Google: The Search for Internet Intellectual Property Integrity and Financial Security

The General Counsel for the North American branch of Europe's largest systems software provider recently observed that one of the biggest challenges she faces is that the law lags behind the pace of technological change. ⁽¹⁾ The rapid evolution of modern technology, especially information technology (IT), however, also forces the relevant law to evolve more quickly. She accordingly finds that it is not enough to keep abreast of statutes, regulations, and court decisions that impact global IT; she must also try to anticipate them so that her company can be ready for a future legal environment that is suddenly here. ⁽²⁾

Probably no company illustrates the business and legal implications of a rapidly-changing IT landscape better than Google, Inc. The Google Internet search engine has risen from credit card debt and the dormitory room of one of its co-founders in 1998 to become, less than six years later, a word in almost everyone's vocabulary, a tool on the fingertips of almost every Internet user, and the basis for a $1.67 billion initial public offering-and one of the most highly-publicized IPOs in the past decade.

Google's meteoric rise to fame and fortune, however, has spurred a flurry of high profile intellectual property infringement lawsuits against it. According to Google's own filings with the Securities and Exchange Commission, these lawsuits (primarily trademark and copyright infringement lawsuits) threaten to significantly harm its revenue stream.

The most highly-publicized of these lawsuits was brought by the giant national automobile insurance company, Geico Corp. ⁽³⁾ The central issue in the lawsuit is the legality of Google allowing companies to purchase advertising linked to keywords that are trademarks owned by other companies. For example, insurance companies other than Geico can buy advertisements from Google that are linked to searches for “Geico” or “Geico Direct.” Geico claims that this practice is an illegal infringement of its trademarks and causes consumer confusion that illegally exploits Geico's investment of hundreds of millions of dollars in those trademarks.

After a three-day hearing, on December 15, 2004, a U.S. District Court in Eastern Virginia granted partial summary judgment in Google's favor and found that there was no evidence that Google's AdWords program, which displays the advertisements of Geico's rivals under a “Sponsored Links” heading next to a user's search results, by itself, causes any consumer confusion. The presiding Judge left open the question of whether pop-up ads that use Geico's trademark in the text violate trademark law, but she suspended the trial and encouraged the parties to try to settle the remaining issues out of court.

Prior to April, 2004, Google did not use trademarks to link to advertisements for companies other than the trademark owners if the trademark owners complained to Google. By changing its practice after April, 2004, despite opposition from numerous trademark owners, and by refusing to settle the resulting litigation prior to a dispositive summary judgment hearing, ⁽⁴⁾ Google appears to have intentionally adopted a policy of challenging the frontiers of trademark infringement law. Before Geico was filed, no court had specifically determined the propriety of this Internet business model of linking trademarked words with the advertisements of trademark owner rivals. ⁽⁵⁾ The ultimate success or failure of this challenge will significantly impact how all search engines are able to generate revenue in the future.

Google's innovative business practices have also spurred other intellectual property infringement litigation. In a related lawsuit brought by American Blind and Wallpaper Factory, Inc. against Google, the issue of whether allowing the use of generic terms like “American” and “wallpaper” to link to advertisements may be deemed trademark infringement has been raised. ⁽⁶⁾ Because of the larger universe that such generic words encompass, the outcome of this lawsuit may have an even greater impact than Geico on the definition of what constitutes trademark infringement in Internet contextual advertising.

Google has also recently been sued by Perfect 10, a publisher of an adult entertainment website, for allegedly providing Internet users at least 800,000 unauthorized links to images of Perfect 10's nude models and thereby stealing membership fees and advertising revenue. ⁽⁷⁾ Perfect 10 alleges that Google's conduct violates twelve different intellectual property laws. The primary thrust of the lawsuit, though, is that the practice violates Perfect 10's copyright ownership interests in the nude photographs.

On December 9, 2004, Google was sued by the American Chemical Society for trademark infringement. ⁽⁸⁾ Google recently launched a search tool called “Google Scholar.” The American Chemical Society claims that the name of this new search tool infringes upon the trademark that it holds for its academic Internet search tool “SciFinder Scholar.”

On December 14, 2004, Google announced that it has made arrangements with some of the world's most preeminent libraries to scan their books and make all of some books and portions of all others available on the Internet. Whether this ambitious undertaking will spur more intellectual property litigation remains to be seen.

One thing is certain, though. One of Google's business strategies is to push the limits of intellectual property law as far as possible in order to optimize Google's technological innovations. Google's policy is to not only anticipate what the law will be, but to create it. As shown by the summary judgment disposition in Google's favor after the other defendants had settled out of court in Geico, Google expects the law that it creates will surprise its competitors and therefore give it a competitive advantage. We have a clue, though, about the nature of the intellectual property law surprises that might be in store for us. They will be at least partially in response to issues created by Google's technological innovations. In Google's own words:

What's next from Google? Hard to say. We don't talk much about what lies ahead, because we believe one of our chief competitive advantages is surprise. Surprise and innovation.

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Endnotes:

1. “Keeping Pace with Global Technology,” THE NATIONAL LAW JOURNAL, Vol. 27, No. 12, p. 8 (November 22, 2004), featuring Katherine Butler, General Counsel for Software AG USA.

2. Id.

3. Geico Corp. v. Google, Inc., U.S. District Court, E.D. Va. (“Geico”) (partial summary judgment granted Dec. 15, 2004).

4. Other parties to Geico, including competitors such as the Yahoo! company Overture, settled prior to the Preliminary Injunction hearing.

5. Similar issues were argued, however, in Playboy Enterprises, Inc. v. Netscape Communications and Excite, 354 F.3d 1020 (9th Cir. 2004) (denying the Defendants' motion for summary judgment and finding that genuine issues of material fact precluded ruling in favor of Netscape and Excite regarding whether their use of the keyed words “playboy” or “playmate” and similar words to link to banner ads infringed upon or diluted Plaintiff Playboy Enterprises, Inc.'s trademarks).

6. American Blind & Wallpaper, Inc. v. Google, Inc., et al., U.S. District Cout, E.D.N.Y. (filed January 27, 2004).

7. Perfect 10, Inc. v. Google, Inc., et al., U.S. District Court, C.D. CA (filed November 19, 2004).

8. American Chemical Society v. Google, Inc., U.S. District Court, D.D.C. (filed December 9, 2004).

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

Copyright © 2004, Fairfield and Woods, P.C.,
ALL RIGHTS RESERVED.

Comments or inquiries may be directed to:
John A. Leonard