When does the use of a trademark in third-party advertising constitute infringement? To an extent, it depends on where you are. In the US, eBay is in the clear, while the same behavior has caused it trouble in France. Google is facing similar suits in a variety of countries over the use of trademarked names in its Adwords service, and its attempts to quash one of these cases before the trial was turned down on appeal last month. Apparently, that legal setback has been taken as a sign that it's open season on adwords, as a new class-action suit targets Google and anyone who has embedded its search ads on behalf of the entire state of Texas.

Well, maybe not the entire state, but it's potentially a very large class. Although the lead plaintiff, a company that does business under the name of Firepond, appears to be a small outfit located in East Texas, it's hoping that any individual or company based in the state will join in, provided they meet two conditions: they have a registered trademark and Google has sold that trademark to a competitor as part of the Adwords system at some point in the last four years. The primary limit there may be providing evidence that the trademarked name was used for advertising.

Firepond's attorneys aren't limiting themselves to Google, either, as a number of other big names, such as Turner Broadcasting, Myspace, and Ask.com all are targeted. Each of these companies relies on Google to provide a search service with embedded ads on their site, and so are involved in aiding and abetting the alleged trademark infringement, according to the suit. Firepond helpfully embeds a series of screen captures for most of these sites, showing a competitor's ad as a sponsored link; an equivalent ad campaign doesn't appear to be happening currently.

The key legal question will be whether Google's presentation of links to a competitor's product will be sufficient to cause confusion among Web-surfing consumers. Firepond's attorneys claim that such confusion abounds, as some of the sponsored links are often to the company associated with the trademark, the suit argues, "Internet users are conditioned to expect the Sponsored Links to include Trademark Holders and authorized users of such Trademarks." Elsewhere, the suit implies that the company is willing to provide evidence that this sort of consumer-level confusion has happened, and Firepond may provide testimony to that effect. "Upon information and belief," it reads, "defendants' use of the Firepond Marks and Class Marks causes at least some consumers actively seeking to find and do business with Firepond and Class Members to be diverted to one or more Sponsored Links linking to the webpages of Firepond’s and Class Members' competitors."

A court seems likely to have to sort out whether any confusion of this sort meets the relevant legal standards, or decide that these confused individuals are out where the bell curve of Internet behavior goes flat. Or, more accurately, a jury will, as that's what Firepond is asking for. Firepond should have less trouble demonstrating that Google is taking these actions deliberately, as they've found a financial prospectus from Google in which the search engine company acknowledges that it implemented its Adwords policy knowing that it will likely expose them to lawsuits of precisely this nature.

The court, however, will have to decide whether to allow the class action. There are reasonable arguments that it shouldn't; the degree of consumer confusion will undoubtedly vary based on how generic-sounding a trademark is, the number of ads, etc. But Firepond's suit argues that it's the policy that causes the problems, and that transcends the vagaries of individual cases. "There are questions of law and fact common to the Class," the attorneys state, "which predominate over any questions affecting only individual Class Members." And, since that policy is implemented in software, it's possible for further infringements to occur at any time.

Even if it does wind up avoiding a class action, Google is unlikely to want to continue to expose itself to risks of further lawsuits if Firepond prevails. Firepond is asking for damages, punitive damages, profits from the infringing ads, attorneys fees, corrective advertising, etc.

Given that this case cites violations of Texas law, and is limited to plaintiffs in the state, it's a fair bet that we'll be seeing further lawsuits of the sort in future months. Google's recent loss on appeal suggests that the legal question is still open, and it appears that lawyers are smelling the money and moving in.

Listing image by Brian Turner