• by Wendy Davis  @wendyndavis, June 4, 2008

A federal court in California has ruled that a portion of a longstanding lawsuit by search marketers against Google can proceed to trial.

The case stems from a dispute about the interpretation of the words "daily budget" in Google's AdWords contract with search marketers. The search marketers, Minnesota printing company CLRB Hanson Industries and New Jersey resident Howard Stern (no relation to the radio personality), filed suit in 2005, alleging that Google violated the terms of its AdWords agreement by charging marketers up to 120% of their maximum daily budget.

In a decision quietly issued two weeks ago, U.S. District Judge James Ware in San Jose, Calif., ruled that the marketers who advertised for less than 30 days with Google could attempt to prove at trial that Google's practice of charging more than the amount designated as a "daily budget" constitutes false advertising.

"Google has not provided sufficient evidence that the disclosure of its practice of charging up to 120% of a customer's 'Daily Budget' is so prominent that a reasonable customer would necessarily view it," Ware wrote. "Indeed, the disclosure is located well within the AdWords agreement, a document over 100 pages long."

That ruling, however, came almost one year after Ware dismissed a much larger portion of the case. Last August, he ruled that Google did not violate its contract with companies that advertised for at least 30 days. That's because even if the company charged advertisers 120% of their budget on some days, the total monthly charges did not surpass 30 times the daily budget.

At the time, Ware ruled that short-term advertisers could continue with the case and attempt to prove that Google had violated its contract with them, and that Google falsely advertised AdWords by its use of the phrase "daily budget." In the decision two weeks ago, he found Google had not violated its contract with even short-term advertisers and granted the company summary judgment on that point.