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Google's ad sales tested in court

A payday lending company in Ohio sues Google, saying it shouldn't sell rivals ads for searches on its trademarked name.

Another lawsuit is poised to challenge Google's lucrative advertising-based business model by arguing it encourages unlawful use of trademarks as keywords.

The parent company of a payday loan provider called Check 'n Go has sued Google in federal court in Ohio, saying that the search engine permits other payday lenders to purchase ads that appear when the trademarked phrase "check n go" is typed in.

CNG Financial, a Cincinnati-based company that operates more than 1,300 through its subsidiaries, has asked a federal court to halt the practice.

"Google is enriched by the misappropriation" of the trademark, CNG said in court documents filed Jan. 24. "Consumers may click on the links to the competitors of Check 'n Go (and) may not realize that they have unwittingly 'clicked' on a competitor's Web site."

Because no federal appeals court has addressed the practice of selling trademarked keywords, the law in this area remains relatively unsettled. That means Google and other search engines that follow similar practices could be found liable for trademark violations, which would slice into future profits.

In a case that auto insurer Geico brought against Google in 2004, a federal district judge in Virginia began the process of weighing the legality of selling ads based on other companies' trademarks.

U.S. District Judge Leonie Brinkema partially sided with Google in December 2004 but ruled that Geico's case could proceed because "there has been enough evidence of confusion" about trademarks on the part of the consumer. The two companies settled the case before it went to trial.

"We believe our trademark policy is lawful as was demonstrated by the Geico court decision and we will defend against this suit vigorously," a Google representative said in an e-mail to CNET on Monday.

Google didn't have as much luck in France. Last year, a French court ruled that Google must stop using the trademarks of European resort chain Le Meridien Hotels and Resorts to trigger keyword ads.

Another federal lawsuit, currently being prepared for trial in California, tests whether Google can sell keyword advertising around trademarks owned by American Blind & Wallpaper Factory, an interior decor specialist.

Though about 99 percent of Google's revenue comes from advertising, the company does not disclose how much is generated by sales of trademarked keywords. Google decided two years ago to reverse an earlier policy and permit advertising sales around trademarks.