Google, GEICO settle lawsuit

Google Inc and auto insurer GEICO have resolved a trademark infringement challenge filed by GEICO against Google over its online advertising practices, the auto insurer said on Wednesday.

GEICO, the No. 4 US auto insurer and a unit of investor Warren Buffet's Berkshire Hathaway Inc, said a suit filed in the US District Court for the Eastern District of Virginia was 'resolved to the mutual satisfaction of the parties.'

The lawsuit, originally filed in May 2004, had sought to hold Google responsible for trademark infringement for displaying advertising paid for by rival insurers when computer users searched for the word 'GEICO' on the Google system.

The complaint could have effectively derailed a basic way Google sells online advertising, by linking keyword searches to ads. This is the source of virtually all of Google's revenues. Rival Yahoo Inc relies on a similar keyword technique for roughly half of its advertising revenue.

'Terms of the settlement, although not disclosed, would suggest some sort of payment was made, but that a trial has been avoided,' Martin Pyykkonen, an analyst with brokerage Hoefer & Arnett. 'This mitigates the risk of further trademark lawsuits,' he said.

He rates Google stock a 'buy' and says it can hit $350 over time, a gain of 20 per cent from current levels.

Late last year, a US judge ruled there was insufficient evidence to bar Google from using the technique.

Terms of the settlement are confidential, GEICO said. No further comment on the settlement will be provided, it said. Google spokesman Mike Mayzel confirmed the two companies had resolved the dispute, but also decline to provide details.

The resolution of the dispute puts off, at least for now, the threat of a major battle pitting the intellectual property rights of a trademark like GEICO against the free speech rights of Google to create new forms of advertising, Pyykkonen said.

GEICO, or Government Employees Insurance Co, is the fourth-largest private passenger auto insurer in the United States, covering more than 6 million policyholders.

Google users who search for the word 'GEICO' on the main search results page are returned a set of results that include sponsored links alongside the main Web search results. Three lesser rivals are featured next to a link to GEICO currently.

Google shares were up 35 cents in after-hours trading at $288.80 following the GEICO announcement. The stock had closed $2.20 higher in regular session trading on Nasdaq at $288.45. Berkshire Hathaway shares were unchanged in after-hours trading from their New York Stock Exchange close at $84,100.