Unfortunately for Google [and Overture], you are not usually permitted to use someone elses trademark for your financial gain, even where there is no confusion of consumers," Gerstein said. "That argument probably helped GEICO win this first round and looks likely that it will be the winner in the end."
GEICO, of Chevy Chase, Md., issued a statement this week praising the courts ruling.
"The judge rejected the argument advanced by Google and Overture that they should not be subject to liability for allowing their advertisers to bid on the GEICO marks and, in the words of the judge, pay defendants to be linked to the trademarks," the company said. "We look forward to the opportunity to prove at trial that this unauthorized use of GEICOs well-known trademarks is unlawful and should be stopped."
Meanwhile a Google spokesman vowed that the search company would continue to fight the lawsuit. An Overture spokeswoman declined to comment on pending litigation.
"We believe the suit is without merit and will continue to defend against it vigorously," Google spokesman Steve Langdon said.
Click here to read more about the impact of keyword-based advertising on the resurgence of search.
Trademark-infringement lawsuits are often decided in preliminary motions rather than in trial, Gerstein and other attorneys said. The motions to dismiss were just the beginning. The next major decision likely will come from any of the parties filing a motion for summary judgment, which seeks a decision without a trial, or from GEICO seeking a preliminary injunction.
"Its just in its infancy," Rob Andris, a partner at law firm Ropers, Majeski, Kohn & Bentley LLP, said about the GEICO case.
Still, the recent ruling is more of a boon for GEICO, because it could open Google and Overture to further legal challenges and because it challenges the way they run their key ad programs, Andris said. The next phase is the case is discovery, a costly and time-consuming process.
"A ruling such as this puts wind in the sails of other people hanging out there whose trademarks are being used to file a similar lawsuit," said Andris, in Mountain View, Calif. "Google understands that it becomes more exposed to those lawsuits with this type of ruling."
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