• by Wendy Davis  @wendyndavis, June 1, 2010

A Seattle locksmith has sued Google for click fraud for allegedly charging the company for clicks on paid-search ads that it believes were made by a competitor.

In a complaint filed in King County state court last week, 123 Lock & Key argues that Google breached its contract and also violated Washington state laws by charging for allegedly questionable clicks.

This lawsuit appears to be the first of its kind in more than five years, when Google settled a class-action click-fraud lawsuit.

A Google spokesperson said the company had not yet been served with the lawsuit and couldn't comment on 123 Lock's allegations. But he said Google has "devoted significant resources to protect advertisers from invalid clicks." He added that the company "will continue to fight click fraud and work with our advertisers to investigate every click fraud claim and credit them retroactively, as appropriate."

123 Lock says in its court papers that it began advertising with Google last October, at which time it received around 15 clicks a day -- a figure that remained stable through March. Between October and March, around 80% of the people who clicked through followed up with a phone call, according to the lawsuit.

Last March, however, 123 Lock began receiving between 100 and 150 clicks a day. "123 would often receive a flurry of clicks within a single minute," the lawsuit alleges. "These clicks never converted into phone calls. Because of the click fraud, 123 was forced to cease advertising on Google."

123 Lock owner Guy Aloni said through a spokesman that he informed Google he suspected that the uptick in clicks was the result of actions by a competitor, but that Google did not satisfactorily respond.

The lawsuit alleges that Google's AdWords agreement with marketers provides that Google has sole discretion over whether to offer a refund for suspected click fraud. But 123 Lock's lawyer, Aric Bomsztyk, argues that Google still has to exercise that discretion in good faith.

Several years ago, allegations of click fraud frequently drew headlines. But in 2006, Google settled a class-action click-fraud lawsuit by agreeing to provide ad credits to marketers that had been charged for improper clicks. The agreement called for up to $60 million in total ad credits.

Since then, Google has faced several cases challenging its placement of paid-search ads on supposedly low-quality sites, but hasn't faced other lawsuits by marketers that alleged that a competitor was driving up search costs by clicking on ads on the main search results page.

In July of 2006, Google began offering a reporting feature that tells marketers how many clicks are being filtered out of Google's system. Overall, Google says it currently filters out less than 10% of clicks. The company estimates that undetected click-fraud accounts for less than .02% of clicks.