Google Wins Trademark Dispute

American Blind and Wallpaper Factory agreed to settle its four-year-old trademark dispute with Google out of court. American Blind had filed one of the first trademark cases revolving around Google’s AdWords practices concerning trademarks, but it wasn’t the last, and there are more in the works. Don’t expect the search engine giant to change its behavior any time soon, however.

The suit was originally filed in 2003, and would have gone to trial in November in the US District Court for Northern California. We’ll get to the full details of the resolution in a moment, but first I want to cover a little "history." This will give you the background for why this kind of case matters to Google — and why the search engine wants to keep such disputes out of court.

The suit’s filing coincided with a decision by Google to change the way it ran its advertising keyword business. When the search engine first came out with its AdWords service, it avoided letting advertisers bid on trademarked names. Perhaps realizing how much money it was leaving on the table, the company finally decided to allow advertisers to bid on trademarks — even trademarks the advertisers themselves didn’t own.

When Google made this decision, Sheryl Sandberg, the search engine’s vice president of global online sales and operations, said that "By letting people restrict certain words, you’re not getting the results that people expect from Google." This decision opened the door to a plethora of trademark infringement lawsuits. Google has not been too successful defending its practices in Europe; as an American company, however, it is most concerned with American court and precedent.

Here it has been more successful. For example, in a case involving Geico Insurance, the judge sided with Google, granting the search engine’s motion for summary judgment. The judge stated that "as a matter of law it is not trademark infringement to use trademarks as keywords to trigger advertising," according to Michael Page, one of the lawyers who represented Google in that case. The motion was granted at the end of 2004, and many thought that Geico had an excellent case against Google.

Going forward to 2005, when Google filed a motion to dismiss the suit filed against it by American Blinds, the judge disagreed, allowing the case to go forward. But there was at least one point to that decision which weighed in Google’s favor. The judge dismissed American Blinds’ claim of tortious interference with prospective business advantage.

Later, in April of this year, American Blinds’ lawsuit hit another snag. Judge Jeremy Fogel, of the US District Court in San Jose, stated in a pretrial ruling that two of the company’s trademarks — "American Blind" and "American Blinds" — were descriptive terms and unenforceable. The judge allowed the case to proceed based on three other trademarks: "American Blind Factory," "Decoratetoday" and "American Blind & Wallpaper Factory."

And last month, American Blind and Google settled. The paperwork states that both companies agreed to dismiss their relevant litigation, with prejudice. They both agreed to pay their own costs and attorneys’ fees. Furthermore, the agreement says that "So long as Google does not make a material change in AdWords trademark policy that adversely affects ABWF, ABWF covenants not to sue Google…" and American Blind "expressly acknowledges that Google has not made and has not agreed to make any payment to ABWF of any kind whatsoever…and that Google has not agreed to make any change to its trademark policies or any exception to how it applies its trademark policies."

Google portrayed the result as vindication for its AdWords practices. "We’ve said that American Blind & Wallpaper Factory’s claims were baseless, and that Google’s trademark policies are perfectly reasonable and lawful," Michael Kwun, a managing counsel for Google, said in a statement. "Now, with trial approaching, American Blind decide to withdraw all of its claims. We are very pleased with this outcome."

Eric Goldman, director of the High Tech Law Institute at Santa Clara University, described the outcome as "a stunning victory for Google" and noted in an interview with Mercury News that American Blinds may have spent in excess of $100,000 on the case — only to lose legal fees and two trademarks. In his blog, Goldman says that "this case reiterates that keyword-related lawsuits can be a sucker’s bet."

Follow the Media, which bills itself as "a knowledge base for media professionals," quoted a statement it said came from American Blinds. "We still believe that what Google does is wrong, but this is no longer our fight. Our competitors should know that our settlement agreement with Google in no way limits our ability to object and seek legal relief if they continue to buy our trademarks as key words from any search engine, including Google."

Perhaps one of the reasons that American Blinds was willing to step back was that it knew a more powerful opponent had just entered the ring against Google. American Airlines is suing Google, making the same claims that American Blinds did — that the search engine is selling its trademarks as keywords to third parties who use them to position their ads in Google’s AdWords service.

Some analysts seem to be salivating over this lawsuit, while others aren’t convinced it will play out too differently from the one with American Blinds. For example, Follow the Media noted that "Drawing things out for as long as possible to dry up legal funding and take obsessive amounts of management time won’t work" as it has with smaller opponents; AA has the money to hire copyright lawyers every bit as smart and talented as the ones employed by Google. So it could go to court and get very interesting.

Other observers disagree. Goldman makes some important observations about the case in his blog. He suspects that at least a few of AA’s examples involve broad matching on the word "airlines," which may not be actionable. Furthermore, one of the airline’s complaints is that many of the advertisements triggered by its trademarks lead to sites that sell tickets for both AA and its rivals. That’s a legitimate use of AA’s trademark; as Goldman points out, "Any retailer can advertise that it sells X even though, in its store, it displays X next to competitive offerings."

Goldman thinks this could be a very costly lawsuit for American Airlines. The company is a Google customer, and Goldman wonders if AA has ever used third party trademarks as keywords. He notes that "plenty of keyword plaintiffs have engaged in such duplicity, and I’d be surprised if American Airlines has run a completely clean shop."

Philip M. Stone, writing for Follow the Media, observed that AA issued a statement after filing the lawsuit that tried to portray the dispute almost as a simple misunderstanding between friends. "The business issue American has with Google is not related to their overall business model. Rather, the dispute is centered on Google’s process of allowing other companies to purchase the right to use American Airlines trademarks for Internet search. In working through this business dispute, American is hopeful that it will continue professional, friendly and fruitful relationships with Google, while finding an appropriate resolution to the trademark issues." Stone figures that the lawsuit was the airline’s way of "playing hardball" with Google after talks between the two companies on the issue did not progress as AA had hoped.

There are a couple of points worth noting that may perhaps be peripheral to AA’s lawsuit, but which are interesting nonetheless. First of all, if it wants to get help from American Blinds, it will have to subpoena the company — even if American Blinds wants to help. In the home decorating company’s agreement with Google, it expressly states that "ABWF shall not take any steps to voluntarily assist any other party in asserting any claims against Google. This provision shall not preclude…ABWF providing information in response to a subpoena or Court order, provided that ABWF complies with any confidentiality obligations imposed independent of this Agreement…"

It’s tempting to point to this as evidence of some kind of "divide and conquer" strategy on Google’s part. I am not a lawyer, however, and I haven’t seen anyone else single out this stipulation for special attention. Therefore, I’m forced to guess that this is simply some kind of legal boilerplate — designed, perhaps, to prevent American Blinds from pursuing the lawsuit further in other venues or by other means.

The second point worth noting is American Airline’s main legal counsel. He’s Terence Ross, and he’s handled keyword lawsuits before, going up against adware companies. Granted, he didn’t win, but that experience will still serve him in good stead. What’s more, he’s on record as being against Google’s revised AdWords policy toward trademarks. Of the change in policy, he said that "That was then seen as almost a declaration of war on trademark owners." 

So is Google prepared to go to war? It will almost certainly try to head one off if it can. A year after changing its AdWords policy, Google went public, and its stock skyrocketed. It continues to perform amazingly well. Goldman puts the matter plainly: "Google can’t be a multibillion-dollar company if they disable trademarked keywords at anyone’s request." Don’t be surprised if the case with American Airlines is settled out of court, too — Google simply can’t afford to see a bad precedent set in an American court.

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