The Trademark Tango

The two U.S.-based trademark actions against Google (Geico, American Blinds) are being allowed to proceed to discovery. Discovery is a phase of litigation after the initial documents are filed that requires the parties to exchange information and, as the term suggests, generally involves the unearthing of facts to determine whether a case will go to trial.

Judges' rulings in both matters — one in California and one in Virginia — have essentially said the plaintiffs in both cases can press their claims against Google without ruling on the merits of those claims. In other words, there's enough factually to potentially justify the lawsuits. (The Geico case however was partly dismissed in December 2004.)

The cases essentially both involve claims that Google's AdWords program violates the law by allowing competitors to purchase keywords that are protected trademarks.

Every year, hundreds of trademark-infringement lawsuits are filed in the U.S. A " trademark" is a word, symbol (i.e., logo) or phrase used to identify a particular product and distinguish it from other products in the marketplace. The degree of distinctiveness or uniqueness is what usually determines legal protection.

Terms or symbols that are not unique to a particular product or company are generally not given protection. Generic terms are also not protected. Since the mid-1900s, trademark law has generally been governed by the federal Lanham Act and related amendments.

"Trademark law is primarily directed at protecting consumers," explained attorney Thomas H. Zellerbach, in a 2004 interview with The Kelsey Group. Zellerbach is an intellectual property attorney in the Silicon Valley office of Orrick, Herrington & Sutcliffe. "The test is 'likelihood of confusion.' If consumers aren't going to be confused, then arguably there's no harm."

Zellerbach told TKG that the litigation could get very complicated. It could require the parties to conduct elaborate consumer surveys to determine whether there's any confusion about the way Google serves ads in response to certain keywords and phrases.

In one way of thinking, Google has an interest in allowing these cases to go to trial so that the law can be clarified and established. A favorable decision (especially on appeal) would help insulate Google against future claims. Settling the case (as Overture did in Geico) would not establish any legal precedent and would allow other similar cases to be brought in the future. However, allowing a case to go through trial also risks a finding of liability against Google.

An ultimate finding of liability against Google, theoretically strikes at the core of Google's advertising model, which represents 99% of the company's income, according to the recent 10-K filing. The reason is that Google's AdWords is based on automation and self-service, which are at odds with policing trademark violations. The fundamental problem is that there is considerable potential ambiguity in any given case. Google would have to render what amounts to a legal opinion in many cases (what a mess!). And that has to be done by humans and not by machines.

Barring settlement in these cases, it's likely that there will be some sort of requirement that Google do some policing of trademarks. To date, Google has taken the position that this is purely a private matter between advertisers using AdWords. A court probably won't be persuaded by that argument — the cases would have been entirely dismissed otherwise.

Search engine marketing firm Oneupweb has recently come up with a tool (how effective it remains to be seen) that policies trademark infringement. The very existence of this tool could make it more likely that courts will require Google to do some policing of trademarks.

But setting up a system that doesn't involve Google in case by case determinations of the legality of trademark use is a vexing problem. The courts will be interested in fairness and balancing Google's right to operate an automated system with the rights of the public and trademark owners, which have an interest in protecting the integrity of those marks.

I don't believe the courts will require Google, Yahoo!, FindWhat and others to be the arbiters of thorny trademark disputes. Yet I also don't believe that they will be able to get away without some sort of role in the process.