• by Wendy Davis  @wendyndavis, June 11, 2014

In a blow to Yahoo, a federal judge in California has again rejected the company's bid to dismiss a trademark infringement lawsuit by Parts.com.

The online retailer, which sells car parts, alleges that its trademark in the name "parts.com” is infringed when rival replacement-part sellers use the term to trigger search ads on Yahoo.

Last December, U.S. District Court Judge Janis Sammartino in the Southern District of California ruled that Parts.com could move forward, despite Yahoo's argument that “parts” was too generic a term for trademark protection. Sammartino said at the time that Yahoo's argument was premature.

Soon after the ruling, Parts.com filed a revised version of its complaint. The newer document contains some additional details about the company's history, but the gist of the complaint still centers on Yahoo's paid search ads. Parts.com says that the search ads that appear when consumers type the phrase “parts.com” into the query box “divert internet traffic and sales leads from Parts.com to unrelated or competitive entities, resulting in lost sales, loss of goodwill, trademark dilution and damages.”

Yahoo responded by repeating its request that Sammartino dismiss the case on the ground that “parts.com” shouldn't be protected by trademark law. Yahoo also asked Sammartino to sanction Parts.com “for wasting this court's time.”

Sammartino rebuffed Yahoo on Monday, again ruling that Parts.com could move forward. The judge said that Parts.com's written allegations were sufficient to warrant further proceedings, but hasn't yet ruled on the key question -- whether the trademark is too generic to stand.

Several years ago, federal courts ruled that “Hotels.com” and “1800Mattress.com” were too generic for trademark protection.

Santa Clara University law professor Eric Goldman, who follows trademark litigation against search companies, predicts that Yahoo will ultimately prevail, given the potential problems with Parts.com's trademark. He says there's “zero doubt” that a name like parts.com is generic, and can't be protected.

Even companies with valid trademarks typically don't get very far in court when they sue over paid search ads. Yahoo-rival Google has faced numerous lawsuits by companies who aren't happy that their names are being used to trigger ads. Google has settled some of those cases on confidential terms, but has never definitively lost a lawsuit challenging the practice.