February 13, 2006 5:35 PM PST

Google's ad sales tested in court

Another lawsuit is poised to challenge Google's lucrative advertising-based business model by arguing it encourages unlawful use of trademarks as keywords.

The parent company of a payday loan provider called Check 'n Go has sued Google in federal court in Ohio, saying that the search engine permits other payday lenders to purchase ads that appear when the trademarked phrase "check n go" is typed in.

CNG Financial, a Cincinnati-based company that operates more than 1,300 Check 'n Go stores through its subsidiaries, has asked a federal court to halt the practice.

"Google is enriched by the misappropriation" of the trademark, CNG said in court documents filed Jan. 24. "Consumers may click on the links to the competitors of Check 'n Go (and) may not realize that they have unwittingly 'clicked' on a competitor's Web site."

Because no federal appeals court has addressed the practice of selling trademarked keywords, the law in this area remains relatively unsettled. That means Google and other search engines that follow similar practices could be found liable for trademark violations, which would slice into future profits.

In a case that auto insurer Geico brought against Google in 2004, a federal district judge in Virginia began the process of weighing the legality of selling ads based on other companies' trademarks.

U.S. District Judge Leonie Brinkema partially sided with Google in December 2004 but ruled that Geico's case could proceed because "there has been enough evidence of confusion" about trademarks on the part of the consumer. The two companies settled the case before it went to trial.

"We believe our trademark policy is lawful as was demonstrated by the Geico court decision and we will defend against this suit vigorously," a Google representative said in an e-mail to CNET News.com on Monday.

Google didn't have as much luck in France. Last year, a French court ruled that Google must stop using the trademarks of European resort chain Le Meridien Hotels and Resorts to trigger keyword ads.

Another federal lawsuit, currently being prepared for trial in California, tests whether Google can sell keyword advertising around trademarks owned by American Blind & Wallpaper Factory, an interior decor specialist.

Though about 99 percent of Google's revenue comes from advertising, the company does not disclose how much is generated by sales of trademarked keywords. Google decided two years ago to reverse an earlier policy and permit advertising sales around trademarks.

See more CNET content tagged:
GEICO, advertising sales, trademark, court, Google Inc.

3 comments

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Valid use of the trademark term.
If I use google to search for "Check N Go" services, then other companies would have an interest in offering me services that may compete directly with theirs. This is a not only a fair use of the trademark, but something that makes a whole lot of sense.

Databse sites make money indexing the textual content of music and movies. They also often allow you to cross reference to other artists or titles you might be interested in. This is all part of marketing.

If I search for "Playstation 3" then someone might want to sell me a PS3, or even show me a new XBox 360 (blasphemy). Both of these names are trade marked, but can be freely used to sell products and services to people interested in the product.

What companies like Check N Go need to do is work with Google on exclusive right to their trademark. As long as Google does not provide services under their trademark they should be free to sell targeted advertising utilizing any trademark.

It would be a bad thing to be unable to search for "metallica" because Google profits from my searching for the band. The targeted ads are only a start against search engines sending people to sites not directly controlled by the trademark owner. They will be able to further this move by showing Google still profits on the search even if they do not sell ads for the specific search word because they still display an ad when I use an unsold search term.
Posted by zaznet (1138 comments )
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Suggestion:
This practice should be allowed under fair use, so long as the rightful owner is distinguished. For instance: If i query "Playstation 3", then the first link should be to Sony's PS3 site, after that, it's fair game. If i query "Metallica" then the first link should be to the official band page (through the record company), after that everything's fair game. This would eleviate any customer confusion - they could no longer argue that in court, plus Google would still win. Everyone's happy. The copyright holder is distinguished first and others can still buy related ads.
Posted by mortis9 (370 comments )
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Seems a bit unfair that one <a href="http://www.actionpaydayloans.com">Payday Loan</a> company is allowed to wrap up the market with a simple search term. Next thing you know, searching for software will be a problem as well. You would think that there would be more care and attention paid to the people who are actually needing the loans, and less to the companies that are only trying to line their own pockets.
Posted by UnhappyConsumer (1 comment )
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