Google Wins Its “AdWord” Battle with American Blinds, but Still Faces A War With American Airlines

On Friday, August 31, 2007, the internet was buzzing with the news that Google had reached a settlement agreement with American Blinds.

For those of you who have not followed the case, on November 26, 2003, Google filed a declaratory relief action against American Blinds & Wallpaper Factory seeking a judicial determination that Google’s "AdWords" advertising program did not infringe American Blinds’s trademarks. Google’s "AdWords" advertising program involved Google’s practice of selling at auction certain trademarked terms as “keywords” to various sponsors, often competitors of the trademark owners. When a person performs a Google search using the trademarked terms, sponsored links on Google’s search results would appear.

Under the settlement agreement, the lawsuit, which was scheduled to go to trial in November 13th, is dismissed with prejudice. Google did not pay anything to American Blinds under the settlement. The agreement was also specific to state that Google would not change its policy of allowing sponsors to place ads when a competitor’s trademark is searched.

Google is proclaiming this settlement as a victory, and some commentators maintain that this outcome will deter others from filing similar lawsuits against Google’s “AdWords” practice However, a closer look at how the case was progressing for American Blinds reveals that American Blinds settled because it did not have a strong trademark case – not because Google’s practice did not violate American Blind’s trademark rights.

The court, in its April 18, 2007, order granting in part and denying in part Google’s motion for summary judgment, made several rulings that hurt American Blinds’ case. See Google, Inc., v. American Blinds, 2007 WL 1159950 (N.D. Cal. 2007) (unpublished) – slip opinion here and Westlaw version here. Most notably, the “American Blind” and “American Blinds” trademarks were declared unenforceable. American Blinds did not register the “American Blinds” trademark until after the date the lawsuit was filed and did not provide sufficient evidence of secondary meaning to establish an enforceable descriptive common-law trademark.

However, some of the court’s ruling are encouraging to future trademark owners. Most notably, the court concluded that the sale of trademarked terms in Google’s AdWords program did constitute “use in commerce” for the purposes of the Lanham Act, following those cases that have reached a similar conclusion (Government Employees Insurance Co. v. Google, Inc., 300 F.Supp.2d 700 (E.D.Va.2004); 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp.2d 273 (D.N.J.2006); Buying for the Home, LLC v. Humble Abode, LLC, 459 F.Supp.2d 310 (D.N.J.2006); Edina Realty, Inc. v. TheMLSOnline.Com, 2006 WL 737064 (D.Minn.2006)) and rejecting court decisions in the Second Circuit that concluded that the sale of trademarks as keywords for sponsored links does not constitute use for the purpose of the Lanham Act (Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402, 408 (S.D.N.Y.2006); 1-800 Contacts v. When U.com, Inc., 414 F.3d 400 (2d Cir. 2005); Rescuecom Corp. v. Google, Inc., 456 F.Supp.2d 393 (N.D.N.Y.2006)). The court further stated that American Blinds had produced sufficient evidence of a likelihood of confusion to withstand summary judgment for the marks that were found to be enforceable.

The decision to settle with Google may have been more about not spending any more money on a losing lawsuit – and face the possibility of having to pay Google’s courts costs and attorneys fees (a point that was specifically addressed in the settlement agreement, whereby both parties agreed to pay their own costs).

But Google’s war over its AdWords program is not yet finished . . . and now faces a much more formidable opponent.

On August 16, 2007, American Airlines filed suit against Google in the U.S. District Court in Northern District of Texas. A copy of the complaint can be found here. American Airlines has a much stronger trademark portfolio and more financial resources to take Google all the way.

[NOTE: Interesting to note that if you do the same “Google” search as that shown in the complaint, the sponsored links are different.]