There’s a new type of lawsuit coming against PPC advertisers and domainers, about search marketing and the right to bid on trademarked or just competitive terms.

In this particular case Nike sued a New Hampshire outdoor sporting goods retailer, Eastern Mountain Sports, which does not sell any Nike clothing, for bidding on the term “Dri-Fit” in Google’s advertising system.

Dri-Fit is a trademark of Nike.

So when a user clicks on an EMS ad after searching for Dri-Fit, she is driven back to the retailer’s website, which displays other versions of wicking technology which Dri-Fit is based on.

For Google, bidding on competitors’ trademarks is allowed, even if some marketers think it shouldn’t be.

Google recently settled a trademark-infringement suit brought on by American Airlines, which was upset that competitors advertised against its trademarked terms. The settlement didn’t clarify the rules, but it did allow Google to keep selling ads against marketers’ trademarks.

At the heart of it, the debate over trademarks is part of a bigger branding battle marketers wage online, where billions of dollars are spent on advertising and other forms of marketing to create brand awareness. When a consumer goes online to search on a specific brand, marketers don’t want competitors to be able to park in the paid search listings.

While Google’s policy allows bids to be placed on someone else’s trademarked keywords, it does not allow a marketer to use a trademarked term in the ad copy. Google asserts that allowing competitors to bid on branded keywords gives consumers more choice in their search results. “We are trying to balance the interests of trademark owners, advertisers and our users,” said a spokeswoman in an e-mail. Yahoo and Microsoft search have stricter regulations and generally don’t allow advertisers to bid on competitors’ trademarked terms.

“If I’m Geico and driving people to Google’s search engine to perform searches and Google’s saying we want to give consumer choice, well, in algorithmic search everyone expects that in unpaid or natural search results,” Mr. Murray said. “But when it comes to paid search, the fact Google will benefit from all clicks, it’s a slippery slope.” In Google’s defense, he said, there’s lots of aggressive bid management going on and Google can only police it so much.

Mr. Adams is part of a coalition of marketers, the Alliance Against Bait & Click, that includes InterContinental Hotels Group, Starwood Resorts, Northwest Airlines and 1800 Contacts.

The group is attempting to stop what they call “scads”, scam ads that confuse consumers. And while the group’s target goes beyond trademark bidding, it does count such tactics as confusing to consumers.

“Somehow in context of search-engine advertising, search engines have gotten idea that if you ask for one thing it’s OK to give something else or something in addition,” said Harvard professor Benjamin Edelman, a member of the alliance. He likens it to hitting the channel for Fox on a remote control and getting NBC instead.

Of course, who decides what is or isn’t acceptable is the big question. Adding another layer of cloudiness is that many trademarked terms have arguably entered the common lexicon. For example, a consumer might say they need a Kleenex, but that doesn’t mean they wouldn’t take a tissue from Puffs. Or a person may say they Googled something, even when they looked it up on Yahoo.

Last week we received a letter from a law firm objecting to another advertiser being shown on one of our domains.  According to the law firm their client, although having no trademark in the term, was a distributor of a product which the link buyer did not actually sell.  The claim that the advertiser buying a link under this keyword was misleading because they did not actually sell the product, while there client did.

We explained that we do not provide the links or the advertisers but we have been dragged into this dispute since the ads appeared on one of our domains.

Just a heads up on the next round of litigation.