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Google has been sued for breach of contract, negligence and unfair business practices over its Adwords ad program. The class action lawsuit filed by Click Defense seeks $5m damages.

The filing seeks discovery on whether Google has taken adequate measures to prevent click fraud, which accounts for between 10 and 20 per cent of all Adwords clicks, according to insider estimates; whether it has misled its Adwords customers, and whether the refunds it has collected from Adwords click fraud victims are justified.

Advertisers pay a fee for every click on a text ad, with the amount depending on the value of the keyword. However the lucrative nature of the system means that 'click syndicates' are deployed to generate clicks on competitors adwords or boost their own.

The suit includes a quote from Google's CFO George Rayes last year, describing click fraud as "the biggest threat to the Internet economy".

"I think something has to be done about this really, really quickly, because I think, potentially, it threatens our business model," he said. Google generates almost all of its revenue from its text advertising.

Stephen Messer, who runs the ad affiliate LinkShare, has described 2005 as "the last big year for search before it blows open or people start looking for alternatives".

Click Defense says it bid $3 for its own advertisements when Google users searched for the term "click fraud", and then became a victim of click fraud itself.

Google denies the charge. ®

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Google sues website over click fraud

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