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Google trademark grab defies mounting lawsuits

Court costs no match for money machine?

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Despite facing multiple lawsuits over the sale of trademarked keywords on its web-dominating ad machine, Google has expanded the use of trademarks by US advertisers.

Yesterday, with a post to the Google AdWords blog, the company said it will soon allow the use of trademarks in the text displayed by its online search ads.

"We are adjusting our trademark policy in the U.S. to allow some ads to use trademarks in the ad text," wrote Dan Friedman, part of the Google AdWords team. "Under certain criteria, you can use trademark terms in your ad text in the U.S. even if you don't own that trademark or have explicit approval from the trademark owner to use it."

The change goes live on June 15. Google declined to speak with us about the new policy, but it did confirm this is the first time it has allowed trademarks into ad text.

It's a bold move considering the company faces no fewer than three lawsuits over the sale of trademarked keywords. Google is still battling a suit from computer repair company Rescuecom, and this week, two similar suits were filed down in Texas, one from software maker FPX (aka Firepond) and another from an outfit dubbed John Beck Amazing Profits.

The John Beck suit - backed by the same lawyers as the FPX action - came down yesterday, within hours of Google announcing its new US ad text policy.

AdWords serves up text ads in response to keyword searches. Google bills it as an auction. You bid for a particular keyword or group of keywords - "rubber ducky," for instance, or "whips and chains" - and if you bid high enough, your ad will appear each time someone searches on those terms.

Like others before them, Rescuecom, FPX, and John Beck claim that Google has violated their trademarks by allowing third-parties to bid on keywords and keyphrases that contain those trademarks. The FPX and John Beck suits seek class action, encouraging other companies to join the fight. FPX limits its class to Texas, but John Beck alleges a class comprised of all US trademark owners.

Google's new US trademark policy does not involve the sale of keywords. It covers the use of trademarks in ad text. But it still opens the company up to greater scrutiny in these pending lawsuits. "These two issues are completely related. Both involve when Google might be liable for its AdWords program," Santa Clara University law professor and tech law blogger Eric Goldman tells us.

"The way that Google tunes its trademark policy might have significant implications for how the court views its liability for the program. If Google wanted to minimize its liability, it would not announced the policy that it did."

To wit, Google is allowing trademarked ad text even though this will harm its ability to fight lawsuits over trademarked keyword sales. And of course, the new move may spark additional lawsuits.

Google's new US policy follows a liberalization of trademark policies in other parts of the world as well. Per usual, the company argues that it's simply trying to improve the quality of its ads.

"Imagine opening your Sunday paper and seeing ads from a large supermarket chain that didn't list actual products for sale; instead, they simply listed the categories of products available - offers like 'Buy discount cola' and 'Snacks on sale.' The ads wouldn't be useful since you wouldn't know what products are actually being offered. For many categories of advertisers, this is the problem they have faced on Google for some time," Friedman wrote.

"[The new US change] will bring Google's policy on trademark use in ad text more in line with the industry standard."

But this is also yet another way to crank more revenue from its top-secret money machine.

The question is whether the extra revenue will surpass its added court costs. "On a net basis, it's not clear to me this will be cash-flow positive," Goldman says. "Who knows how much additional new revenue will shake out. And who knows how many new lawsuits will come that will force them to defend the systems. If they were looking for a short-term cash grab, there might have been easier ways."

"But both this and its liberalization of its international trademark policies are consistent with a company that's looking for new revenue streams."

In October, Google ended a four-year self-imposed ban on worldwide gambling ads, proving that its holier-than-thou attitude is no match for a shrinking economy. But the implications of its latest policy change are far more interesting.

Odds are, the short term revenue gains from trademarked ad text will far exceed what the company spends battling suits from Rescuecom, FPX, and others. But Google is also thinking long term. If it can establish the right to offer trademarked ad text, it's securing mountains of extra revenue for years to come. And what better time to force the issue than during a weak economy, when trademark owners are less willing to spend their own dollars in court? ®

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