Google has announced a change in its advertising policy and will now be allowing advertisers to bid on placement for trademark protected terms. They’re not allowing advertisers to use others’ trademarks in the ads themselves, but rather in the machine code that determines which ads to show on a given search results page or Adwords client page. (For example, the “Ads by Google” you see on the left side of this page.)

This is a significant issue for Google because it will bring more revenue and more law suits. The revenue will come from competing companies that want to target users who are interested in the competition. The law suits will come from companies that want to suppress such ads and will argue that the machine use of trademarks is infringement.

The issue of whether using trademarks in machine code constitutes infringement has not been clearly determined, but the issue is now arising in multiple contexts (search engine advertising is just one – third party pop-up ads is another). Apparently Google is confident that the machine use of trademarks does not constitute infringement. I think they have a strong argument (after all – trademark law is really supposed to protect against consumer confusion – upon which machine linking as no effect). We’ll see if the courts agree.