Google is facing a lawsuit over claims that it encourages users of its AdWords system to illegally target rival firms’ trademarks. But Google has responded with an announcement that it’s further relaxing the rules about such behavior.

The lawsuit comes from a Texan firm, FirePond, and deals with the ’sponsored results’ listings which appear to the right of the main Google search results for some terms. The case involves the way firms are allowed to bid to appear in the ad listings for any search term, even if that term is a trademark belonging to a rival company.

FirePond argues that Google is directly profiting from the illegal use of a trademark. It’s asking for the case to become a class action suit allowing all trademark owners in Texas the opportunity to join the case. However, that appears unlikely to happen as trademark cases generally need to be assessed individually, while class action suits are usually for multiple claimants with largely identical situations (for example, ticket buyers at a canceled concert).

As well as objecting to rivals benefiting from their trademarks, trademark holders have also complained that they are effectively forced into a bidding war to protect their trademark – which means more income for Google. A lawyer for American Airlines told the New York Times , “It certainly smacks of a protection racket.”

Ironically Google has just announced changes which allow more use of trademarks. Previously firms could bid to appear on results for a particular trademarked phrase, but were not allowed to use it in the text of the ad itself. From now, U.S. firms will be allowed to do this, though only in cases where it is clear they are not trying to mislead users. For example, a retail store will be allowed to include the trademarks of brands which they sell.

Another allowable use  is for “non-competitive and informative details” about a trademarked brand or product. The sites linked to by such ads must not “sell or facilitate the sale of the goods or services of a competitor of the trademark owner.”

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Entry was posted on Friday, May 15th, 2009 at 2:03 pm under Advertising, Google.

Read more entries by John Lister.
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