District Court Judge Jeremy Fogel ruled that the public has an interest in whether AdWords represents an abuse of US trademark law.
US retailer American Blinds and Wallpaper took Google to court after its rivals were advertised alongside search results for its own business.
Under the pay-per-click AdWords system, related adverts appear on a page of search results. This means that if a user searches for McDonald's, for example, an advert for Burger King or another rival may appear next to the results.
Judge Fogel wrote in his decision to proceed: "The large number of businesses and users affected by Google's AdWords programme indicates that a significant public interest exists in determining whether AdWords violates trademark law."
However Google remains optimistic. Michael Kwun, the company's defence lawyer, said: "Judge Fogel rightfully concluded that [American Blinds] did not prove that two of their marks are protectable. We are confident that they will be unable to prove their remaining claims at trial."
In 2004 Google survived a similar trademark infringement lawsuit from insurance company Geico.
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