Playboy Settles Netscape Search Engine Advertising Case

Playboy and AOL reached undisclosed terms a week after an appeals court ruled that Playboy could proceed with its trademark infringement lawsuit.

A week after an appeals court ruling revived a Playboy Enterprises Inc. trademark infringement lawsuit against Netscape Communications Inc., the companies have reached a settlement in the case.

On Friday, a spokesman for Netscape parent America Online Inc. and the attorney representing Playboy confirmed that a settlement had been reached in recent days but declined to discuss the terms of the settlement.

Chicago-based Playboy had sued Netscape for linking to advertisements of its competitors when users entered words such as "playboy" and "playmate" in search engines. Playboy had claimed that the practice, known as "keying," damaged its brand because its trademarks were associated with other products.

Last week, the Ninth Circuit Court of Appeals in San Francisco reversed a district courts 2002 dismissal of the suit, allowing it to head to trial. But this weeks settlement puts an end to the case, which has been closely watched in the search engine advertising field.

While the Playboy case dealt specifically with banner ads triggered by keywords, it is likely to have a bearing on other cases that involve the use of specific words to launch search engine advertising, said Robert Andris, a partner at Ropers, Majeski, Kohn & Bentley LLP, in Redwood City, Calif.

Keyword-base advertising has become big business for search engines such as Google Inc. and Yahoo Inc. subsidiary Overture, that let advertisers bid on terms that return paid search listings.

Google, of Mountain View, Calif., already has faced legal challenges over its keyword-based ad service, AdWords. It is embroiled in a lawsuit with Luis Vuitton SA regarding keyword-based ads. And in November, Google asked for a California courts ruling to back its trademark policy for AdWords after facing the threat of a lawsuit from American Blind & Wallpaper Factory Inc.

Andris, who was not involved in the Playboy case, said that a settlement was likely Netscapes best option following the Ninth Circuits decision. Netscape could have appealed the ruling further to the U.S. Supreme Court or gone to trial, but both options can be expensive and difficult to win, Andris said.

"There really are only a couple places that the losing party can go if it doesnt agree with result," Andris said.