December 23, 2004, 11:10 AM — Google Inc.'s informal corporate motto is "Don't be evil" but the search engine provider isn't viewed as particularly nice by a growing list of companies that claim Google is misusing their trademarks and, in so doing, hurting their businesses.
Search engines such as Google deliver users both a list of Web sites and a list of ads triggered by the users' query terms, also known as keywords. For example, a seller of art supplies may pay Google to run its ad whenever a user enters a query containing keywords such as "easel" or "stencil." The dispute at hand arises when advertisers sell keywords that are trademarks without authorization from the trademark owner.
Rescuecom Corp. is one company challenging Google's practice in court. The Syracuse, New York, computer services franchising business says Google is seriously hurting it by serving up competitors' ads when users search for "Rescuecom" in Google's search engine.
Google and the Rescuecom competitors buying the ads are profiting without authorization from the Rescuecom trademark, which the company spends significant amounts of money promoting and protecting, Rescuecom claims in a lawsuit filed against Google in September in U.S. District Court for the Northern District of New York. The practice can also confuse potential customers and franchisees, leading them to incorrectly assume that Rescuecom is associated with a competitor, which results in lost business for Rescuecom, the lawsuit claims.
"Defendant Google is promoting, encouraging, enabling and profiting from Rescuecom's competitors 'free-riding' on (Rescuecom's) goodwill and the name recognition it enjoys in its marketplace," the lawsuit reads, and adds further down: "Rescuecom would have realized additional sales, franchisees, customers and revenue from such diverted Internet users were it not for Google's intentional and improper sale of (Rescuecom's) protected trademark 'Rescuecom' as a keyword."
Rescuecom, which had 67 franchisees when the lawsuit was filed, asks the court, among other things, to forbid Google from using "Rescuecom" as a keyword for ads in its search engine and to have Google pay damages.
Google has said the lawsuit is without merit.
So who will prevail? With U.S. law unclear on the legality of using trademarks without authorization to trigger online ads, search engines and trademark owners will spend a lot of time and money in coming years battling the issue in court, experts say.
Search engines such as Google and Ask Jeeves Inc. are fighting over the issue with trademark owners in several ongoing cases at the federal district court level. Although Google won a partial victory last week against Government Employees Insurance Co. (Geico) in one of those cases, experts say a solid legal precedent is likely to be years away.
"There have to be more cases and the cases need to get appealed," said Sheldon Klein, an attorney specializing in intellectual property matters and a partner at Arent Fox PLLC in Washington, D.C. "When you have one of the circuit courts of appeals ruling on something, it carries more weight (than at the district court level) and it's a binding precedent within that entire circuit. We may end up having two or three or more circuits ruling different ways and that's how cases get to the Supreme Court."
In May, insurance company Geico sued Google for trademark infringement over its advertising practice. However, last week Leonie M. Brinkema, a district court judge for Virginia's Eastern District, citing lack of evidence, dismissed Geico's allegation that the practice will cause confusion among customers. The judge also ruled that advertisers who use Geico trademarks without authorization in the text of their ads are infringing on Geico's trademarks. The judge still has to rule on whether Google is liable when such an infringement occurs.
Until a legal consensus is reached, search engines are expected to strongly defend this advertising practice because it is an important part of their advertising model.
In the second quarter ended June 30, total U.S. Internet ad spending was about US$2.37 billion, a 42.7 percent increase over the same period in 2003, according to the Interactive Advertising Bureau and PricewaterhouseCoopers LLP. Search-related ads -- triggered both by generic and trademarked terms -- were the largest category with $947 million.
Search engine ads that are triggered using trademarks tend to yield better results for advertisers than those using generic terms, said Kevin Lee, chief executive officer of Did It.com LLC, a search engine marketing company based in New York. "Trademarks are very popular as search terms, so this is a huge issue," he said.
