Adwords law suit could devastate Google revenues

Stuart Corner
Sunday, 13 May 2007 12:22

Your IT - Home IT

Google will face a jury for the first time over its Adwords program, after a federal judge set November 9, 2007 for jury selection in a trademark infringement lawsuit brought on behalf of American Blind & Wallpaper Factory (ABWF).

Adwords is Google's proprietary program that enables advertisers to arrange for their ads to be displayed when end users search on nominated keywords. These can include trademark terms belonging to the advertisers competitors - which is the issue that has triggered the ABWF lawsuit. ABWF alleges that this practice violates trademark laws and has caused it to lose customers and significant revenue.

If ABWF were to be successful and prevent Google making trademark words available to any advertiser, Adwords could become much less attractive to advertisers, and choke off much of Google's revenue stream. According to Google's filing with the Securities and Exchange Commission, the Adwords advertising program accounts for more than 98 percent of its $US11 billion annual revenue.

In an April 18, 2007 decision denying Google's motion to dismiss the case, the court said, according to ABWF, that "the evidence suggests that Google used [ABWF's] mark with the intent to maximise its own profit ... [and] ABWF has produced sufficient evidence of likelihood of [consumer] confusion [to allow the case to be decided by a jury]."

According to ABWF's lead attorney, David Rammelt of law firm Kelley Drye & Warren, "The downside of search optimisation based on use of trademarks is rarely discussed. The reality is that companies large and small are hurt when Google uses a company's trademark, without permission, for the benefit of the company's competitors and Google. This is the first time a jury will have the chance to hear how Google's business model takes advantage of companies that have built the value of their trademarks through hard work and investment."