The Hanseatic Higher Regional Court ruled that Google's use of 'Gmail' in the region breached the 'G-Mail' trademark owned by local businessman Daniel Giersch.
"In doing so, Google infringed [Giersch's] trademark that had been previously been registered," said the judgement.
Sebastian Eble, Giersch's lawyer, said that the ruling was a victory for the many "Davids fighting Googliaths", as the multi-billion dollar company would not be allowed to continue the case in Germany.
"As far as the Hanseatic Higher Court is concerned, the legal situation is unambiguous to the extent that it has not allowed an appeal to the Federal Court of Justice," said Eble.
Arnd Haller, Google's senior legal counsel, said that the company regretted the German court's decision, but claimed that it would not affect Google's ability to provide web email to German users.
"Google owns the Gmail trademark in over 60 countries worldwide and we have used it ever since we launched the service in 2004," he said.
"Our German users will continue to use 'Google Mail' and enjoy the same experience as users of Gmail worldwide."
Giersch said that he secured the G-Mail name in 2000, four years before Google, but denied Google's claims that he only registered it to gain financially by selling it on.
"I have made it clear since the beginning that I will never sell the name," Giersch said. "It is my sole intention to realise my idea for a hybrid mail system and I am absolutely convinced of its success. Neither G-Mail nor myself are for sale."
The trademark ruling has taken three years, as the case moved through different courts and various regions in Germany.
In addition to the lawsuit in Germany, Google is also taking action against Giersch in Spain, Portugal and Switzerland.
The G-Mail trademark has already been upheld in action through the Austrian courts. Giersch said that each individual court process has required five-figure amounts to fight.
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