Keywords Put Google Earnings In Peril

Even though the lawsuit involved Google and keywords, for once no one has shown up at the Googleplex bearing warm greetings and a stone-cold subpoena. In Edina Realty, Inc. v. TheMLSonline.com, Marquette law professor Eric Goldman has blogged that the case equates keyword purchases to trademark infringement.

“That’s what makes this case significant. I think this is the first case substantively analyzing a purchaser’s liability for buying a competitor’s keyword,” he wrote in his post.

TheMLSonline.com purchased keywords like “Edina Realty” and several variations, including misspellings, on both Google and Yahoo. Yahoo recently changed its policy for trademark purchases, restricting them to being eligible for purchase only by the trademark holder. Google does not do this.

Along with the keyword purchases, TheMLSonline.com also indulged in placing hidden text on its site, Goldman noted. Phrases like “Edina Realty information presented at TheMLSonline.com” were hidden as white text on a white background.

The impact of the court’s initial ruling that the purchase of keywords, though not conventional, is a use in commerce, could have implications down the road. Goldman believes a couple of key points arose from the ruling.

First, Google may now be pressured into adopting Yahoo’s policy of forbidding keyword purchases of trademarks by competitors. “To the extent that competitors’ ad purchases constitute direct trademark infringement, Google may face an elevated risk of being deemed a contributory infringer,” he wrote.

Also, adopting such a policy could be a significant hit to Google’s revenue stream. If the court finds in the case that competitor keyword purchases constitute trademark infringement, and Google bans those purchases, that would drain quite a bit of the keyword purchase pool.

“Some competitive keyword ad buys currently being made will be eliminated because the competitors (or search engines) decide those purchases are too risky,” said Goldman. “Stock valuations of relevant industry players should adjust downward accordingly.”

Google recently announced a new stock sale of 5.3 million shares, leading in to the search advertising company’s addition to the S&P 500 index.

Pricing for GOOG shares fell dramatically from its $394.98 close in after-hours trading, by $12.07 to $382.91, after Google made the stock sale announcement.

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David Utter is a staff writer for WebProNews covering technology and business.