From the NYT article: In a memorandum to support an ultimately unsuccessful motion to dismiss the case, Google said that the problem was a misunderstanding of new technology. "For some reason, rules and propositions that are easily understood in more traditional contexts get hopelessly muddled when applied to the Internet," the memo said. It compared keyword search advertising to print ads in magazines, pointing out that magazines do not infringe on trademarks when they allow one marketer to place an ad near a competitor's.
"That isn't trademark infringement, it's competition," Google said.
But the court will also have to consider whether Google's ad model confuses consumers even for a moment, as Geico argues it does.
I've also posted a recent copy of the case docket here.