• by Wendy Davis  @wendyndavis, January 20, 2010

Computer repair shop Rescuecom scored a major coup last year when an appellate court allowed the company to proceed with a lawsuit against Google over keyword ads.

But the win might prove a Pyrrhic victory for Rescuecom.

That's because the computer services company is again in court fighting about keyword ads on search engines, but this time is defending its use of another company's trademark -- Best Buy's "geek squad" -- to trigger pay-per-click ads.

The face-off between Rescuecom and Best Buy dates back to last October, when Best Buy demanded that Rescuecom stop using "geek squad" as an ad keyword, according to Rescuecom's court papers. Within one week, Rescuecom quietly brought a case in the northern district of New York seeking declaratory judgment that its use of "geek squad" was legitimate.

The company argued its use of geek squad was protected by fair use principles and that the ad copy obviously showed that Rescuecom was a competitor to Geek Squad. "Rescuecom's use of the Geek Squad trademark to trigger this advertisement does not give rise to a likelihood of confusion," the repair shop argued.

Best Buy filed a counterclaim alleging trademark infringement and other violations. "Consumers looking for the Geek Squad or information on the Geek Squad using a Google search have been confronted with sponsored links that direct consumers to Rescuecom's website," Best Buy alleged, adding that Rescuecom's use of keyword ads is misleading and diverts consumers who are trying to find Best Buy.

Rescuecom's lawsuit against Google involved similar issues, but in that case Rescuecom successfully argued that it should be allowed to sue the search giant for "hijacking" Rescuecom's trademark and diverting consumers to its competitors.

Google had argued that the lawsuit should be dismissed at a preliminary stage because allowing trademarks to trigger ads was not a "use in commerce." A trial court agreed with Google, but Rescuecom appealed to the 2nd Circuit Court of Appeals.

The appellate court ruled that using trademarks to trigger search ads is a use in commerce and returned the case to the trial court for further proceedings. The ruling doesn't mean that Rescuecom will win the case; the company still would have to show that the search ads confused consumers before it can prevail.

But the decision makes it harder for companies to get allegations of trademark infringement dismissed at an early stage of the lawsuit. That matter is still pending in the northern district of New York.

Law professor Eric Goldman says that Rescuecom's position in the lawsuit against Google is "intrinsically inconsistent" with its stance in the Best Buy litigation -- which could end up hurting Rescuecom in both cases. "In my opinion, they have some duplicity in their arguments -- and that duplicity ultimately doesn't play well with judges," says Goldman, director of the High Tech Law Institute at Santa Clara University.

He also points out that Rescuecom isn't the only litigant to argue both sides of the same ad-related issue. "This is yet another example of a plaintiff in a keyword advertising case who loves keyword advertising," he says. "It's embarrassing for a company that gets its hand caught in the cookie jar that way."

Another company in a similar situation is 1-800-contacts, which unsuccessfully sued WhenU for trademark infringement for allowing rivals to send pop-up ads to people who visited 1-800-contacts' Web site. The 2nd Circuit Court of Appeals dismissed the lawsuit on the grounds that using Web addresses to trigger ads is not a use in commerce. But the court also mentioned in a footnote that 1-800-contacts had itself arranged to have its competitors' Web sites trigger pop-up and banner ads.

Representatives of Rescuecom and Best Buy did not respond to messages seeking comment for this article.