SAN FRANCISCO — Search engine giant Google Inc. won a key ruling Wednesday in a case that had put an important chunk of its multibillion-dollar online advertising business in jeopardy.
A federal judge in Alexandria, Va., dismissed the heart of a lawsuit brought by auto insurer Geico that had sought to bar Google from selling the ads from rival insurers that appear when Web surfers type "Geico" into the search engine.
After 2 1/2 days of argument, Judge Leonie Brinkema granted Google's request to dismiss much of the trademark infringement case. She said Geico, a subsidiary of Warren E. Buffett's Berkshire Hathaway Inc., had failed to prove that consumers were tricked into doing business with the advertisers.
With the victory, Google survived the first major legal challenge to its lucrative practice of letting advertisers lure customers to their sites by buying small text ads linked to their competitors' brand names.
About 98% of Google's revenue, forecast at more than $3 billion this year, comes from targeted advertising. Although the company won't say how much of that comes from ads tied to trademarked words, analysts believe it is significant.
"It's pretty fundamental to what Google does," said Scott Kessler, an analyst at Standard & Poor's. "If the company were not allowed to sell copyrighted words, that would remove from its inventory a very large number of prized keywords."
Google shares gained $1.09 to $179.78 on Nasdaq.
The Mountain View, Calif., company hailed the decision as a broad validation of its advertising practices. But Geico and other companies suing Google on similar grounds said Brinkema's ruling set no precedent for the Internet industry.
Google collects revenue every time someone clicks on one of the text ads -- known as "sponsored links" -- that are delivered alongside normal search results. Many of the links are generated by searches using generic terms, such as "car insurance." But advertisers also buy links based on brand-name keywords.
In court, Google argued that targeting advertisements at people looking to buy a competitor's product isn't trademark infringement -- it's competition. Company lawyers likened the situation to a pizza-shop owner handing fliers to customers as they walk into a rival pizzeria.
The judge agreed. "There is no evidence that that activity alone causes confusion," Brinkema said.
