The Lawsuit That Could Cripple Google: Will American Airlines Ruin Everything?

Oct.31.07 | About: Alphabet Inc. (GOOG)

A Federal Judge last week dismissed a motion by Google (GOOG) to dismiss a copyright infringement lawsuit brought on by American Airlines in August.

American Airlines is suing Google for letting competitors and internet marketers bid on trademarks owned by American Airlines in Google’s highly lucrative AdWords search advertising program.

Bidding on trademarked keywords means that competitors can show their own advertisements. What this means is that if someone did a search for “American Airlines” on Google, you will see competitors advertisements in the “sponsored results” portion of the page.

American Airlines says that buy allowing marketers to bid on their keywords, Google is in violation of trademarked terms, monetizing these keywords for themselves while taking business away from American Airlines.

Google had this to say in their request for dismissal:

"Advertisers and merchants in America regularly target their competitors' customers, seeking to capture their business for themselves," the company argued in its motion to dismiss. "Drugstores place their generic ibuprofen next to the Advil," the company added.

It should also be noted that Google does not currently allow competitors to use the actual name of the trademarked-term in the ad. For example, while a customer is allowed to bid on the phrase “American Airlines”, they may not actually use that phrase anywhere in the copy of the ad.

What could this mean for Google bottom line? Currently, 65% of Google’s revenues come from sponsored search results. We have no way of knowing for certain, however I would assume that a very large portion of that – upwards of 90% -- come from marketers competing on keywords that consumers associate with their competitors.

If AA is triumphant in its lawsuit, this will be devastating for Google, and will be a huge loss for everyone; Google, Consumers and Marketers.

It will be a loss for Google, obviously, because they will lose extraordinary amounts of revenue.

It will be a loss for Consumers because we will lose the ability to have easy access to alternative products, prices and market competition.

It will be a loss for Marketers because we will be stripped of our ability to be competitive in the marketplace and will lose the new customers that we wouldn’t otherwise have access to.

I can’t think of one good thing that can come from American Airlines winning this suit. Can you?