A federal judge on Wednesday dismissed the major claim in insurer GEICO's trademark-infringement lawsuit against Google. The Government Employees Insurance Co. accused Google of undermining its trademark and confusing consumers by allowing GEICO competitors to bid on the insurer's trademark to return the sponsored links that appear alongside Web search results.

U.S. District Judge Leonie Brinkema sided with Google on that claim but left another part of the case open. She asked both parties to work on a settlement regarding the issue of trademarked terms used within the ads themselves, according to an Associated Press report.

"The court said that there's no likelihood of confusion here because people who are using the Internet recognize that the sites are not affiliated with GEICO and are probably competitors, and that's OK," said Robert Andris, an intellectual property attorney and partner at Ropers Majeski Kohn Bentley LLP, in Redwood City, Calif.

GEICO's lawsuit challenged the main ad models of both Google and Yahoo Inc.'s Overture Services division. For Google, advertising accounts for about 95 percent of revenue. Earlier this month, Overture reached a settlement with GEICO and was dropped from the lawsuit.

While Google won a significant reprieve, the legal issues surrounding trademarks in search advertising remain far from settled, attorneys said. Other cases against Google are still pending in federal court, and appeals courts have yet to rule on the decision.  

"This result, finding that a common and profitable search engine practice will not be struck down on a wholesale basis, is obviously a significant victory for search engines," Barry Felder, a partner at New York-based Brown, Raysman, Millstein, Felder & Steiner LLP, said in an e-mail interview. "However, the decision will have to be tested in the Fourth Circuit, and various cases in other federal circuits have yet to be adjudicated."

Felder served as lead counsel for Playboy Enterprises Inc. in its case against American Online Inc.'s Netscape Communications Inc. subsidiary and Excite. The case, in which Playboy sued over use of trademarks as keywords that linked to the banner ads of its competitors, was settled early this year after a federal appeals court ruled that it could head to trial.

Google faces similar trademark-infringement charges from retailer American Blind and Wallpaper Factory Inc. Chicago-based American Blind in January sued Google along with five other companies that display Google's ads, and the case is pending in federal court.

Click here to read more about the American Blind case.

Andris said the GEICO ruling could impact American Blind's case, depending on the legal arguments presented in Judge Brinkema's written brief. While the decisions of one district court are not binding on another, they are considered.

"The question is whether the sponsored links section is something confusing to consumers, and if it's not confusing them with GEICO then it's not confusing them with American Blind, most likely," Andris said. "[The ruling] is pretty persuasive stuff, and if a judge has taken the time to write a thoughtful opinion, then generally the courts like to side with brethren unless they see a problem or distinction."

Mountain View, Calif.-based Google, in a statement, applauded the GEICO decision and said it validates its trademark policy.

"It confirms that our policy complies with the law, particularly the use of trademarks as keywords," David Drummond, vice president and general counsel at Google, said in a statement. "This is a clear signal to other litigants that our keyword policy is lawful."

GEICO, of Chevy Chase, Md., did not respond to a request for comment.

Google in April had altered its trademark policy to let any advertiser bid on trademarks as terms for triggering ads in the United States and Canada. But Google agreed to limit the use of trademarks within the text of ads.

The GEICO ruling, though, is bad news for major trademark holders, said Catherine Seda, president of Internet marketing company Seda Communication Inc., in Thousand Oaks, Calif.

"Trademark owners have invested many years and millions of dollars in developing their brands," Seda said in an e-mail interview. "It's an unfair business practice to allow competitors to simply leech off trademark owners' efforts."

She predicted that the owners of major trademarks will face higher costs in bidding for their own trademarks to return search ads as competitors try to grab the sought-after keywords.