Overture, of Pasadena, Calif., reached the settlement on Friday with GEICO, one of the nations largest insurers. Overture is the paid search division of Yahoo Inc.
The Government Employees Insurance Co. had filed the federal lawsuit in May, accusing the search companies of damaging its trademark by letting other advertisers bid on its trademarked terms in search ads.
Spokespeople with GEICO and Overture on Wednesday confirmed the settlement but declined to offer details on its terms.
"GEICO and Overture have agreed to a settlement and their claims against each other in the litigation have been dismissed as a result of that agreement," the GEICO spokesperson said in a statement.
Overture and Google both sell sponsored links, advertising that appears alongside Web search results and is triggered based on keywords. Advertisers bid on search terms in an auction-based model and pay based on the number of clicks on their links. The search-based ads account for a significant portion of revenues for Google and Yahoo.
The ad model, though, has raised trademark concerns because advertisers can bid on keywords that also may be trademarked terms, such as product or company names.
GEICO, of Chevy Chase, Md., alleges in its lawsuit that Google and Overture infringed on its trademark by allowing advertisers and competitors to bid on the term "GEICO."
Overture and Google tried to have the trademark infringement claims dismissed, but a judge in August denied their motions and allowed the case to proceed.
GEICOs case against Google has continued to move forward. Early last week, a judge for the U.S. District Court in the Eastern District of Virginia denied Googles motion for a summary judgment in the case, according to court records.
Officials at Mountain View, Calif.-based Google could not be immediately reached for comment.
GEICOs lawsuit is one of many challenging the use of trademarks as keyword triggers for paid search results. In another high-profile case in the United States, Google is battling a trademark infringement lawsuit from American Blind and Wallpaper Factory Inc.