Google's Searching for Trouble

At the Berkshire Hathaway (NYSE: BRK.A  ) annual shareholders' meeting on May 1, Warren Buffett was singing Google's praises, calling it "a fabulous business." Three days later he was suing it. Well, kind of.

On May 4, auto insurer Geico, owned by Berkshire Hathaway, filed suit against Google and Yahoo's (Nasdaq: YHOO  ) Overture, alleging trademark infringement, as CNET News.com first reported yesterday. Geico claims both companies infringed upon its trademark by using its name as a keyword, which was then linked to competitors' ads.

It's easy to see why Geico is upset. When a prospective customer types in the keyword "Geico" on Google's site, not only will she find Geico's site, but she sees ads for non-Geico insurance sites as well (triggered by her search for Geico).

"This practice," a Geico spokesperson told CNET News.com, "deliberately misleads consumers and allows Geico's competitors and these defendants to illegally exploit for their own commercial purposes Geico's investment of hundreds of millions of dollars in its brand."

And Geico isn't alone in seeking legal recourse. According to Google's SEC S-1 filing to go public, the firm is fighting this sort of lawsuit not just in the U.S., but in France and Germany, too. But lawsuits haven't stymied Google's practice of using other companies' trademarks as keywords. In fact, according to the S-1, the company has made this type of business official Google policy, "In order to provide users with more useful ads."

While Geico is clearly troubled by Google's practices, it is the latter company that faces the risk of real trouble. As Google noted in its filing, if the trademark lawsuits go against it, it "may result in, or even compel, a change in this practice, which could result in a loss of revenue for us, which could harm our business." The suits from Geico and others should signal to Google that it's time to start searching for a solid legal defense.

What do you think about Google's practices? We're waiting to hear from you. Come give us the word on theGooglediscussion board(free trialrequired).

Fool contributor Matt Logan owns shares in Berkshire Hathaway, but not Yahoo.


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