AOL Settles Playboy Suit

America Online has settled a trademark lawsuit brought by Playboy Enterprises against the ISP’s Netscape subsidiary.

“The terms are not being disclosed, but the settlement reached by the participants is mutually satisfactory,” an AOL spokesman told internetnews.com

The action was first brought in 1999. Hugh Hefner’s adult entertainment empire claimed Netscape infringed and diluted its trademark by presenting ads for rival companies when users entered “playboy” or “playmate” as keywords. The words were among 400 that triggered adult ads.

Chicago-based Playboy asserted that users could wrongly assume that the banner ads — especially those that were poorly labeled or unlabeled — were associated with Playboy, and click through because of that mistaken impression.

Previously, a lower court judge dismissed the case. But last week, a three-judge panel of the 9th Circuit of the U.S. Court of Appeals disagreed, determining that Playboy’s case is strong enough to proceed.

For AOL, the online arm of Time Warner , the legal tangle was an inherited one. The case predated the company’s March 1999 acquisition of browser software maker Netscape. The company stopped using “playboy” and “playmate” to trigger adult ads. In addition, it screens for other trademarks in keywords.

Excite, which filed for bankruptcy protection in 2001, was also named as a defendant in the case because its technology was used by Mountain View, Calif.-based Netscape. A source close to the case said Excite has settled as well.