In a case that could eventually derail the paid search industry, a federal judge recently ruled that Government Employees Insurance Co. (GEICO) can proceed against Google and Yahoo! subsidiary Overture Services.

Judge Leonie Brinkema of the U.S. District Court for the Eastern District of Virginia, denied the motion filed by Google and Overture to dismiss the case.

GEICO alleges that both Google and Overture are violating GEICO’s trademark by selling “sponsored links” to GEICO’s name. If GEICO is successful, the lawsuit could be the start of many to follow and impact seriously the bottom line profits earned in sponsored link placement.