There are a lot of companies unhappy with how Google's lucrative AdWords system operates. Several of them have taken the issue to court over the years, saying Google shouldn't be allowed to key advertisements to their names, which are protected trademarks. Rosetta Stone has been one of the more persistent AdWords foes. The language-software maker sued Google in 2009, but lost completely in a Virginia federal court. However, its case was revived on appeal, and yesterday it was settled on confidential terms.

Rosetta Stone argued the ads keyed to its name were confusing consumers, leading them to buy low-quality or counterfeit software. Google responded that showing a variety of advertisements to searchers for particular brands was pro-competition and pro-consumer. As far as counterfeits, the search company insisted it was vigilant about taking down ads for fakes as soon as Rosetta Stone pointed them out.

The case was appealed, and a muddled ruling came out of the US Court of Appeals for the 4th Circuit earlier, overturning significant parts of Google's win. The appeals court was swayed in part by a 2004 Google internal study that showed a fair number of consumers were indeed confused by its ads. That's a somewhat troubling evidence point, since Internet users are far more familiar with how searches work in 2012 than they were in 2004. The case was remanded to the lower court for further proceedings. It's unlikely Google would have actually lost, since the lower court judge was seeing things Google's way. However, the case certainly promised to drag on.

Only one of the trademark lawsuits against Google actually went to trial, GEICO v. Google, and the judge ruled for Google mid-trial. Many other trademark owners simply gave up and dropped their lawsuits against Google. Those included small companies like American Blinds and Rescuecom, as well larger entities like American Airlines.

Financial terms of the Rosetta Stone settlement weren't disclosed. Even though it's impossible to know who came out ahead in this case, Google may have a strategic win just because it has worn down its opponents. Only two lawsuits against Google remain, and those were brought by minor trademark owners with little chance of winning, notes Eric Goldman, a law professor who has followed trademark-keyword lawsuits closely over the years. "As a result, Google is tantalizingly close to successfully running the table on all of the US trademark challenges to its AdWords practices," Goldman wrote today. "When this happens, Google will have legitimized the billions of dollars of revenues it makes by selling trademarked keywords in AdWords."

A Google spokesperson said via e-mail: "Google and Rosetta Stone have agreed to dismiss the three-year old trademark infringement lawsuit between them and to meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet. At the end of the day, both companies would rather cooperate than litigate, and we believe this agreement is an important step toward eliminating piracy and trademark abuse on the Internet."