American Airlines is the latest—and perhaps largest—company to sue Internet search giant Google, Inc. over a policy that allows companies to buy the right to appear above and beside search results by purchasing certain key words.

On Aug. 16, American Airlines filed a complaint in U.S. District Court for the Northern District of Texas, Fort Worth Division, challenging Google’s AdWords program, which allows competitors to purchase trademarked terms. See American Airlines, Inc. v. Google, Inc., No. 4-070V-487-A (N.D. Texas, Aug. 16, 2007). In its complaint, American Airlines alleges that Google has misappropriated its trademarks by allowing competitors to appear as “Sponsored Links” in search results when users type in AA trademarks such as “American Airlines” and “AA.com.”

When users search for American Airlines using the Google search engine, competitors such as United.com, USAirways.com and CheapTickets.com appear in the right margin as Sponsored Links because Google has allowed them to purchase American Airlines’ marks as well as confusingly similar terms, the latter alleges.

“Due to Google’s sale of the American Airlines Marks to third parties as keywords, such consumers could be redirected to competitors of American Airlines even though they originally intended to go to AA.com,” AA states in its complaint. “Accordingly, Google aids third parties in ‘hijacking’ consumers who use their search engines to navigate the World Wide Web,” AA says. “This interferes with American Airlines’ sale and business.”

Muddled Precedent

The lawsuit is the latest in a growing number of attempts to force Google to change its policy.

GEICO unsuccessfully challenged Google in 2005. In August of that year, a federal judge in Virginia ruled that GEICO had failed to establish the likelihood of consumer confusion—necessary to proving trademark infringement—by the placement of competitors in the paid sponsor column. See Government Employees Insurance Co. v. Google, et al., 04-CV-0507 (E.D. Va.). For more information, see “GEICO and Google Settle…,” pub. date Sept. 19, 2005.

However, the judge left open the possibility that GEICO might be able to show that Google was liable for infringement for allowing or failing to prevent competitors from using GEICO’s name in the actual text of their search ads. Following that ruling, the two sides settled.

Since the GEICO decision, American Blind & Wallpaper Factory Inc. (ABWF), which runs the website decoratetoday.com, has gained ground it its attempts to challenge Google’s AdWords program.

Google filed an action for declaratory relief against ABWF in federal court in San Jose, California, seeking a judicial determination that its AdWords program does nto infringe on ABWF’s trademarks. In April, the judge denied Google’s motion for summary judgment, ruling that ABWF had produced enough evidence of the likelihood of confusion for the issue to go to trial. See Google Inc. v. American Blind & Wallpaper Factory, Inc., 2007 WL 1159950 (N.D. Cal. April 18, 2007).

The court further noted that “the large number of businesses and users affected by Google’s AdWords program indicates that a significant public interest exists in determining whether the AdWords program violates trademark law.” Industry observers say that if the trial does go forward, it will be the first time the issue of key word sales is put before a jury.

The American Blind case follows a loss by Google on the issue last year in Europe, when a French court ruled on behalf of French luxury goods seller Louis Vuitton. Other courts have addressed key word disputes with inconsistent results.

In the American Blind decision, the court noted that previous courts have differed as to whether the purchase of a trademarked key word even constitutes “use” of a trademark in commerce. Rescuecom Corp. is appealing an unsuccessful challenge after a federal court ruled that Google’s “internal use of plaintiff’s trademark to trigger sponsored links is not a use of a trademark within the meaning of the Lanham Act….” See Rescuecom Corp. v. Google, Inc., 456 F.Supp. 2d 393 (N.D.N.Y. 2006).

However, a New Jersey federal court ruled the opposite in 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp.2d 273 (D. N.J. 2006), concluding that a search engine’s solicitation of bids from advertisers for key words or phrases to be used in search terms constituted “use” for the purposes of the Lanham Act.

Policy Change

The furor over Google’s AdWords program has intensified in recent years following an apparent shift in company policy. In its complaint, American Airlines quoted from a 2004 public disclosure document in which Google stated that “to provide users with more useful ads, we have recently revised our trademark policy in the U.S. and Canada. Under our new policy, we no longer disable ads due to selection by our advertisers of trademarks as keyword triggers for the ads.”

This differs markedly from Google’s policy outside the United States and Canada, where Google prohibits the use of trademarked terms as ad text or as key word triggers, American Airlines alleged.

“Google’s specific use of the American Airlines Marks as keyword triggers in its advertising program allows Google and its advertisers to benefit financially from and trade off American Airlines’ goodwill and reputation without incurring the expense that American Airlines has incurred in the building up its popularity, name recognition, and brand loyalty,” AA states.

Google Responds

For its part, Google said, “[w]e are confident that our trademark policy strikes a proper balance between trademark owners’ interests and consumer choice, and that our position has been validated by decisions in previous trademark cases.”

In previous court filings, the company has argued that distributors place their products alongside competitors on store shelves as a legitimate means of attracting customers. The purpose of content-based advertising is to deliver targeted ads to consumers who have expressed an interest in a type of service or product, Google said.

Google’s supporters include the Electronic Frontier Foundation (EFF), which recently filed a friend-of-the-court brief in the Rescuecom case. EFF argued that search engines facilitate free speech by allowing parties to purchase ads that appear beside search results.

Why This Matters: There appears to be a fundamental disagreement between trademark holders and those in the search community over the protection that trademarks should receive online. Google derives a large portion of its revenue from search ad sales. Even if Google were to agree to refrain from selling actual trademarked terms as key words, disputes likely would remain. For example, in the American Blind case, Google states it has agreed to refrain from selling American Blind’s trademarked terms, but maintains that descriptive terms such as “blind” and “wallpaper,” while components of American Blind’s marks, are not entitled to protection. And American Airlines took issue with the phrase “American Airline Deals,” which appears in one of Google’s Sponsored Links, claiming it was “confusingly similar” to the “American Airlines” mark.