In what many see as yet another victory for Google and defeat for trademark advocates, American Airlines has settled its action against Google on undisclosed terms, with both sides paying their own legal fees.

In a lawsuit filed in August 2007, American Airlines claimed that Google violated its trademark rights by allowing competitors to bid on keyword search text containing its brand name in order to generate “sponsored links” on search result pages. Google claimed that this “invisible use,” which did not generate any advertisements using American Airlines’ name, did not violate any trademark.

While the precise impact of the settlement on use of the term “American Airlines” as a keyword search term is not known, Google may have agreed to halt bidding on “American Airlines” as a keyword. In several searches conducted by our office, no sponsored link (other than those sponsored by American Airlines itself) appeared when a Google search was conducted using “American Airlines.” In contrast, Google searches on other airlines generated numerous sponsored links by discount airfare vendors.

Whatever its agreement with American Airlines, however, it is clear that, at least for the moment, Google remains free to allow competitors to bid on keyword search text for other trademarks.