• by Wendy Davis  @wendyndavis, August 26, 2009

Online travel agency Expedia has landed in the middle of American Airlines' legal dispute with Yahoo about paid search ads.

Yahoo alleges in court papers that Expedia has information that Yahoo needs to defend itself, but refuses to turn it over. Yahoo is now asking the federal district court in Seattle to order Expedia to disclose a host of documents.

"The material sought is not merely relevant to Yahoo, Inc.'s defense, it is critical," the Web company argues in papers filed last week. Among other data, Yahoo is asking the court to order Expedia to turn over all contracts with American Airlines as well as market research about the conversion rates of users who came to Expedia through sponsored search ads.

Wednesday evening, an Expedia spokesperson said the company is cooperating and producing information pursuant to the subpoena. It wasn't immediately clear what data Expedia had agreed to turn over.

The airline sued Yahoo last year in federal district court in Texas for trademark infringement on the theory that Yahoo allowed other companies to use "American Airlines" to trigger paid search ads. Among the companies that allegedly used the name as a trigger was the online travel agency Expedia.

While American Airlines allows Expedia to sell tickets, the airline objects to Expedia purchasing "American Airlines" as a keyword, according to Yahoo. The airlines alleges both that Expedia is infringing the American Airlines trademark and that Yahoo has interfered with the airline's contract with Expedia by allowing such ads, according to Yahoo's court papers.

But it's not clear that Expedia's alleged use of the airline's name infringes its trademark. Santa Clara University law professor Eric Goldman says that if Expedia purchased the tickets from American, it might have the right to use American's name to advertise the tickets -- the same as other legitimate resellers would. "From my perspective, American Airlines' direct infringement argument looks questionable," he writes on his blog. He adds that Expedia, like any other retailer, "is free to advertise the trademarks of the manufacturers it vends."

Goldman also points out that American is running a risk by pointing fingers at business partners like Expedia. "They're certainly not going to win friends in the industry by hanging Expedia out to dry," he tells Online Media Daily.

Earlier this year, Yahoo argued in court papers that it has the right to run ads from retailers who legitimately offer branded goods. "Yahoo's trademark policy and practice is well within the established bounds of trademark law, and is no different from a newspaper accepting advertisements from an electronics retailer who places an advertisement announcing 'Sony Televisions on Sale,' "the company wrote.