Growing Number of Lawsuits Could Hurt Google's Ad Revenue

[David Farber <dave () farber net>]

http://www.nytimes.com/2005/03/27/technology/27cnd-google.html

March 27, 2005

Growing Number of Lawsuits Could Hurt Google's Ad Revenue
 By DOREEN CARVAJAL,
International Herald Tribune
 

 ARIS, March 27 - Fabrice Dariot's travel agency, Bourse des Vols, boasts a
terrace lined with potted plants and sweeping views of 17th-century
apartments in the center of the city.

 The compact fifth-floor office is an unlikely front line for a battle of
words with the online search engine  Google - or "Omnigoogle," as some
French critics scornfully call the giant company.

 Mr. Dariot, a mathematician turned Internet entrepreneur, is an even more
unlikely standard-bearer for a series of proliferating lawsuits and legal
disputes that challenge Google's sacrosanct business routines.

 "Google is a giant, but they cannot dictate the law," said Mr. Dariot, 41,
a chief executive in a casual sweater and denim who took on the
international company with some inspiration, he said, from independent
French icons like Joan of Arc who were not afraid to challenge authority.

This month, Mr. Dariot triumphed in his year-and-a-half-old lawsuit against
Google's French subsidiary, which has been ordered to pay him $97,000 in
fines and legal costs.

Dariot and his travel companies, Luteciel and Viaticum, successfully
challenged Google's practice of selling Internet advertising from rivals
designed to appear with Web searches for his trademarked Web site name,
Bourse des Vols, which means flight exchange.

Keyword advertising, as it is known, is the main source of revenue for
Google, which posted $3.19 billion in sales in 2004, largely through charges
of a few cents each time a user clicks on an ad.

The growing number of lawsuits against Google around the world could
diminish that advertising revenue by reducing the number of search words
that could be sold to competitors - a threat to Google's business model that
the company has acknowledged in regulatory filings.

 Mr. Dariot's company is one of the first to win against Google; similar
cases in the United States and Germany that challenged the search engine's
use of keywords have failed.

 But more companies are piling on. France is home to as many as 15 cases,
according to lawyers involved.

 Elsewhere, other companies are pressing Google with varying results on
different legal points.

 The Associated Press in New York and Kyodo News Agency in Tokyo have been
negotiating with Google in connection with what they contend is its
unauthorized use of material from the two news services.

Agence France-Presse, which had been talking to Google for almost six months
in the same kind of dispute, sued the search engine in France in February
and in the United States this month for $17.5 million in damages.

 "The core issue is the same," said Joshua Kaufman, A.F.P.'s lawyer in
Washington. "Google is using A.F.P. pictures and stories without
authorization in violation of copyright."

 The keyword lawsuits have been filed by companies ranging from the hotel
chain Accor to LVMH Moët Hennessy Louis Vuitton, the luxury goods
manufacturer, which in February won its case. Keyword advertising is
particularly sensitive for luxury retailers because manufacturers of
knockoffs and counterfeits could advertise alongside trademarked names.

That has quietly changed in France, where rival advertising has been
eliminated on Google's French Web site next to search results for prominent
brand perfumes like Dior or Chanel. Yet similar advertising still surfaces
with the same brand names on Google's Web sites in Britain and Germany.

Asked about those international differences in advertising from rivals,
Google's spokeswoman in France, Myriam Boublil, said: "I can't really get
into technical specifics. What I can tell you is that it was necessary to
take down when a trademark issue is raised in France. Companies get back to
us and let us know, and then we take it down."

 She said that it was likely that companies had raised the trademark issue
in some countries but not others.

Google itself is keenly aware of the perils of its keywords policy, which
took effect in the spring of 2004 in the United States and Canada.
Basically, Google abandoned its policy of screening for trademarks when
companies choose keywords for its popular advertising program, a gamble that
could increase revenue but, as the company acknowledged, could also create
legal problems.

 According to Google's Web site: "When we receive a complaint from a
trademark owner, we will only investigate whether the advertisements at
issue are using the trademarked term in ad text. If they are, we will
require the advertiser to remove the trademarked term from the text of the
ad and prevent the advertiser from using the trademarked term in ad text in
the future."

 In Mr. Dariot's case, that meant that if users searched for his trademarked
name, "Bourse des Vols," rival advertising would emerge alongside the name
of his Web site.

In a Google filing with the United States Securities and Exchange
Commission, the company admitted that the new policy could lead to more
legal attacks. "Adverse results in these lawsuits," it said, "may result in,
or even compel, a change in this practice, which could result in a loss of
revenue for us, which could harm our business."

<snip>


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