Search yahoo.com for “American Airlines” and you’ll get a sponsor result — ads Yahoo (YHOO) charges a hefty premium for — that goes to lowfares.com. As far as American Airlines (AMR) is concerned, that’s trademark infringement, and last week filed suit against Yahoo in federal court (PDF here).
This isn’t the first time American Airlines has pressed the case that search engines can’t sell ads on trademarked words to just anyone. Last year American sued Google (GOOG) for the same reasons. The AA-Google case settled in July (terms not disclosed), so the case law here is still largely unknown. (Search “American Airlines” on google.com and now there’s no “sponsored links” at all.)
We’re not lawyers, and can’t evaluate the strength of AA’s case. But Yahoo probably won’t want to risk having a judge ruling in AA’s favour–and, thus, nuking the revenue from all the other folks who buy ads on other people’s keywords. So get ready for a quick, quiet settlement.